# Petition — South Dakota v. Lewis

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1981
- **Citation:** 451 U.S. 984

## Text

NO. | ' FEB 4& 198t
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2 L. STEVAS,

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1981

STATE OF SOUTH DAKOTA
Petitioner,
v.

NEIL GOLDSCHMIDT, UNITED STATES
SECRETARY OF TRANSPORTATION;
WILLIAM M. COX, FEDERAL HIGHWAY
ADMINISTRATOR;

ARTHUR JOHNSON, DIVISION HIGHWAY
ADMINISTRATOR;

AND THE UNITED STATES OF AMERICA

PETITION FOR WRIT OF CERTIORARI
TO THE EIGHTH CIRCUIT COURT OF APPEALS,
AND THE USS. DISTRICT COURT,
DISTRICT OF SOUTH DAKOTA,
CENTRAL DIVISION

Counsel of Record:

Ronald G. Schmidt

Special Assistant Attorney General
State of South Dakota

P.O. Box 8

Pierre, South Dakota 57501
Telephone: (605) 224-0461

STATE PUBLISHING COMPANY, PIERRE, SD 57501

QUESTION PRESENTED
Whether 23 USC 131:

(1) Violates the propriety requirement of the neces-
sary and proper clause by the use of economic coercion,
or a penalty as an improper means of inducing state
agreements, and is but an indirect method of vitiating
the limitation of the Tenth Amendment (National
League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465
(1976) prohibiting Congress from directly displacing
traditionally reserved state powers i.e., zoning and
land use regulation;

(2) Violates the necessity requirement of the neces-
sary and proper clause by giving the states the option
of complying, or of not complying with a stated na-
tional policy, and of thus subverting any assumed con-
stitutional necessity or justification for the exercise of
a national power;

(3) Is beyond the power of Congress as an attempt to
regulate the state’s governance of commerce, as op-
posed to commerce itself; and

(4) Violates all notions of comity underlying constitu-
tional federal-state relations through the use of eco-
nomic coercion, or penalties to induce state action.

INDEX

QUESTIONS PRESENTED
ty sia cay wv NEWS a eke awe ORO
IRENA Shear an ah er a eae ome ae
EEE a a ee Oe
os hd goo adware
mremeoms For Grantinl WIE 6 oa siicc ccc ccseneess
ea le ee vcd wee

Appendix A

Opinion of U.S. District Court, District of
South Dakota, Central Division of April 7,
kk Es S| Pre ree re Te rere Tree rer

Appendix B

Judgment of U.S. District Court, District of
South Dakota, Central Division of April 9,

oe ee ee en re eee Xxi

Appendix C

Opinion of U.S. District Court, District of
South Dakota, Central Division, of April 7,

I ts wd ress Oy vet sa 640.08 Xxill

Appendix D

Judgment of U.S. District Court, District of
South Dakota, Central Division of April 9,

Ne eye a ahs 5s ea ob 5aed sO SS lvii

Appendix E

Opinion of Eighth Circuit Court of Appeals of
December 12, 1980 (No. 80-1358/59 Con-

NER A SD ee, Oe tt i

Appendix F

Order of Eighth Circuit Court of Appeals
denying rehearing and suggestions of rehear-
ing en banc of January 3, 1981 (No. 80-1358/59). . . Ixiii

Appendix G

Judgment of Eighth Circuit Court of Appeals
of December 12, 1980, filed below on January
| Perry rT er ere eee PeTerey rere rere Ixv

Appendix H
ee RE nears ce cC ee eter Kareawenes Ixvii
Appendix I

H.B. 786, 1977 South Dakota Legislature,
OE as GO i gc ec pe bescceccakeses Ixxvii

Appendix J

Article 1, Section 8 and Tenth Amendment,
Chee oN rs cies hae ome etter rae XCiil

Appendix K

July 11, 1977 letter from U.S. Secretary of
Transportation, Brock Adams, to South
Dakota Governor Richard F. Kneip ........... xevii

Appendix L
23 CFR Highway Beautification ................. ci

TABLE OF CASES
CASES: PAGE

Brown v. Environmental Protection Agency,
521 F2d 827 (9th Cir. 1975), vacated and
remanded 431 U.S. 99, 97 S.Ct. 1635, (Brown I)
566 F2d 665 (9th Cir. 1977) (Brown II)......... 19, 20

Cleary v. Bolger, 83 S.Ct. 385, 371 U.S. 392 (1963) ...11

District of Columbia v. Train, 521 F2d 971
(D.C.CIR. 1975), vacated and remanded 431

Se EE oe hs eG Sea eGR Lad ee ees 19, 20
Euclid v. Ambler Realty Co., 47 S.Ct. 114, 272

Pa ee ol cl eee aa es hee eee nee ae 21
Hartsville Oil Mill v. U.S., 46 S.Ct. 389, 271
Ue oe a ee een pa oceans bean 14

Leiter Minerals, Inc. v. U.S., T7 S.Ct. 287, 352
U.S. 220 (1957), reh. den. 77 S.Ct. 553, 352 U.S.
Da RRA lat ng LAG eet cy Marat pia Oe a ep regey Hl ae mr 11

McCulloch v. Maryland 4 Wheat. 316 (1819) .. 12,15, 18

National League of Cities v. Usery, 96 S.Ct.
2465, 426 U.S. SBS IGT)... oc cc cccecs 17, 18, 20, 22

Pure Oil Co. v. Tucker, 164 F2d 945 (CCA8)......... 14

State of Oklahoma v. Civil Service
Commission, 67 S.Ct. 544, 330 U.S. 127

tC” GRAN ATE fy PR Eon des Pat as ARs ur uy Pe 3, 5, 11, 16, 17
Steward Machine Co. v. Davis, 57 S.Ct. 883,

Be We oe ick cc ek ces RPE Rees 22
U.S. v. Bethlehem Steel Corp., 62 S.Ct. 581,

EG Rises Ce os os a oo hea hd ee eee 14

United States v. Butler, 56 S.Ct. 312, 297 U.S.
DO eos ok ewe eee eke laees 11,15, 16,17,19

Younger v. Harris, 91 S.Ct. 746, 401 U.S. 37

CWS cb ee kn 6b eee h eee eesbtewwnsssven 12,17
U.S. CONSTITUTION

Article I, Section 8 ................0 ee eee 3, 12,15, 18

Tenth Amendment ...............e cece eee ee ee Oye
STATUTES AND RULES

BO USE 104 2. ccc ccc ccc ccc cece ccc cccccece 3, 5,13

3. ie F. ) Sr 3,4, 5,6, 7,10, 11,

12, 16, 18, 19, 20, 21, 22, 23

BO UBC USL (1)... ccc ccc cece cece cece eccccccs 3,4

Be UG 1ZOE ow ccc cece ccc cece cesceccnces 3,4,5
H.B. 786, 1977 South Dakota Legislature,

codified as SDCL 31-29................0..0200058. 3

23 CFR Highways, Part 750,
Highway Beautification. ........ 0. cee eee 5)
TEXT BOOKS

A Commentary on the U.S. Constitution, Schwartz .13

Restatement of the Law of Contracts.............. 13

Williston On Contracts ...... 0.02 13,14

25 Am. Jr. 2d 351 Duress And Undue Influence..... 13

MISCELLANEOUS
Federalist (No. 79)... 0.0... ccc ce ee ee ee eee eee 14

IN THE

©.PREME COURT OF THE UNITED STATES

NO.

OCTOBER TERM, 1981

STATE OF SOUTH DAKOTA
Petitioner,
v.

NEIL GOLDSCHMIDT, UNITED STATES
SECRETARY OF TRANSPORTATION;
WILLIAM M. COX, FEDERAL HIGHWAY
ADMINISTRATOR;

ARTHUR JOHNSON, DIVISION HIGHWAY
ADMINISTRATOR;

AND THE UNITED STATES OF AMERICA

PETITION FOR WRIT OF CERTIORARI
TO THE EIGHTH CIRCUIT COURT OF APPEALS,
AND THE USS. DISTRICT COURT,
DISTRICT OF SOUTH DAKOTA,
CENTRAL DIVISION

2
To The Honorable, The Chief Justice and Associate
Justices of the Supreme Court of the United States:

The State of South Dakota, Petitioner herein, prays
that a writ of certiorari issue to review the opinions
and judgments of the United States District Court,
District of South Dakota, Central Division, entered in
the above-entitled case on April 7, 1980, and of the
Eighth Circuit Court of Appeals rendered on Appeal
herein and entered on December 12, 1980, and the Peti-
tion for Rehearing and suggestions for rehearing en
bane denied by such Appellate Court on January 2,
1981.

OPINIONS BELOW

The opinions of the United States District Court are
unreported and were rendered on April 7, 1980. That
court’s opinions and judgments are printed herein as
Appendices A-D, infra.

