This appeal concerns a First Amendment challenge to nearly twenty-year-old New York City rules that ban advertisements in for-hire vehicles ("FHVs") absent authorization from the Taxi and Limousine Commission (the "TLC" or the "City"). See 35 R.C.N.Y. §§ 59A-29(e)(1), 59B-29(e)(1). A similar rule has applied to yellow and green taxicabs (collectively, "taxicabs," "taxis," or "cabs") for over two decades. See 35 R.C.N.Y. § 58-32(f). The TLC originally enacted these bans because, as the record reflects, passengers find in-ride advertisements-particularly, as relevant here, video advertisements-extremely annoying. However, in 2005, the TLC permitted a limited category of advertisements in taxis: those displayed on the screens of new equipment that the TLC required taxis to install ("Taxi TV"). This new equipment allows taxi riders, inter alia , to track the progress of their metered fare and pay by credit card. The TLC authorized advertising on Taxi TV to offset the cost to the taxi owners of installing the newly mandated equiрment.
Plaintiff-Appellee Vugo, Inc. ("Vugo") has challenged the rules banning advertisements in FHVs because it wants to sell an advertising software platform it developed for certain FHVs, including Ubers and Lyfts. Vugo primarily argues that the ban is impermissibly underinclusive under the First Amendment because the City's interest in enacting the ban bears no relationship to the City's justification for exempting Taxi TV advertising.
The parties agree that the prohibition on advertising in FHVs is a content-based restriction on commercial speech and, as such, is subject to intermediate scrutiny.
See
Central Hudson Gas & Elec. Corp. v. Public Servs. Comm'n
,
We respectfully disagree. First, we think there is a sufficient nexus here between the ban and its exception because both advance the City's interest in improving the overall passenger experience. Second,
Accordingly, we REVERSE the judgment of the district court and direct the entry of judgment in favor of the City.
BACKGROUND
I. Factual History
The material facts are undisputed. "[T]ransporting passengers for hire by motor vehicle in the city of New York is affected with a public interest, is a vital and integral part of the transportation system of the city, and must therefore be supervised, regulated and controlled by the city." N.Y.C. Admin. Code § 19-501 (legislative findings). The New York City Council has tasked the TLC with regulating this critical component of the City's transportation system, which includes both taxis and FHVs. N.Y.C. Charter §§ 2300, 2303(a).
The term "taxicab" refers to yellow cabs and green cabs, which are the only vehicles the TLC allows to pick up passengers by street hail in New York City. See N.Y.C. Admin. Code § 19-504(1). 1 FHVs, by contrast, are vehicles "other than a taxicab" that "carr[y] passengers for hire in the city." N.Y.C. Admin. Code § 19-502(g). FHV rides are prearranged through businesses licensed by the TLC, such as limousine companies and, more common today, companies like Uber and Lyft. See N.Y.C. Admin. Code § 19-516(a) ("For-hire vehicles ... may accept passengers only on the basis of telephоne contract or prearrangement."). FHVs comprise a growing share of the passenger vehicle market. As of August 2016, the TLC regulated 94,000 vehicles. More than seventy-five percent of these were FHVs. Around that same time, riders took approximately 370,000 daily trips in yellow taxis and 213,000 daily trips in Uber and Lyft vehicles.
One of the TLC's statutory mandates is to "promot[e] and protect[ ] ... public comfort and convenience." N.Y.C. Charter § 2300. Consistent with this mandate, the TLC sets comprehensive standards for driver licensing, vehicle equipment, and vehicle markings in both taxis and FHVs. For example, the TLC can deny an applicant a license if the applicant has assaulted a passenger or unlawfully denied a passenger service in the past two years,
Also in furtherance of this mandate to promote passenger comfort, the TLC-for more than two decades-has prohibited any advertising inside taxicabs except as specifically authorized by the Commission. See App. at 288, 303-04 (original prohibition, March 1, 1996) ("An owner shall not display inside a taxicab any advertising or other notice not specifically authorized by these [taxicab owner] rules or the Commission's Marking Specifications for Taxicabs unless approved by the Commission."); 35 R.C.N.Y. § 58-32(f) (current prohibition) ("An Owner must not display inside a Taxicab any advertising or other notice not specifically authorized by these rules or the Commission's Marking Specifications for Taxicabs unless approved by the Commission.").
