Grandfathering and Amortization

In Flagstaff, AZ, legal battle, courts ruled businesses can change the faces of their grandfathered signs.

The following article originally appeared in the July 2000 issue of Signs of the Times magazine.

By Jennifer Flinchpaugh

“The provision stipulated that if a grandfathered sign’s message was changed, or if more than 10% of any part of the sign was modified, it must be brought into conformance.”

The neighboring Grand Canyon is more than a Flagstaff, AZ, landmark. Its width also approximates the gap that once existed between Flagstaff officials and several business owners – at least on the matter of signage. The gap formed in 1997 when Flagstaff revised its sign code. Included in the new code was a provision restricting the height of all new pole signs – even pole signs along highways – to 8-12 ft. Existing, non-conforming pole signs were grandfathered. However, the provision stipulated that if a grandfathered sign’s message was changed, or if more than 10% of any part of the sign was modified, it must be brought into conformance.

Joining forces
Shortly after the sign code was implemented, the Motel 6 hotel chain – of Tom Beaudette, “We’ll leave the light on for you” fame adopted a new corporate logo. New sign faces, with the company’s new registered-trade- mark logo, were to replace existing signs, including those at Motel 6’s four Flagstaff locations.

When staff members of Pearson’s Sign Co. (Phoenix), the sign company Motel 6 had contracted for the change-over, applied for appropriate city permits, they were refused. Flagstaff officials cited the sign code’s “10% rule” as reason for the denial.

According to Phoenix attorney David K. Jones, “Motel 6 had several hotels near freeways where cars travel at speeds of 75 mph. Removing the hotels’ [40- and 50-ft-tall] signs would have been devastating to business. It may have been devastating to the point of being fatal.” As such, Motel 6 hired Jones to fight the sign code.

Circle K, a convenience grocery store, faced a similar situation. Like Motel 6, the chain underwent a logo revision and wanted to change its Flagstaff store signs accordingly. Although Circle K’s stores were not near highways, they were located on major streets and relied heavily on impulse business generated by signage. Because changing sign faces would mean relinquishing its tall pole signs, Circle K also hired Jones to pursue legal action.

Greentree Village Shopping Center likewise hired Jones to combat its sign-code problem. An ice-cream shop moved out of the shopping center’s stand-alone building, and a Japanese restaurant moved in. Green- tree wanted to change the face of its grandfathered metal and masonry sign to identify the new restaurant. The City would not grant the permit unless Greentree rebuilt the entire sign structure at a conforming, shorter height.

Jones said the three companies banned together in their legal battle. He served as primary legal counsel, but he also corresponded with a Motel 6 corporate lawyer.

“Before we went to court, we asked FlagstafPs city-council members if they wanted to stick with their guns or allow the signs to have their faces replaced. They weren’t open to any options or alternatives, so we went to trial court,” Jones says.

Point, counterpoint
In court, Jones offered four primary arguments. First, he pointed out that Flagstaff’s own sign code states any “normal,” but non-conforming, grandfathered sign use is allowed to continue. Jones then argued that because changing faces is an inherent part of

“The Flagstaff case could serve as a precedent not only in Arizona towns, but in other cities whose states have laws protecting sign repairs and alterations,” a sign’s normal use, it could not be prohibited.

Supporting this first argument, Jones cited an Arizona law stating that cities must allow for reasonable sign repairs and alterations. And he provided an affidavit from Pearson’s Sign Co. describing the customary use of cabinet signs, as well as technical information about what is required to change a sign face (removing retainers, installing a new face, replacing retainers).

Second, Jones noted the absurdity of the sign code’s 10% provision. He says, “I pointed out that if you took the code’s language literally, you might end up having to replace an entire sign, when you only intended to replace its stripped bolts. Plus, there’s no way to replace 10% or less of a sign face, which is a minimal part of the sign’s value.”

Third, he argued constitutionality. “The code is unconstitutional because, in effect, it regulates the content of a sign. If a sign contains an old message, then it can remain in- definitely. But if you wish to change its message, you must give up property rights,” Jones explains.

Finally, the code potentially violated the Lanham Act, the federal law that protects registered trademarks and prevents them from being altered.

The City of Flagstaff, in turn, argued its desire to have all signs conform to new rules. City officials also said they have a general policy favoring the elimination of non-conformities.

And the winner is . . .
After hearing arguments on both sides, the state court ruled in favor of the plaintiffs. In October 1998, the court ordered the city to issue the permits and awarded Motel 6, Circle K and Greentree S 10,000 in attorney fees.

“The Arizona state law permitting reasonable repairs and alterations is what the court hung its hat on,” Jones explains. “Courts follow a general legal principle whereby they only decide constitutional issues if they have to. Since there was a state law being violated, the court didn’t even have to address the constitutional issue or the federal law [Lanham Act].”

The court did rule the city could maintain its general policy for eliminating non-conformities, but said the city must eliminate such non-conformities in a fair and reasonable manner.

After losing in state court, the City of Flagstaff appealed; in mid-1999, the city lost the appeal on the same grounds. The Court of Appeals issued a written opinion upholding the sign owners’ rights to change the faces of the signs without losing their non-conformity. The opinion is published as Motel 6 v. City of Flagstaff, Ariz., 991 P.2d 272 (App.2000).

The fallout
Since winning the case, Motel 6, Circle K and Greentree have all changed their signs. The City of Flagstaff, however, has not changed its sign code, nor have countless other cities with similar provisions regarding grandfathered signage. In fact, Jones estimates a third of Arizona towns have sign provisions violating the same state law that Flagstaff s code does.

Jones says the Flagstaff case could serve as a precedent not only in Arizona towns, but in other cities whose states have laws protecting sign repairs and alterations. In states without such laws, similar provisions for grandfathered signs would have to be tried on their constitutionality and their potential violation of the Lanham Act.

Why don’t more businesses and sign companies fight their cities unfair sign restrictions? “Most believe that if it’s in the code, it must be legal. They just don’t know better,” Jones concludes.

 

Posted in Blog: Rhetorical.