The opinion of the Eighth Circuit Court of Appeals is
unreported and with the judgment is printed herein as
Appendices E-F, infra, and were filed December 12,
1980. The judgment was filed below on January 23,
1981.

The order of the Eighth Circuit Court of Appeals
denying the petition for rehearing and suggestions for
rehearing en bane was rendered January 2, 1981, and
is also printed herein in Appendix G, infra.

JURISDICTION
The opinion and judgment of the Eighth Circuit

Court of Appeals was entered on the 12th day of
December, 1980. (Appendices E-F)

A timely petition with suggestions of hearing en
bane was denied by the Eighth Circuit Court of Ap-

3
peals on the 2nd day of January, 1981. (Appendix E) Its

judgment was filed in the District Court on January
23, 1981.

The jurisdiction of the United States Supreme Court
is invoked under 23 USC i31(1), expressly providing
for review by this Court of disputes under this Act be-
tween a state and the United States Government upon
certiorari pursuant to 28 USC 1254. (Appendix H)

Where the state has a legitimate right to receive
federal highway trust funds by virtue of statute, 23
USC 104, violation of such right creates a justiciable
claim even without specific statutory authorization for
judicial review. State of Oklahoma v. U.S. Civil Ser-
vice Commission 67 S.Ct. 544 at 550, 330 U.S. 127
(1947).

STATUTES INVOLVED

The Statutes involved in this matter are 23 USC 131,
as amended, and H.B. 786, 1977 South Dakota
Legislature, codified as SDCL 31-29, both printed
herein as Appendices H and I, infra.

The Constitutional provisions involved herein are
Article I, Section 8 and the Tenth Amendment of the
United States Constitution and are also printed herein
as Appendix J, infra.

STATEMENT OF CASE

This Petition concerns the potential reapportion-
ment by the United States Secretary of Transporta-
tion to other states of in excess of $4 million of South
Dakota’s Fiscal Year 1978 Federal Highway Trust
Fund apportionment otherwise legally belonging to
Petitioner as provided by 23 USC 104. The U.S. Secre-
tary of Transportation made an administrative inter-

4

pretation that South Dakota had not complied with the
Federal Highway Beautification program, 23 USC 131,
and rules promulgated thereunder, and penalized the
state by reducing its federal highway funds ten per-
cent. (Appendix K)

The state requested an administrative hearing pur-
suant to 23 USC 131. The hearing examiner found the
state had made a “good faith” effort to comply with the
federal law. The Secretary ignored the hearing ex-
aminer’s findings and conclusions and ordered that the
penalty be made permanent.

The state as provided by 23 USC 131(1) niade a time-
ly appeal of such administrative decision to the United
States District Court, District of South Dakota, Cen-
tral Division. South Dakota raised numerous Constitu-
tional issues in both the administrative proceeding and
appeal to the Federal District Court (No. 78-3051) and,
additionally, had initiated a separate Constitutional
test case (No. 77-3039) attacking the constitutionality
of 23 USC 131. The cases were consolidated and the
Federal District Court rendered opinions and judg-
ments adverse to the state in both cases. (Appendices
A-D)

Appeals as specifically authorized by 23 USC 131(1)
were taken from both adverse decisions and judg-
ments to the United States Court of Appeals for the
Eighth Circuit where, again, consolidation was
ordered. The United States Court of Appeals fer the
Eighth Circuit affirmed the trial court on December
12, 1980, and denied the state’s petition for rehearing
and suggestions for rehearing en banc on January 2,
1981. (Appendices E-G)

Jurisdiction is provided by 23 USC 131(1) for review
of such decisions upon certiorari as provided in 28 USC

9)

1254, and under the principle of Oklahoma v. U.S. Civil
Service Commission, supra. 23 USC 131 provides that
the penalty withheld by the secretary shall not be
reapportioned to the other states as long as suit is
pending.

The penalty which the secretary in his discretion
may impose upon the states under 23 USC 131 is ten
percent of the state’s annual apportionment otherwise
due the state pursuant to 23 USC 104. But for the
penalty the state would automatically receive its full
apportionment pursuant to the statutory formula
enacted by Congress.

The penalty as is clear from the face of the statute
has nothing whatsoever to do with the actual use of the
Federal Highway Trust Funds for the construction of
the Federal-Aid Highway Systems. Thus, it is also
clear from the face of the statute that the penalty is
not in any way 4 conditioning of the actual use of the
funds for the purpose intended, but rather a sanction
for the states not agreeing to undertake an unrelated
object, i.e., state zoning and land use control.

Another material fact is that the U.S. Secretary of
Transportation has actually promulgated a wealth of
administrative rules codified in 23 CFR Highways,
Part 750, Highway Beautification, setting forth every
minute detail of the state’s zoning and land use regula-
tion and enforcement requirements. (Appendix L)

The record establishes that the penalty and threats
of sanction are in fact weapons of coercion.

The requirements imposed upon the states by 23
USC 131, under threat of loss of ten percent of their en-
tire annual Trust Fund apportionment, are to enact
laws and provide all funds and resources for the en-

6

forcement of the Federal scheme for regulating out-
door advertising in the corridor zone adjacent to
thousands of miles of selected federal-aid highways.

The South Dakota highway map (appearing as a trial
exhibit) discloses that the federal statute mandates a
strip zone wherein the state must exercise its jurisdic-
tion of enforcement of the federal regulatory scheme
for several thousands of miles adjacent to all In-
terstate and primary federal-aid highways across the
width and breadth of the state.

This strip zoned corridor covers all private property
within sight of and adjacent to the covered federal-aid
systems. Although other federal-aid highway systems
are not covered by the requirements of 23 USC 131,
the penalty, nevertheless, is imposed upon all federal-
aid highway system apportionments.

The so-called “effective control” of outdoor adver-
tising which must be imposed by the state within this
zoned corridor adjacent to the rights-of-way of the
covered systems means that the state to comply in the
eyes of the secretary must:

(1) Exercise its sovereign police power to prohibit
the erection and maintenance of covered outdoor
advertising within sight of the covered systems
to the full extent of this zoned corridor across the
width and breadth of the state;

(2) Exercise its sovereign powers of eminent domain
to cause the removal of existing non-conforming
outdoor advertising;

(3) Pay from state funds for twenty-five percent of
all “just compensation” due from such taking or
damaging of property rights;

(4) Pay for all legal expenses and costs associated

-
i

with such condemnation and other legal proceed-
ings and negotiations;

(5) Utilize the state court system for all such re-
quired legal proceedings; and

(6) Establish an acceptable surveillance program
which in the opinion of the secretary is
“effective” utilizing state money, personnel, and
resources for total enforcement of the federally
devised scheme pursuant to the federal rules and
regulations.

All of the foregoing state action as clear from the
record is subject to continuous monitoring and ap
proval by various federal Department of Transporta-
tion officials to conform to the myriad of federal rules,
internal Department of Transportation policy memo
randums and directives, and broad, unwritten adminis
trative discretion.

The material facts disclose that the state, in effect,
had no choice at all and that it suffered econumic
reprisals whether it complied or did not comply wit!
the mandates of 23 USC 131.

The material facts disclose that the state faced ir
reparable damage and economic injury no matter what
it chose to do.

The material facts in this regard were undisputed in
the record.

Consider:

Tourism is South Dakota's second largest industry.
Tourism obviously caters to the traveling public, most
ly strangers to the environs, and studies conducted by
Congress, itself, disciose that outdoor advertising is
the only effective means of communicating between
this industry and its constituents.

8

South Dakota, then, faced a dilemma. The record
demonstrates that compliance would severely injure
the state’s second largest industry and its own
finances through tax revenue losses.

The state through the University of South Dakota
had undertaken substantial economic studies to deter-
mine the effect of compliance and non-compliance. The
economic findings and conclusions were placed into the
record by the economist who had been responsible for
these studies.

The studies showed:

(1)

(2)

(3)

(4)

(6)

Over forty percent of South Dakota tourists
would not have stopped at the businesses where
they were interviewed without outdoor adver-
tising;

Thirty-seven percent of the travelers in South
Dakota would not have stopped in the absence of
non-conforming outdoor advertising;

Almost fifty percent of those travelers stopping
in the lesser populated counties would not have
done so in the absence of non-conforming outdoor
advertising;

In the absence of non-conforming ouidcoor adver-
tising over sixteen percent of the tourism
business would have been lost to the state;

This loss of business would have cost the state as
much as $81.5 million in lost income which is ap-
proximately two percent of the gross income of
the state;

The loss of income would have been twice as
great in the smaller more rural counties as in the
more populated ones thus creating some special

9

economic problems through business closings, un-
employment, etc.;

(7) The decrease in state sales tax revenue due to
the removal of outdoor advertising could equal as
much as $2.1 million per year, with local govern-
ments losing substantial amounts of rea] prop-
erty taxes through the closing of businesses;

(8) The loss of employment in the state could total as
many as two thousand eight hundred (2,800) jobs
with the impact being most severe on part-time
and seasonal employees, particularly students;
and

(9) The loss of tourism business in the state would
lead to a reduction in gasoline tax revenues thus
actually reducing the ability of the Highway De-
partment through its dedicated highway revenue
fund to match and obtain Federal Funds which, in
turn, would create a negative impact on the con-
struction and maintenance of the federal-aid
highway program itself.