The TLC codified similar rules for FHVs in 1999, which are at issue in this case. 35 R.C.N.Y. §§ 59A-29(e)(1), 59B-29(e)(1). 2 Section 59A-29(e) provides that an "[o]wner must not display any advertising on the exterior or the interior of a For-Hire Vehicle unless the advertising has been authorized by the Commission." Section 59B-29(e)(1), which applies to owners of for-hire base stations-central facilities that manage, organize, and/or dispatch FHVs-contains essentially the same restriction. See 35 R.C.N.Y. § 59B-29(e)(1) ("A Vehicle must not display advertising on the outside or the inside unless the Commission has authorized the advertising and has given the Vehicle Owner a permit specifying that the advertising complies with the Administrative Code."). Violation of either section subjects the violator to a $50 fine. See 35 R.C.N.Y. §§ 59A-29(3), 59B-29(e)(1). The City's position throughout this litigation has been that "[t]he Challenged Rules govern advertising on posters, stickers, or any other format in which one could promote a product or service." City's Reply Mem. of Law in Support of Cross-Motion for Summary Judgment at 10, ECF No. 53, Vugo, Inc. v. City of New York , No. 1:15-cv-8253 (S.D.N.Y. Sept. 30, 2016).
Thе City's prohibition on in-ride advertising has only one exception: advertisements on Taxi TV. TLC authorized this limited form of interior advertising in taxis in May 2005 to allow taxi owners to offset the cost of a new technology system that TLC had recently required vehicle owners to purchase and install. See App. at 95 (deposition testimony of Ryan Wanttaja, Deputy General Counsel for the TLC) (the TLC permits interior advertising in yellow and green taxis "principally because of the-or solely because they offset the cost of these mandatory pieces of equipment that provide the additional functionality that the TLC requires").
This new hardware and software system, referred to as the Technology Passenger Enhancements Program ("TPEP") for yellow taxis and the Livery Passenger Enhancements Program ("LPEP") for green taxis, advances the TLC's mandate to innovate and experiment with new designs
The TLC required vehicle owners to pay for the TPEP and LPEP systems. Because the TLC did not expect that the "significant" cost of installing these systems would be offset by any increase in business, App. at 297, the TLC authorized advertising on the passenger information monitors as a means of reducing the expense for vehicle owners. 3 See 35 R.C.N.Y. § 58-32(f) (exempting "[a]dvertising on the Technology System," subject to certain restrictions, from the general ban on interior advertising); App. at 297 ("TLC authorized advertising in [taxis] simply as a means by which owners could offset the new cost."). The system allows limited advertising, known as "Taxi TV." 35 R.C.N.Y. § 58-32(f) (exempting "[a]dvertising on the Technology System," subject to certain restrictions, from the general ban on interior advertising).
In response to passenger dissatisfaction with Taxi TV, the TLC has sought to again entirely eliminate advertising from taxicabs. Approximately one-third of TLC survey respondents named Taxi TV as the one thing they disliked most about taxis. The commissioner оf the TLC expressed the need to be "responsive" to passengers who found Taxi TV to be "somewhat of an invasion." App. at 453. The TLC recently completed a pilot program to test new technologies that could maintain the functionality of TPEP and LPEP without Taxi TV. The executive director of the taxi drivers' union reported that the drivers responded to the proposed change with "utter elation." App. at 458. After the pilot program concluded in June 2018, TLC eliminated its requirement that taxicab technology systems contain monitors to display advertisements.
See
35 R.C.N.Y. § 66-24(c). Instead, taxi owners must install any technology system that provides certain core functions, including data collection, credit card payment, and communication between drivers and TLC, but that system need not have a monitor.
See
FHVs do not have technology akin to the TPEP and LPEP systems. Indeed, such technology is not necessary in FHVs. FHV fares are usually sеt in advance (and not subject to the metered rates set for street-hail vehicles), so passengers do not need real-time information about their fare. In addition, FHV passengers less frequently need a device that accepts in-car payment since payment is usually made in advance via a credit card on file.
Vugo, a Minnesota-based technology company, has developed a system for displaying video advertisements to FHV passengers. Under Vugo's business model, the vehicle driver purchases an internet-connected tablet and downloads the Vugo app. The driver mounts the tablet on the back of the front seat's headrest so that it faces the passenger seats at еye level. When the passenger's trip begins, the tablet automatically plays advertisements, mostly in video format. Passengers cannot turn off or mute the advertisements (unlike Taxi TV, which can be muted or turned off). Passengers can, however, use on-screen controls to reduce the volume to a "near-mute" level. App. at 180-81. Advertisers pay Vugo, and Vugo splits this ad revenue with drivers. When Vugo contacted the TLC about its plans to enter the New York City market, the TLC confirmed that it did not allow advertising in FHVs.