Non-compliance, on the other hand, resulted in
equally serious fiscal and economic problems due to
the loss of ten percent across the board of all federal
highway-aid system apportionments.

The testimony and exhibits of the state highway of-
ficials disclose (1) that there was without the imposi-
tion of the sanction an existing highway finance crisis
in South Dakota at the time of the hearing and (2) the
imposition of the sanction would exacerbate an already
critical fiscal situation. The state’s testimony stands
unrefuted.

Consider:

The state transportation secretary testified that due

10
to the existing crisis, and not considering the ten per-
cent sanction, the state had had to lay off a number of
highway employees and cut back seriously on mainte-
nance due to a lack of highway funding.

Maintenance, which is a 100 , ercent state financial
responsibility since there are no federal-aid funds
available for maintenance of the federal-aid systems,
was without the penalty falling behind 140 miles per
year. The state was already 666 miles in arrears in its
maintenance program. The dramatic impact of infla-
tion and increased costs for petroleum products used
so heavily in highway maintenance were also steeply
increasing due to the energy crisis.

The state as disclosed from the material facts could
not win. 23 USC 131 presented the state with no choice
at all. Any alleged choice is illusory.

The hearing examiner had found that the state had
acted in good faith in attempting to comply.

The trial judge found and held that the state would
not have exercised its sovereign zoning powers with-
out the penalty of 23 USC 131.

The Eighth Circuit, like the trial judge, repeatedly
states that the provisions of 23 USC 131 constitute a
“penalty ’.

The result of 23 USC 131 either on its face or as ap-
plied to the state of South Dakota is penal or con-
stitutes economic coercion.

REASONS FOR GRANTING WRIT
I.

CERTIORARI SHOULD BE GRANTED
BECAUSE OF THE PRESENCE OF IMPOR-

1]

TANT AND DIFFICULT QUESTIONS OF
FEDERAL-STATE RELATIONS

This Court has clearly established that the presence
of important and difficult questions of Federal-State
relations is grounds for granting certiorari. Cleary v.
Bolger 83 S.Ct. 385, 371 US 392 (1963). Leiter Minerals,
Inc. v. United States 77 S.Ct. 287, 352 US 220 (1957)
reh. den. 77 S.Ct. 553, 352 US 1019.

A. 23 USC 131 violates the propriety requirement of
the necessary and proper clause, and further violates
all notions of comity underlying tederal-state relations.

The highway beautification act, 23, USC 131, man-
dates a state zoned corridor beyond and within sight of
certain federal-aid highways, and state regulation of
all outdoor advertising within such zone, subject to a
penalty of 10% of each annual highway fund entvtle-
ment for a state's failure to create the control zone and
regulate the private land use therein in accord with
the federal regulatory scheme. South Dakota exer-
cised its police power and created the zone but was
determined by the Secretary to have deviated from
the Federal regulatory scheme. The district court held
the State would not have exercised its sovereign zon-
ing powers but for the penalty. The appellate court
acknowledges 23 USC 131 to be penal, but affirmed.

It is constitutionally impermissible for Congress to
use a penalty to induce state action. Oklahoma v. Civil
Service Commission 67 S.Ct. 544, 330 U.S. 127 (1947).

It is constitutionally improper for the Congress to
use economic coercion to induce an agreement to parti-
cipate in a federal regulatory scheme. United States v.
Butler 56 S.Ct. 312, 297 U.S. 1 (1936).

Thus, 23 USC 131 which admittedly imposes a penal-

12

ty, and which is economically coercive under the undis-
puted facts, is a constitutionally improper exercise of
Congress’ power by the limitation of the necessary and
proper clause of Article 1, Section 8. It is repugnant to
the concepts of comity upon which federal-state rela-
tions are founded. Younger v. Harris 91 S.Ct. 746, 401
US 37 (1971).

Both the tax and spend powers and the necessary
and proper clause are part of Article I, Section 8 of the
United States Constitution.

All express congressional powers, including that of
tax and spend, depend upon the interpretation and ap-
plication of the necessary and proper clause for their
effective implementation.

Even though the exercise of a power itself may be
for a proper end or objective, the “means” of carrying
the power into law must be hoth necessary and proper.
This has long been a litmus test of contitutionality and
is a matter of judicial review and determination.
McCulloch v. Maryland, 4 Wheat. 316 (1819).

23 USC 131 requires that the state enact acceptable
statutes and enter into acceptable agreements.
Whether in fact the state statutes and agreements are
acceptable is a matter of discretion for the United
States Secretary of Transportation.

Thus, 23 USC 131 purports to govern intergovern-
mental relations via contract. In order to induce the
states to enter into the contracts to enforce the out-
door advertising program envisioned by the federal
statutes and rules, a penalty or sanction is imposed in
the amount of ten percent of all otherwise legally ap-
portioned federal-aid highway trust funds. This con-
stitutes economic coercion.

13

If the state complies with the Federal Statute, it
gets to keep what was already its own entitlement,
namely all of its previously legally apportioned
Federal-Aid fund. (23 USC 104) It also however takes
on the additional burdens of diverting its constitu-
tional sovereign police and eminent domain powers,
funds and personnel to implement and enforce the
federal program within the corridor zone which it
would not have adopted but for the penalty. The trial
judge in this case so found and held. (Appendix A)

Agreements not freely reached and entered into,
but which are tainted by any degree of coercion are im-
proper. Restatement of the Law of Contracts, Volume
II, CH. 16; Williston on Contracts, 3rd Ed., Vol. 13, Ch.
47; 25 Am Jur 2nd 351, Duress and Undue Influence.

Contracts of the United States Government are ex-
pressly subject to the law of contract including duress
and undue influence. Williston on Contract, Id. at 728,
et seq.

It is a fundamental constitutional principle that
Americans have rejected dualism in the laws; that is,
one legal standard for the people and a different legal
standard for the government. A Commentary on the
Constitution of the United States, Volume I, Bernard
Schwartz.

Thus the rule of law applies equally to the govern-
ment and the people including in areas of contract.

A fiscal penalty or economic loss is and has long been
recognized as improper as a form of economic coercion.
Restatement of the Law of Contracts, supra, Sec. 492
et seq; Williston on Contracts, supra, Sec. 1603, pages
663-664.

14

It is concluded by Williston in Sec. 1603 that duress
flows from threats or other wrongful withholdings of
land or other things.

The Supreme Court of the United States has long
recognized the concept of economic coercion as imper-
missible. Hartsville Oil Mill v. United States, 46 S.Ct.
389, 271 US 43 (1946) United States v. Bethlehem Steel
Corp., 62 S.Ct. 581, 315 US 289 (1942). The Eighth Cir-
cuit Court of Appeals has also held that a person is
coerced when he is made to execute a contract not
based on a prior proper agreement. Pure Oil Co. v.
Tucker, 164 F. 2nd 945 (CCA8).

Contracts of the United States government have on
numerous occasions been avoided because of coercion.
Williston on Contracts, supra, 726-736.

Is economic coercion of a state by statute to be given
less judicial recognition than economic coercion of a
private contractor by personnel of federal administra-
tive agencies?

As put by Alexander Hamilton in the Federulist (No.
79), “A power over a man’s subsistence amounts to a
power over his will.”

All enlightened authority hold that threats of with-
holding property including money as a lever to extract
an agreement constitutes duress or coercion.

The fact that the coercive inducement has a federal
statutory genesis and is being used as a means by Con-
gress of coercing state action makes it even more
repugnant than economic coercion used between pri-
vate parties. The government supposedly by example
leads the ethics and morality of society.

The use of economic coercion as an inducement to
state action has never been directly judicially review-
ed by the United States Supreme Court.

15

This is an extremely important and difficult ques-
tion of Federal-State relations which deserves to be
heard.

The closest this Court has ever come to this issue
was United States v. Butler, 56 S.Ct. 312, 297 US 1
(1936). The Court in that case held upon dual grounds
that the Agricultural Adjustment Act before it was un-
constitutional. The issues in the case were primarily
focused upon in light of the tax and spend powers of
Article I, Section 8.

The Court held that the Congress was without the
power to tax and spend to regulate intra-state agricul-
ture. The holding in this regard became watered down
when the Court subsequently held that the Congress
could regulate agriculture under the commerce power.

Importantly, however, for present purposes, the
Court in Butler had also held that the Congress could
not properly resort to economic coercion by threaten-
ing to withhold the benefits of the federal program to
farmers who did not enter into agreements to partici-
pate in the program. That portion of the holding of
Butler parallels the concepts now urged by South
Dakota in the present case except that in Butler the
Court was dealing with relationships between the
federal government and individuals as opposed to be-
tween the federal government and the several states.

The Supreme Court in Butler directly held that the
use of economic coercion as a means of inducing con-
tracts was “improper” citing McCulloch v. Maryland,
supra.

This is the thrust of South Dakota's present argu-
ment and to this extent petitioner relies upon Butler
as authority for the proposition that since economic
coercion is improper as a means to induce a contract
between a federal agency and an individual, economic

16

coercion is equally if not more improper as a means to
induce contracts between the federal government and
the several states.

The other relevant authority relied upon by peti-
tioner for its position is Oklahoma v. Civil Service
Comm., 67 S.Ct. 544, 330 US 127 (1947). That case
stands for the proposition that the Congress may con-
dition its funds so long as the condition does not con-
stitute a penalty. (The necessary and proper clause
was not before this Court in Oklahoma as a limitation
upon the tax and spend power or otherwise.)

This Court in Oklahoma expressly notes that it did
not find the condition before it to be a penalty and in
fact states that, “No penalty was imposed on the
state.”’67 S.Ct. at 554. That case involved the withhold-
ing of what would appear to be a few hundred dollars
representing two years compensation of a part-time
highway commissioner from the state's federal high-
way funds which at that time were in excess of two
million dollars per year.

A few hundred dollars withheld out of over two
million dollars certainly would not be coercive. That is
factually distinguishable from the current case where
South Dakota is being penalized in excess of $4 million
dollars and both the Eighth Circuit Court of Appeals
and the Federal District Judge recognize, concede and
admit that the sanction provisions of 23 USC 131 are in
fact and in law a “penalty”.

It must, again, be pointed out that the necessary and
proper clause was not considered by the Court in

Oklahoma.

This Court has expressly noted that the power to
condition funds by the Congress is a limited power.
United States v. Butler, supra. The limitation is the

17

necessary and proper clause. This Court points out in
Butler for example that an appropriation to an educa-
tional institution which by its terms is to become avail-
able only if the beneficiary enters into a contract to
teach doctrines subversive of the constitution is clear-
ly bad. 296 US at 323. It is said,

“An affirmance of the authority of Congress so to
condition the expenditure of an appropriation
would tend to nullify all constitutional limitations
upon legislative power.” (Ibid)

The use of a penalty or economic coercion as an in-
strument of inducing state action is equally obnoxious
and constitutionally offensive.

The holding of Butler to the extent that economic
coercion is constitutionally defective as an inducement
to contract has never been overruled or weakened to
this date.

The holding of Oklahoma where the Court stated
that the conditioning of federal funds was valid
because there was no penalty, is totally inapplicable to
the situation here where both the District Court and
the Court of Appeals fully acknowledge that a “penal
ty” is the instrument or means utilized by the statute,
itself.

Federal-State interrelationships are often said to be
based upon the notion of comity. Justice Hugo Black
best defined this notion as one of respect by the federal
government for state functions in recognition of the
belief that the national government will fair best if the
states and their institutions are left free to perform
their separate functions in their separate ways.
Younger v. Harris, 91 S.Ct. 746, 401 U.S. 37 at 44
(1971). See, also: National League of Cities v. Usery,
supra. Comity or cooperation is never founded upon
penalties or coercion.

ie)
B. 23 USC 131 violates the necessity requirement of
the necessary and proper clause.

The federal statute purports on its face to have a
nationwide purpose. 23 USC 131 (a). However, it con
templates that any or all of the states may choose not
to comply. 23 USC 131 (b).

Thus, any state or all of the states may thwart the
alleged national will of Congress and subvert a policy
directed at alleviating what is perceived as a nation
wide problem.

The necessary and proper clause of Article 1, Sec-
tion 8 mandates that Congress in carrying out its ex-
press powers may adopt legislation which is both
necessary and proper. As earlier noted what is “neces
sary’ is a matter of judicial review. McCulloch v.
Maryland, supra.

It is clear by McCulloch v. Maryland, supra, that
what is either necessary or proper must be a matter of
substance, not just a whim.

How can it be argued that 23 USC 131 is “necessary”
if any or all of the states may by the ‘simple expedient
of not yielding’ ignore the problem and assume the
penalty? If the problem rises to one of national scope
and concern may it be treated so lightly?

The federal outdoor advertising control program is
as readily acknowledged merely an attempt to create
and establish a national esthetic. Although desirable it
cannot be argued that there is any national peril justi
fying or necessitating exercise of ary express power of
Congress.

There is no national crisis or emergency falling with
in the exception to the holding of National League of
Cities v. Usery, supra.

%

19
As stated by this Court, similarity of local conditions
does not give rise to a national problem. U.S. v. Butler,
supra, at 392. If on the other hand the control of out-
door advertising is a problem national in scope, giving
the states the option to ignore the problem is a consti-
tutional farce.

There is no necessity of a constitutional stature
justifying this statute.

C. 23 USC 131 regulates the states governance of
commerce, not commerce itself.

Legislation such as 23 USC 131 is readily distin
guishable from direct federal regulation of a problem
(i.e., pollution or environmental despoliation) where a
real and vital national problem is faced and the federal
law is mandatory, direct and knows of no exceptions.

The federal government's position attempting to
justify 23 USC 131 is akin to that of the EPA’s “in
direct polluter” thesis urged in Brown v. Environ-
mental Protection Agency, 521 F.2nd 827 (9th Cir.
1975), vacated and remanded 431 U.S. 99, 97 S.Ct. 1635,
(Brown IJ), 566 F.2nd 665 (9th Cir. 1977) (Brown II), and
District of Columbia v. Train, 521 F.2nd 971 (D.C.C.A.
1975).

The federal government in the two Brown cases
argued that since the states build the roads (albeit pur.
suant to a federal program with federal funds), and
roads attract automobiles which pollute, a state which
owns such roads indirectly pollutes when it fails to
obey an EPA directive to adopt and enforce a federal
scheme of regulation, and the state is thus subject to
penalty.

Presently, the federal government argues that since
the state maintains the roads, and outdoor advertising

20
is adjacent to the roads, the state must enforce a
federal scheme for regulating private land use.

In both instances the federal government seeks to
use state police powers under threat of penalty.

Both the Ninth Circuit and the District of Columbia
Circuit Courts of Appeals rejected the government's
argument pointing out that there is a difference be-
tween the governance of commerce by a state under its
police power, and commerce itself. Brown J] at 669, and
672.

The District of Columbia Court of Appeals notes
that it is constitutionally impermissable to allow the
federal government to “commandeer” the state's
regulatory power. District of Columbia v. Train,
supra, at 992.

Although the legislative history discloses that Con
gress did not choose to adopt the EPA “indirect
source’ concept after Brown J, the Ninth Circuit Court
of Appeals on remand clearly warns that had Congress
done so it would not have lightly rejected the argu
ment that the indirect source theory collides with the
holding of National League of Cities v. Usery, supra.
Brown IT at 672.

Congress has in fact, however, embodied the “in
direct source” concept in 23 USC 131.

The record is clear that the government attempts to
justify 23 USC 131 under the commerce power, and
that the trial court herein so justified this federal
regulatory scheme. (Appendix A)

23 USC 131 makes the state police power the conduit
for the control and regulation of privately owned out
door advertising located on private property.

21
23 USC 131 commandeers the state's power
regulate commerce. 23 USC 131 usurps the state's
police power under threat of penalty. The state's con
stitutional powers, resources and money are used as a
means by Congress of regulating private rersons or
firms who do not conform to the national eschetic

The federal statute regulates the states power
regulate commerce, not commerce itself.

IT.

CERTIORARI SHOULD BE GRANTED DUE TO
THE PRESENCE OF A NOVEL QUESTION OF
WHETHER THE CONGRESS MAY BY THE
UNLIMITED USE OF ECONOMIC COERCION
OR PENALTIES UNDER THE GUISE OF CON
DITIONING ITS FUNDS INDUCE STATE AC
TION
The planning and zoning of private land use has
since it was originally recognized by this Court as cor
stitutionally proper been a traditional function of the
state and local governments. Euclid v. Ambler Realty
Co., 47 S.Ct. 114, 272 U.S. 365 (1926).

23 USC 131 requires in effect that the state exercise
its sovereign police power to strip zone a corridor
within sight of certain federal-aid highways wit!
which to regulate and control outdoor advertising.