II. Procedural History
Vugo sued the City on October 20, 2015, alleging that the TLC's prohibition on interior advertising in FHVs violates the First Amendment and requesting that the court declare the rules unconstitutional and enjoin their enforcement. Both parties moved for summary judgment. The district court (Abrams, J. ) granted summary judgment for Vugo. 4 The court concluded that, while the City had articulated a substantial interest in promoting passenger comfort, there was an insufficient fit between the ban on in-ride advertising and the City's asserted interest because the advertisements on Taxi TV are no less annoying than advertisements in FHVs would be. Moreover, the district court held, the City could have furthered its stated interest by less restrictive means, such as requiring advertising displays in FHVs to contain an on-off switch or mute button.
DISCUSSION
I. Standard of Review
We review a decision on cross-motions for summary judgment
de novo
, examining each motion "on its own merits."
Chandok v. Klessig
,
II. The City's Prohibition on In-Ride Advertising Does Not Violate the First Amendment
The challenged rules affect only commercial advertising.
5
"The First
A. The Proper Level of Scrutiny
We must first briefly address what "intermediate scrutiny" under Central Hudson requires after Sorrell . Although Vugo expressly concedes that Central Hudson 's intermediate scrutiny test applies, Vugo also contends that content-based restrictions on truthful commercial advertising are "presumptively invalid" after Sorrell , Appellee Br. at 18, implying that something more akin to strict scrutiny applies. 6 We hold that the Central Hudson test still applies to commercial speech restrictions.
The Supreme Court has held that "commercial speech enjoys a limited measure of protection, commensurate with its subordinate position in the scale of First Amendment values, and is subject to modes of regulation that might be impermissible in the realm of noncommercial expression."
Bd. of Trustees of State Univ. of New York v. Fox
,
Following
Sorrell
, this Court has continued to apply
Central Hudson
's intermediate scrutiny test to commercial speech restrictions.
See
Centro de la Comunidad Hispana de Locust Valley v. Town of Oyster Bay
,
We agree with our sister circuits that have held that Sorrell leaves the Central Hudson regime in place, and accordingly we assess the constitutionality of the City's ban under the Central Hudson standard. 7
Under
Central Hudson
, we must determine whether: (1) the speech restriction concerns lawful activity; (2) the City's asserted interest is substantial; (3) the prohibition "directly advances" that interest; and (4) the prohibition is no more extensive than necessary to serve that interest.
1. Prong Two: The City's Asserted Interest
The district court held that the City's asserted interest-to protect passengers from the annoying sight and sound of in-ride advertisements-is substantial. We agree.
Vugo's argument to the contrary mistakes the relevant inquiry. Vugo argues that the City's ban was "designed" to suppress speech that "some people didn't like," and that the City cannot ban advertisements just because it "believes the content of advertising is 'uniquely annoying.' " Appellee Br. at 23 (quoting City's Mеm. of Law in Support of Cross-Motion for Summary Judgment at 20, ECF No. 48,
Vugo, Inc. v. City of New York
, No. 1:15-cv-08253 (S.D.N.Y. Aug. 26, 2016));
see also
Tam
,
The second prong of
Central Hudson
, however, asks us to evaluate the City's
asserted
goal in enacting the regulation. Here, the City's asserted goal is to protect its citizens from the offensive sight and sound of advertisements-not their content-while they are traveling through the city by car.
8
That interest is clearly substantial. City governments have a substantial interest in cultivating "esthetic values" and preventing "undue annoyance."
Members of City Council of City of Los Angeles v. Taxpayers for Vincent
,
2. Prongs Three and Four: "Reasonable Fit"
"The last two steps in the [
Central Hudson
] analysis have been considered, somewhat in tandem, to determine if there is a sufficient 'fit between the regulator's ends and the means chosen to accomplish those ends.' "
Bad Frog Brewery, Inc. v. N.Y. State Liquor Auth.
,
i. Prong Three
To satisfy the third prong of
Central Hudson
, the City must demonstrate that (1) "the harms it recites are real," and (2) "that its restriction will in fact alleviate them to a material degree."