The trial court in this case held that South Dakota
would not have exercised its sovereign zoning powers
as required by 23 USC 131, except for the penalty. (Ay
pendix A).

This Court has recently held that the Congress is
without power due to the limitation of the Tenth

..

Amendment to displace the states freedom to struc

22
ture integral operations in areas of traditional govern-
mental functions reserved to the states. National
League of Cities v. Usery 96 S.Ct. 2465, 426 U.S. 833
(1976).

The Eighth Circuit Court of Appeals repeatedly in
its decision affirming the Trial Court herein states that
the sanction of 23 U.S.C. 131 is a “penalty” (Appendix
FE).

The record is clear that the state enacted com-
pliance legislation (Appendix I) creating the zoned cor-
ridor for the regulation of outdoor advertising and that
economic coercion had been placed upon the state by
the federal act. It would not have zoned but for the
penalty.

The state asserts that since the Congress may not
constitutionally directly displace the state’s freedom
to structure its operations in areas of traditional
governmental functions because of the prohibition of
Tenth Amendment, the Congress should not indirectly
be allowed to condition its funds in a way constituting
a penalty or economic coercion as a means of inducing
state action in such areas.

The trial court citing Steward Machine Co. v. Davis,
97 S.Ct. 883, 301 U.S. 548 (1937) intimates that the
power of Congress to so condition its funds is un-
limited. (Appendix A)

This is a novel question of substantial importance.

23
CONCLUSION
WHEREFORE, petitioners respectfully state that
23 USC 131 unconstitutionally affects substantial
state's rights and prays that a writ of certiorari be
granted.

STATE OF SOUTH DAKOTA
Ronald G. Schmidt

Special Assistant Attorney General
P.O. Box 1174

Pierre, South Dakota 57501
Telephone: 605/224-0461

24
PROOF OF SERVICE
The undersigned counsel of record for petitioner,
hereby certifies that on the 12th day of February,
1981, he caused forty (40) copies of the above and fore-
going petition to be filed with the clerk of the U.S.
Supreme Court, and further caused three (3) copies of
such petition to be served upon counsel for the United
States Government and all other parties to such pro-
ceedings, by causing such to be mailed to such counsel
by U.S. Mail, postage prepaid, to:
Robert E. Kopp and Douglas N. Letter
Attorneys
Civil Division
Room 3631
U.S. Department of Justice
Washington, D.C. 20530

Ronald G. Schmidt __

Attorney for Petitioner

l
APPENDIX A
District Court Opinion (477-3039)

April 7, 1980

Ronald G. Schmidt

Special Assistant Attorney General
State Capitol Building

Pierre, South Dakota 57501
Attorney for Plaintiff

Terry L. Pechota

United States Attorney

231 Federal Building & U.S. Courthouse
Sioux Falls, South Dakota 57102

Ms. Judith S. Seolnick

Department of Justice

10th and Constitution Avenue, N.W.
Washington, D.C. 20530

Edward V.A. Kussy
Deputy Assistant Chief Counsel for

Right of Way and Environmental Law Division
Federal Highway Administration

Washington, D.C. 20530

RE: STATE OF SOUTH DAKOTA, Plaintiff
vs
BROCK ADAMS, UNITED STATES SECRE.-
TARY OF TRANSPORTATION; WILLIAM M.
COX, FEDERAL HIGHWAY ADMINISTRA-
TOR; ARTHUR JOHNSON, DIVISION HIGH-
WAY ADMINISTRATOR and THE UNITED
STATES OF AMERICA, Defendants
CIVIL NO. 77-3039

ii
Gentlemen and Ms. Scolnick:
MEMORANDUM OPINION

CASE SUMMARY

Plaintiff, the State of South Dakota, (State) seeks to
overturn the final determination of the Secretary of
Transportation (Secretary) under 23 U.S.C. § 131, (the
Highway Beautification Act [Act]), that the State has
not instituted effective control of billboards. The
Secretary assessed a penalty of ten percent of the
State’s highway funds for 1978 and reserved the funds
for 1979, to be returned to the State if the 1979 South
Dakota Legislature complied with the Act. In accord-
ance with the Act, §131(b), the penalty for fiscal 1978
has been withheld and reapportioned to other states
but cannot be distributed to such other states unless
judgment should be rendered against the State in this
action, and in Civ. 78-3051.

In this action, the State contends the Act is unconstl-
tutional because: (1) It is not within the delegated
powers of Congress; (2) it invades the powers reserved
to the states under U.S. Const., Amend. 10; (3) it places
both adjudicatory and prosecutorial functions in the
Secretary; (4) it unlawfully delegates legislative power
to the states; (5) it violates the constitutional guaran-
tee of a republican form of government; (6) it violates
the Due Process Clauses of the U.S. Const., Amendt. 5
and Amendt. 14; (7) it violates freedom of expression
guarantees of Amendt. 1, U.S. Const.

In Civ. 78-3051, the State asserts that the Secretary
abused his discretion and made his determination on a
record with no substantial evidence to support the
determination. These contentions are resolved against
the State in a separate opinion of this court filed in Civ.
78-3051.

ili
In the case at bar, the court now holds that the Act is
constitutional and the State’s request for a declaratory
judgment to the contrary is therefore denied. Sum-
mary judgment shall be entered for defendants.

FACTUAL BACKGROUND

The State of South Dakota has exhibited some reluc-
tance to comply with the provisions of the Highway
Beautification Act. In 1971, then Secretary of Trans-
portation Volpe informed the State that its zoning of
all areas around interstate and primary roads as com-
mercial was not in compliance with the Act. The Secre-
tary determined that the State was in violation of the
Act. This determination was upheld on appeal. South
Dakota v. Volpe, 353 F.Supp. 330 (D.S.D. 1973). The ten
percent penalty was returned in 1973, after the State
complied with the Act.

The State Legislature passed compliance legislation
in 1973, and the South Dakota Board of Transportation
entered into an agreement with the Secretary's dele-
gate, the Federal Highway Administrator. This agree-
ment conformed to the Act and the administrative
Rules under it, and also provided that billboards
erected during the period of non-compliance were to be
removed entirely at the expense of the State. This
agreement was invalidated, however, when the South
Dakota Supreme Court, in Hogen v. State Board of
Transportation, S.D. _ 245 N.W.2d
493 (1976) declared that the 1973 state statute consti-
tuted an impermissible delegation of legislative au-
thority to the State Board of Transportation. There
was no outdoor advertising control of any kind in
South Dakota from September, 1976 to April 1, 1977.

The 1977 legislative session passed House Bill 786,
and the governor signed it, in spite of the fact that the

iv

Secretary's delegate indicated objections to the bill
and warned that passage of the bill could lead to loss of
ten percent of the State’s highway funds for any period
when such law was in effect. On July 11, 1977, the
Secretary notified the State of his preliminary deter-
mination that the State had not complied with the Act
and that ten percent of the State’s highway funds for
fiscal 1978 and succeeding years would be reserved
pending final determination of whether the funds
would be withheld. The notification did not contain a
detailed statement of reasons for the withholding of
funds. The State asked for a more particular statement
and for an administrative hearing. The bill of particu-
lars was received in September, 1977, and the hearing
was held in December, 1977, before an Administrative
Law Judge. The factual record was made before the
Administrative Law Judge on December 12-15, 1977.
The federal government was represented by the
Federal Highway Adminstration. The Secretary took
no part in this phase of the proceedings.

The State, on December 22, 1977, commenced two
actions in this court. The first challenged the legality
of the Secretary’s 1977 reservation of funds, which
reservation took effect on October 1, 1977. This action
was decided adversely to the State in this court, and
affirmed on appeal. South Dakota v. Adams, Dist. Ct.
Civ. 77-3038, 587 F.2d 915(8th Cir. 1978), cert. denied,
441 U.S. 961 (1979). The instant action, Civ. 77-3039,
challenged the constitutionality of the Act and regula-
tions under it.

The recommended decision of the Administrative
Law Judge, issued in March, 1978, noted discrepancies
between South Dakota and federal law, but indicated
that the discrepancies could be reconciled, either
through negotiation between the Secretary and the

¥
State or through the State’s application for an eco-
nomic hardship exemption under 23 U.S.C. §131(0). The
Administrative Law Judge found that the State had
made a good faith effort to comply with the Act, and
recommended that the Secretary not withhold ten per-
cent of the State’s highway funds.

The Federal Highway Administration appealed this
recommended decision to the Secretary on March 24,
1978, in accordance with 5 U.S.C. §557(b), a part of the
Federal Administrative Procedure Act. The State ob-
jected to this procedure as placing both the prosecu-
torial and adjudicative functions in the Secretary. The
Secretary reviewed the record de novo, having con-
cluded that he was not restricted by any presumption
of correctness of the Administrative Law Judge's
determination.