Edenfield v. Fane
,
As an initial matter, we conclude that the City has substantiated the harm it seeks to prevent. The Supreme Court has "permitted litigants to justify speech restrictions by reference to studies and anecdotes," such as those submitted by the City.
Lorillard Tobacco Co. v. Reilly
,
Next, we must consider whether the City's prohibition on advertising in taxicabs and FHVs adequately alleviates
The City's in-ride advertising ban is not unconstitutionally underinclusive.
First
, the ban materially advances the City's interest in reducing passenger annoyance, notwithstanding the Taxi TV exception.
10
Second
, the City's justification for the Taxi TV exception is sufficiently related to its interest in enacting the ban because both are aimed at improving the overall in-ride experience, albeit in different ways: the Taxi TV exception facilitated the installation of equipment that (among other things) enabled passengers to pay for taxi rides by credit card, which is their decided preference, and the ban applicable to FHVs frees passengers from advertisements, which they find annoying.
Third
, the ban would survive intermediate scrutiny even if the exception and the ban were not related because such a relationship is not an independent requirement under the First Amendment. The "relationship test" is an analytical tool that in some circumstances indicates that a speech restriction is unconstitutional because it casts doubt on whether a regulation is " 'part of a substantial effort to advance a valid state interest.' "
Clear Channel
,
a. The Taxi TV Exception Does Not Undermine the City's Asserted Interest
The exception for Taxi TV does not render the ban ineffective. This case is unlike
Nor is the exception so large that the rules fail to directly advance New York's interest in reducing the number of annoying ads passengers must endure.
See
Discovery Network
,
b. The Justification for the Taxi TV Exception Is Not Too Attenuated from the Justification for the Commercial Advertising Ban
Vugo next argues that the ban is unconstitutional because the justification
Vugo suggests that the "relationship test" set out in Discovery Network requires that the justification for the exception appeal to the identical interest asserted by the City in supporting the restriction. On that view, the only legitimate basis for exempting any advertisements from the City's ban would be that such advertisements are less annoying than others. See Special App. at 16-17. According to Vugo, because the City has not argued that advertisements on Taxi TV are any less annoying than advertisements on Vugo's platform would be, the exception is not sufficiently related to the City's asserted interest in passing the ban ( i.e. , sparing riders from annoying advertisements).
But
Discovery Network
does not impose such a stringent standard. The Supreme Court held only that distinctions that bear "no relationship
whatsoever
to the particular interests that the city ha[d] asserted" are impermissible.
Discovery Network
,
Moreover, Vugo's interpretation of the "relationship" required under
Discovery Network
conflicts with the Supreme Court's "reject[ion of] 'the argument that a prohibition against the use of unattractive signs cannot be justified on [a]esthetic grounds if it fails to apply to all equally unattractive signs wherever they might be located.' "
Clear Channel
,
Here, the City's basis for distinguishing between advertisements on Taxi TV and all other advertisements in taxis and FHVs
c. The "Relationship Test" in Discovery Network Is an Analytical Tool
Separately, even if there were not a sufficient nexus between the City's justifications for the rule and its exception, the City's ban would still pass muster because such a relationship is not an independent requirement under the First Amendment. Although Vugo insists that the First Amendment categorically requires a relationship between the basis for a ban on commercial speech and the justification for any exceptions to that ban, we find no support for that position in the Supreme Court's decisions addressing regulation of commercial speech, save for a few lines in
Discovery Network
. Placed in the context of
Central Hudson
's third prong, the relationship between a government's interest in restricting speech and its justification for exempting some speech from that restriction is not a freestanding requirement but rather an analytical tool for assessing whether а regulation is " 'part of a substantial effort to advance a valid state interest.' "
Clear Channel
,
Sometimes, a disconnect between the government's interest in a speech restriction and the government's justification for exempting certain speech from that restriction reveals that the government is disfavoring a particular speaker or that a law does not actually advance a compelling state interest. That was true in
Discovery Network
, in which the Supreme Court concluded that the newspaper exception to Cincinnati's newsrack ban both reflected bias against commercial speech and rendered the ban ineffective.
But that is not always the case. The absence of a relationship is not-in its own right-constitutionally fatal. Indeed, exceptions to speech restrictions can be justified on grounds not related to the government's interest in enacting the restriction, so long as the exceptions do not "compromise[ ]" the "validity" of the government's asserted interest.