The Secretary’s final Order of November 9, 1978,
determines that the State’s (1) directional sign regula-
tion; and (2) regulation of signs more than 660 feet from
the right-of-way, outside urban areas; and (3) its failure
to enter into an adequate agreement under Section 131
(d), place South Dakota out of compliance with the Act.
The Order further determines that South Dakota’s fis-
cal 1978 funds, previously reserved, are to be reappor-
tioned to the other states. The fiscal 1979 funds were
not to be reapportioned to the other states. The State
failed to enact effective billboard control by March 31,
1979. The State commenced Civ. 78-3051, seeking re-
view of this order, on December 7, 1978.

In the time since the State brought the two actions
now before the court, the legislature has passed, and
the Governor has signed, legislation intended to insure
compliance with the Act. 1979 S.D. Sess. L. Ch. 202,
SDCL 31-29-61 through 87'(Supp. 1979). The State has,
as of December, 1979, entered into an agreement with

vi
the Federal Highway Administration and most of the
fiscal 1979 funds have been released to the State. The
Secretary's order of November 9, 1978, requires that
the fiscal 1978 funds be permanently withheld and re-
distributed to the other states. The redistribution is

automatically stayed pending final judgment in Civ.
77-3039 and Civ. 78-3051. 23 U.S.C. 131(1).

Both parties moved for summary judgment, and
filed briefs and memoranda in support of their motions.
The court first heard oral argument in this case on
August 10, 1979, at which time the State sought and
was granted leave to file an amended complaint. The
State also requested and was granted permission to
file supplemental briefs in support of contentions made
and refined in the amended complaint. The Secretary
duly responded to these briefs and to the amended
complaint. At the request of the State, further argu-
ment was heard on October 19, 1979, and the parties
have filed further briefs and affidavits since that time.

ISSUE

Is the Highway Beautification Act unconstitutional
under any of the State’s contentions?

DECISION

A. Provisions of the Act Relevant to its Constitu-
tionality.

The Act provides that the Secretary has the power
and duty to enforce its provisions. These provisions re-
quire a detailed regulatory program to be undertaken
by each of the States. The program must be such as
will provide “effective control” of roadside outdoor
advertising. “Effective control” is defined with parti-

vii

cularity in 23 U.S.C. 131 and the regulations adopted
under it by the Federal Highway Administration. Any
State refusing to adopt regulation of billboards in ac-
cordance with the federal standards is to have its
federal highway funds reduced by ten percent. For
purposes of the State’s constitutional challenges, it is
sufficient to point out that the requirements of the Act
and the regulations are quite detailed, and that they
require specific state regulation of billboards adjacent
to interstate and primary highways before the State
may receive one hundred percent of its federal high-
way funds. The requirements often conflict with the
way in which the State of South Dakota would exercise
its sovereign zoning powers in absence of such require-
ments.

23 U.S.C. 131(1) requires the Secretary to prelimi-
narily determine whether a state is in compliance with
§131. This must take place at least sixty days before a
final determination is made. The State may request a
hearing within the sixty-day period, and the Secretary
must then issue his final determination after the hear-
ing. The State may appeal the final determination to
any district court for a district of that State. The filing
of such an appeal stays the Secretary’s order until final
judgment in the appeal. The appeal vests the court
with jurisdiction to affirm or reverse the Secretary's
determination, in whole or in part, or to remand to the
Secretary for further proceedings.

B. Whether the subject matter of the Act is with-
in the power of Congress.

(1) Legal Background

The federal government may require that states in-
stitute certain regulatory measures or certain govern-

viii
mental programs in order to receive full funding under
federal grants. This may be accomplished under the
taxing and spending clause, U.S. Const. Art. I, Sec. 8,
Cl. 1 (text of this clause set forth in Footnote 4, infra./.
Steward Machine Co. v. Davis, 301 U.S. 548, 590 (1937).

Conditiens placed on federal grants may be used to
accomplish goals of the federal government provided
certain tests are met. First, as the tax and spend
clause itself indicates, the spending must be in the
“general welfare.” This means that an expenditure, if
it seeks to accomplish certain federal goals, must ac-
complish goals that benefit society at large, and not a
particular group. In United States v. Butler, 297 U.S. 1
(1936), for example, it was held that a tax on processors
of food, the proceeds of which were to benefit only
farmers, viclated the rule that expenditures must be
for the general welfare.

Second, conditioned grants must be “fairly within
national power and policy,’ Steward Machine, supra at
590. A conditioned grant will pass this test if it ad-
dresses a problem Congress could reasonably find to
be national in scope, even if some of the aspects of the
problem might have traditionally been addressed by
state regulation.

Third, if the condition itself is not within national
policy and power, it will not be invalidated if it is
directed to the attainment of a lawful end, for which
nation and state may cooperate. Steward Machine Co.
v. Davis, supra at 593. The means (condition) calculated
to produce a result need not, therefore, be limited to
those within federal power so long as the end sought to
be accomplished is within the area which the federal
government may address. For example, even though
the federal government has no power over state em-
ployees, it may condition funds for the salaries of such

ix
employees on adoption by the State of regulations pro-
hibiting partisan political activity by the State
employees administering funds. This is so because the
end of this condition, to ensure better public service by
those administering federal funds, is an end within the

powers of the federal government. Oklahoma v. Civil
Service Comm'n. 330 U.S. 127, 143 (1947).

A condition placed on a grant will be invalidated if
its effect is to coerce the State to accept the condition
and to deprive the state of a choice. Steward Machine,
supra at 589-90. In Steward Machine , the court did not
discuss the nature of coercion necessary to invalidate a
condition because it found no coercion present. In
Oklahoma v. Civil Serv. Comm'n. supra at 143-44, how-
ever, the court held that where the State could avoid a
penalty “by the simple expedient of not yield”, that is,
by foregoing the federal benefit to which a condition
wes attached, the condition was not coercive. As ap-
pears from the discussion following, it is unnecessary
in this case to determine under what conditions coer-
cion might be found. The language of Oklahoma v.
Civil Service Comm'n, however, suggests that condi-
tional grants might never be coercive.

(2) Whether the Act is within the “General
Welfare”

The court concludes that the Act could reasonably
be found to be in furtherance of the general welfare.
The discretion vested in Congress to determine what
is in the general welfare is “quite expansive.” Buckley
v. Valleo, 424 U.S. 1, 90 (1975). Congress has stated
that its reasons for seeking State regulation of bill-
boards were to protect the public interest in the high-
ways, promote the scenic and recreational value of the
highways, and promote safety on the highways. These
are national goals, benefitting all of society, not just a

x

particular group. This is especially true in light of the
fact that the construction of these highways is financed
almost entirely by federal funds.

The scope of the court’s inquiry in determining
whether a grant and conditions attached to it are in the
general welfare is narrow. See Buckley v. Valleo,
supra. Congress has the benefit of hearings. legislative
and executive branches and the views of all segments
of society in determining what is in the general wel-
fare. This court cannot utilize such fact-finding pro-
cesses, and is not constituted, as in Congress, to ex-
press the national policy through the enactment of
statutes. Even if this court were to disagree on the
wisdom of the Act, it may not, in this case, substitute
its judgment for that of Congress on the question of
whether the Act is for the “general welfare.”

(3) Whether the Act is within the National
power and Policy.

Regulation of roadside outdoor advertising, if within
the scope of national policy and power, would be
brought there by Congress’ power over interstate com-
merce, U.S. Const., Art. I, Sec. 8, Cl. 3.2 There can be
little doubt that outdoor advertising signs along inter
state and primary roads affect interstate commerce.
Such signs are intended to exert influence on the
traveling public. Public travel is part and parcel of in
terstate commerce. See Heart of America Motel v.
United States, 379 U.S. 241 (1964). The highways are
channels of interstate commerce. Their construction is

* This clause reads as follows:

The Congress shall have Power. ..To regulate commerce with
foreign nations, and among the several states and with the Indian
Tribes....

x!
largely financed by federal taxation. Congress intent
that roadside advertising be regulated is clearly shown
by the Act itself.

The State's contention is, however, that direct regu
lation of billboards by the federal government would
usurp the reserved powers of the states and thus con
travene U.S. Const., Amend. 10.° A subject can be a na
tional problem and yet be beyond Congress's power as
violative of this amendment. National League of Cities
v. Usery, 426 U.S. 833 (1976). In this regard, a distiction
must be made between congressional regulation that
directly affects the State's governmental functions,
(such as enforcement against State Government of
maximum hours—minimum wage requirements for
State employees), and regulation that does not affect
the State in its sovereign capacity.* National League of
Cities, supra, concerned federal regulations that
directly affected rendition of state governmental ser
vices by a state. Federal regulation of billboards, on
the other hand, directly affects only the landowner and
advertiser, rather than the State itself in its sovereign
capacity.

The State contends that such a regulation of bill

This amendment reads as follows:

The powers not delegated to the United States by the Constit
tion, nor prohibited by it to the States, are reserved to the States
respectively, or to the people.

‘In National Le aque of Cities, supra, Congress has extended
minimum wage provisions of the Fair Labor Standards Act

state and local employees. The states and localities were thus rs

quired by Congress to pay certain wages. They were given no
choice in the matter. Here, of course, the State of South Dakota
could choose to persist in its refusal to enact compliance legisla
tion, although at this time it appears that the State has chosen t
compiy. See SDCL 31-29-61 through 87 (Supp. 1979

xii

boards would “impermissibly interfere with [its] inte-
gral governmental functions...”, National League of
Cities, supra, at 851, by displacing the state's tradi-
tional control over land use planning and zoning. It is
inevitable that any federal regulation intruding on
areas once controlled by the states will diminish the
state's power in the area. So long as the activity
regulated (in this case, outdoor advertising) is not a
traditional state function, the Tenth Amendment and
National League of Cities, supra, will not prohibit Con-
gress from regulating the activity. If it were other-
wise, Congress could never extend federal regulation
of private business (as distinguished from regulation of
the state as a state) to any area previously controlled
by the states, because any such extension would, under
the State’s argument, violate the Tenth Amendment.
That Congress’ power is not so severly limited is
shown by a multitude of decisions from the United
States Supreme Court, including: Katzenbach v.
McClung, 379 U.S. 294 (1964); Heart of Atlanta Motel,
supra; Wickard v. Filburn, 317 U.S. 111 (1942); United
States v. Darby, 312 U.S. 100 (1941); N.L.R.B. v. Jones
& Laughlin Steel Corp., 301 U.S. 1 (1937); Stafford v.
Wallace, 258 U.S. 495 (1922). It is also worth noting
that the narrow view taken by cases such as Carter v.
Carter Coal Co., 298 U.S. 238 (1936) and Hammer v.
Dagenhart, 247 U.S. 241 (1918) has been specifically
repudiated by the later cases.

The State places reliance on the case of United
States v. Butler, supra The rationale of this case,
however, has been significantly undermined by subse-
quent cases, particularly Steward Machine Co. v.
Davis, supra at 592-93 and Oklahoma v. Civil Service
Comm'n, supra.

Even Butler does not support a legal conclusion that

Xlii
the Highway Beautification Act is unconstitutional.
Butler held unconstitutional a tax designed to in-
fluence or regulate agricultural production. An essen-
tial part of this holding was the court’s conclusion that
Congress had no power to directly legislate so as to
control agricultural production. The subject of agricul-
tural production was viewed, in 1936, as outside the
scope of national power and policy. This view no longer
controls, since later congressional enactments in the
area of agricultural production have been upheld. See
Wickard v. Filburn, supra. In addition, by levying a
specific tax on a specific industry, and appropriating
funds for the benefit of that industry, Congress was
seeking to tax and spend for particular, rather than
general, welfare. The farmers in Butler, the Supreme
Court found, were being coerced to conform their pro-
duction to a federal standard. The state could not free-
ly exercise its reserved powers to police production
within its borders, it was held, so long as the federal
government coerced farmers into following a federal
program. Finally, the State in Butler had no choice; it
could not avoid the operation of the Agricultural Ad-
justment Act by “the simple expedient of not

yielding’, Oklahoma v. Civil Service Comm'n, supra at
143-44.

The Highway Beautification Act does not suffer
from any of these infirmities. There is no spending for
the benefit of any particular group, but instead, the
subject of outdoor roadside advertising along in-
terstate and primary highways is within the national
interest, and it was within the power of Congress and
the President to declare such a public policy by
statute. This case does not present a fact situation of
misuse of the tax and spend power to accomplish
something the federal government has no right to do

XIV
otherwise. The State need not comply, and may cease
to comply at any time. See Steward Machine Co. v.
Davis, supra at 592-93.

(4) Whether the Condition is Directed to the
Attainment of a Lawful End

The court also finds and concludes that the end of
the grant is within the power of Congress, and that the
condition is reasonably adapted to that end. The Con-
gress as indicated above, could choose to regulate out-
door advertising along interstate and primary
highways. Withholding part of the highway funds of a
state that refuses to regulate such advertising is a
means calculated to produce regulation of advertising.
As cases cited elsewhere in this opinion indicate, it is a
legitimate means to bring about an end, if the end is
within the power of Congress. The end, in this case, is
within Congressional power.

(5) Whether the Condition Amounts to Coer-
cion.

The State’s next contention is that even if the
federal government could regulate biliboards directly,
it could not “commandeer” the State’s police power
and coerce the State to regulate on behalf of the
federal government, citing District of Columbia v.
Train, 521 F.2d 971 (D.C. Cir. 1975) vacated and rem.,
431 U.S. 99 (1977) and Brown v. Environmental Protec-
tion Agency, 521 F.2d 827 (9th Cir. 1975), vacated and
rem., 431 U.S. 99 (1977), opinion after rem., 566 F.2d
665 (1977). It is well settled, however, that the federal
government may require the State to comply with cer-
tain conditions in order to obtain funds that the federal

XV

government grants to the State. Steward Machine Co.
v. Davis, supra. The cases cited by the State recognize
this principle. These cases dealt with the attempt by
the Environmental Protection Agency to impose cer-
tain federal regulations on the states by forcing the
states, through direct regulation to control certain
types of automobile pollution. In Brown and Train, the
agency attempted to impose a federal regulatory
scheme through which states were required to adopt
certain regulations or suffer federal sanctions. The
states were given no option. The applicability of these
holdings to the present case, in which the states were
given an option (although a painful one) is thus doubt-
ful at best, as the court recognized in Brown 521 F.2d
at 840:

Our interpretation is in no way inconsistent with
the recognition that Congress has the power to
authorize the Administrator to obtain the consent
of a reluctant state by conditioning certain federal
expenditures within that state on the granting of
such consent. See Steward Machine Co. v. Davis,
301 U.S. 548, 57 S.Ct. 883, 81 L.Ed 1279 (1937).

There is a vast difference between requiring a state to
adopt certain regulations and denying funding to a
state that refuses to adopt them.

This distinction was recognized in Texas Land-
owner's Rights Ass'n v. Harris, 453 F. Supp. 1025,
1028-31 (D.D.C. 1978), aff'd mem., 598 F.2d 311 (D.C.
Cir. 1979), cert. denied sub. nom. Texas Landowner’s
Rights Ass'n v. Director, Federal Emergency Manage-
ment Agency, ___-U.S.___——s«d100 S.Ct. 267, 62
L.Ed. 2d 184 (1979), a post-National League of Cities v.
Usery, supra, case. In Texas Landowners, the State of
Missouri, forty political subdivisions in twelve states,

XV1

and thirty individual landowners within federally
designated flood zones brought suit against federal of-
ficials administering the federal flood control program.
The portion of this Act alleged to offend the Tenth
Amendment required that local governments adopt
certain flood plain building regulations under their
police powers on pain of losing federal financial
assistance for acquistion of construction purposes
within non-participating communities. This sanction in-
cluded denial of FHA and VA home mortgages in af-
fected communities. The plaintiffs in Texas Land-
owners, supra, argued, as does the State in this case,
that the severity of the sanctions was such that the
“choice” represented no choice at all, but only coercion.
The court rejected this contention, holding that coer-
cion is to be found only where the federal government
gives the states no choice, but mandates compliance as
in Brown and Train. This was essentially the holding of
Steward Machine Co. v. Davis, supra at 589-90.

Further, the court is not convinced that the condi-
tioned grant in this case is coercive. The very fact that
the State of Sovth Dakota chose not to enact billboard
compliance legislation after having been specifically
warned of the ten percent penalty shows as much. In
addition, congressional debates cited by the Secretary
show a definite intention not to be coercive. Congress
had originally planned to withdraw all highway funds
from non-complying states, but the amount was re-
duced to ten percent in order to give the states a
choice. It is plain that the State could avoid the alleged
coercion by the simple expedient of not complying.
Oklahoma v. Civil Serv. Comm'n, supra, at 143-44. This
court therefore concludes that the Act does not violate
the Tenth Amendment.

XVII

C. Whether the Secretary's statutory role as
decision-maker violates due process when considered
in light of his other administrative duties.

The Act provides that the Secretary must make a
preliminary determination of whether to withhold
funds from a state at least sixty days before the final
determination is made. During this sixty-day period,
the State may request a hearing, and after the hearing
is held, the Secretary is required to make his final
determination of whether the funds should be
withheld.