Taxpayers for Vincent
,
On the logic of these decisions, the First Amendment allows a government to carve out exceptions to a speech restriction for reasons unrelated to the government's basis for enacting the restriction in the first place.
See
Nat'l Fed'n of the Blind
,
In this case, although the City's reason for excluding Taxi TV from its in-ride advertisement ban is not directly related to the City's interests in enacting the ban, the exclusion is nevertheless rational.
12
See
ii. Prong Four
Finally, under
Central Hudson
's fourth prong, the City must establish "that the regulation [does] not burden substantially more speech than is necessary to further the government's legitimate interests."
Clear Channel
,
The City's determination here about how to regulate in-ride advertising is "reasonable."
Clear Channel
,
Here, too, we must defer to the City's judgment. The record shows that, notwithstanding the limitations the City places оn Taxi TVs, passengers find the advertisements on Taxi TV annoying. Therefore, a restriction on the size of the devices on which FHV drivers would run Vugo's platform
Thus, we conclude that the City's determination that banning ads altogether is the most effective approach wаs reasonable. Like the ban on billboards in
Taxpayers for Vincent
,
Metromedia
, and
Clear Channel
, the City's prohibition is the "most direct and perhaps the only effective approach" to prevent the harms of intrusive and annoying advertisements.
Taxpayers for Vincent
,
CONCLUSION
The City's prohibition on advertising in FHVs does not violate the First Amendment under Central Hudson . The City's asserted interest is substantial, the prohibition "directly advances" that interest, and the prohibition is no more extensive than necessary to serve that interest. Accordingly, we REVERSE the judgment of the district court and direct the entry of judgment in favor of the City.
Notes
Green cabs are formally classified as for-hire vehicles, but this opinion, following the lead of the district court and the parties, defines the term "taxicab" as including green cabs because green cabs are allowed to display advertisements on Taxi TV.
Sections 59A-29(e) and 59B-29(e) have been renumbered since their original passage. There have also been minor word revisions. None of those changes substantively altered the rule adopted by the TLC on August 5, 1999.
Vehicle owners do not directly receive the advertising revenue. Instead, according to the TLC, TPEP and LPEP providers sell the systems at a discount-the TLC estimates for forty to sixty percent less-when the providers can profit from advertising displayed on the screens.
The district court's judgment has been stayed pending this appeal.
Although the advertising ban, on its face, also covers non-commercial advertising-and there is record evidence that the ban has, in fact, been applied to non-commercial advertising-the parties and the district court proceeded on the assumption that the ban applies only to commercial speech. Since the parties agree on appeal that the ban applies only to commercial advertising, we assume that is the case for purposes of this decisiоn.
The City does not dispute that the ban, construed as applying only to commercial advertising, is content-based. We see no reason to conclude otherwise. "Government regulation of speech is content-based if a law applies to particular speech because of the topic discussed or the idea or message expressed."
Reed v. Town of Gilbert
, --- U.S. ----,
In addition, even if strict scrutiny applied to
some
commercial speech restrictions after
Sorrell
, we doubt it would apply to this one. The statute in
Sorrell
was content- and speaker-based in that it targeted a single category of speech by a single category of speaker: marketing carried out by pharmaceutical manufacturers.
Sorrell
,
Here, by contrast, the City's ban covers the full range of commercial advertising. There is no suggestion that the City is trying to "quiet[ ]" truthful speech with a particular viewpoint that it "fear[s] ... might persuade."
In support of this argument, the City submitted evidence that passengers find the fact, not the content, of in-ride advertisements annoying.
Moreover, we see no reason why the City may not seek to alleviate a harm when the harm is experienced by forty-one percent of the population.
Vugo does not contend that the government's real end is to discriminate on the basis of message.
The number of FHV rides relative to taxicab rides continues to grow. See, e.g. , Johana Bhuiyan, Ride-hail apps like Uber and Lyft generated 65 percent more rides than taxis did in New York in 2017 , VOX (Mar. 15, 2018, 5:16 PM), https://www.vox.com/2018/3/15/17126058/uber-lyft-taxis-new-york-city-rides (in December 2017, FHVs made 65% more pickups than taxis).
As already noted, supra note 10, Vugo does not argue that the City was in fact motivated by a desire to restrict a particular category of speech, rather than its stated desire to improve the in-ride experience.