The State contends that the fact that the Secretary
has power to make both the initial and final decision
and the fact that the Secretary is the official with
Supervisory powers over the Federal Highway Ad-
ministration, which was the agency seeking enforce-
ment, constitutes a violation of due process. This is
said to be the case because the Secretary is cast in the
role of both advocate and decision-maker. 5 U.S.C. 557
prohibits ex parte communications with decision-
makers. Supervision and direction of the advocates by
the decision-maker would thus be unacceptable and
could constitute a violation of due process. There is no
evidence on the record, however, that such abuses
have taken place. Plaintiffs have offered none and do
not now ask for an opportunity to do so. When a party
challenges the regularity of administrative pro-
ceedings, that party has the burden of proving ir-
regularity. In absence of such proof, it is presumed
that administrative proceedings have been properly
conducted. See Hortonville Joint Sch. Dist. No. 1 v.
Hortonville Ed. Ass'n, 426 U.S. 482 (1976); Withrow v.
Larkin, 421 U.S. 35 (1975). These cases also clearly hold

XVili
that, absent evidence of abuses or bias, the combina-
tion of initial decision-making power with that of
making a final determination does not violate due pro-
cess.

D. Whether the Act Unconstutionally delegates
Congressional authority.

The State's next constitutional contention is that
Congress, in passing the Act, delegated authority to
regulate outdoor advertising to the states without ap-
propriate standards, when it should have regulated
outdoor advertising on its own. The State cites
Schechter Poultry Co. v. United States, 295 U.S. 495
(1935) for the proposition that valid Congressional
delegation may be made only to officials of the Na-
tional Government. This principle is indeed contained
in the cited case, but it is inapplicable here. As the
Secretary points out, the Congress has not directly
regulated outdoor advertising, and has not authorized
the states to do so. The State’s authority to regulate
outdoor advertising, or to fail to do so, flows entirely
from the State’s own sovereignty. That Congress
might encourage or induce the State to exercise its
sovereignty does not convert that exercise of state
sovereignty into an invalid exercise of improperly
delegated federal sovereignty. The State is, whether
successfully or unsuccessfully, induced to exercise its
own sovereignty and to some power delegated to it by
the United States Congress. This contention is re-
jected.

BE. First Amendment Contention.

The State also contends that the Act violates free
speech guarantees of the first amendment, United
States Constitution. The State correctly points out

xix

that commercial speech has recently been given first
amendment protection. Virginia State Board of
Pharmacy v. Virginia Citizen's Council, 425 U.S. 748
(1976). We are not, however, required to consider this
contention, since the State lacks standing to assert the
first amendment rights, if any, of advertisers. The
United States Supreme Court has held that a litigant
must assert his own legal rights and interests, and can-
not rest his claim for relief on the rights of others.
Warth v. Seldin, 422 U.S. 490, 499 (1975). Here, the
State seeks to assert the rights of persons otherwise
free to advertise. It cannot do so. Such advertisers
must assert their own rights, if any. It is noted that 23
U.S.C. 131 excludes official state signs, and it thus ap-
pears that the State is not being deprived of free
speech.

In addition, the State cannot assert this claim as
parens patriae for its citizens. The State has standing
to sue under this doctrine only when “its sovereign or
quasi-sovereign interests are implicated and it is not
merely litigating as a volunteer the personal claims of
its citizens” Pennsylvania v. New Jersey, 426 U.S. 660,
665, (1976). In this case, the other contentions of the
State obviously involve its sovereign powers. The
alleged First Amendment rights, however, are only
those of the individual citizens who might choose to
erect outdoor advertising. The State is, at best, only a
volunteer as to these claims and may not, therefore,
successfully assert them.

F. Additional Constitutional Contentions.

The State makes a number of additional constitu-
tional contentions. Among these are due process and
equal protection challenges, additional arguments
based on improper delegation of legislative authority,
and a contention that the Act violates the Republican

XX

Form of Government Guarantee Clause, U.S. Const.
Art. IV, § 4.° The court has carefully considered these
challenges. Those other than the guarantee clause
challenge are rejected, particularly in view of the fact
that the State has cited no authority for its position on
these challenges. The guarantee clause is rejected
because, as the United States Supreme Court recog-
nized in Baker v. Carr, 369 U.S. 186, 223-26 (1962) such
challenges raise non-justiciable political questions.

CONCLUSIONS

The court specifically finds and concludes that the
Highway Beautification Act is constitutional, and that
there is no merit in the State’s constitutional conten-
tions. The State’s request for a declaratory judgment
is denied; the Secretary’s motion for summary judg-
ment is granted; and an appropriate order will be
entered.

Dated this 7th day of April, 1980.
BY THE COURT:

s/Donald J. Porter
U.S. DISTRICT JUDGE

° This clause reads as follows:

The United States shall guarantee to every State in this Union
a Republican Form of Government, and shall protect each of them
against Invasion; and on Application of the Legislature, or of the
Executive (when the Legislature cannot be convened) against
domestic Violence.

XXi

APPENDIX B
District Court Judgment (477-3039)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
CENTRAL DIVISION
STATE OF SOUTH DAKOTA,

Plaintiff

VS

CIV. 77-3039

)
)
)
)
)
)
)
BROCK ADAMS, UNITED )
STATES SECRETARY OF ) ORDER AND
TRANSPORTATION; WIL- _ ) JUDGMENT
LIAM M. COX, FEDERAL )
HIGHWAY ADMINISTRA- _ )
TOR: ARTHUR JOHNSON, )
DIVISION HIGHWAY AD- )
MINISTRATOR and THE )
UNITED STATES OF )
AMERICA, )

)

)

Defendants.

The court having considered the administrative
record in the above entitled case, all papers on file, and
the briefs and oral arguments of the parties, and good
cause appearing, now it is therefore

ORDERED that defendants’ motion for summary
judgment in the above entitled case be, and hereby is,
in all things GRANTED, and it is further

ORDERED that plaintiffs’ motions for summary

XX
judgment, for a declaratory judgment and_ for

preliminary and permanent injunctive relief be, and
hereby are, in all things DENIED,

All in accordance with the court’s memorandum opi-
nion of April 7, 1980, in the above entitled case, and
further in accordance with this court’s memorandum
opinion in Civil Case No. 78-3051, insofar as the
memorandum opinion in 78-3051 is applicable to the
issues raised in this case.

Dated this 9th day of April, 1980.
BY THE COURT:

s/Donald J. Porter
U.S. DISTRICT JUDGE

ATTEST:

WILLIAM J. SRSTKA, CLERK
BY: s/Judy L. Harvey
Deputy

(SEAL OF COURT)

XXill
APPENDIX C
District Court Opinion (#78-3051)

April 7, 1980

Ronald G. Schmidt

Special Assistant Attorney General
State Capitol Building

Pierre, South Dakota 57501
Attorney for Plaintiff

Terry L. Pechota

United States Attorney

231 Federal Building & U.S. Courthouse
Sioux Falls, South Dakota 57102

Ms. Judith 8S. Scolnick

Department of Justice

10th and Constitution Avenue, N.W.
Washington, D.C. 20530

Edward V.A. Kussy
Deputy Assistant Chief Counsel for
Right of Way and Environmental Law Division
Federal Highway Administration
Washington, D.C. 20530

RE: STATE OF SOUTH DAKOTA, Plaintiff
vs
BROCK ADAMS, UNITED STATES SECRE-
TARY OF TRANSPORTATION; KARL
BOWERS, FEDERAL HIGHWAY AD.-
MINISTRATOR;WILLIAM S. WESEMAN,
DIVISION HIGHWAY ADMINISTRATOR and
THE UNITED STATES OF AMERICA, Defen-
dants
CIVIL NO. 78-3051

XX1V

Gentlemen and Ms. Scolnick:

MEMORANDUM OPINION
SUMMARY

This action was brought by the State of South
Dakota [State], against the United States Secretary of
Transportation [Secretary]. The state seeks to over-
turn the Secretary’s final determination and order of
November 9, 1978, because the order and determina-
tion is alleged to be arbitrary and capricious and to be
based on a record not containing substantial evidence
to justify it. The factual and legal background is set
forth in this court’s memorandum opinion in Civ.
77-3039, which deals with the constitutionality of 23
U.S.C. § 131 [The Act].

The administrative hearing from which the factual
record in this case was made was held before an ad-
ministrative law judge on December 12-15, 1977, at
Pierre, South Dakota. The Secretary issued his final
determination and order on November 9, 1978. The
State commenced this action, asking for review of the
Secretary's action, on December 7, 1978. Both parties
have moved for summary judgment and filed briefs
and memoranda in support of their motions. The court
first heard oral argument in this case on August 10,
1979, at which time the State sought and was granted
leave to file an amended complaint. The State also re-
quested and was granted permission to file supplemen-
tal briefs in support of contentions made and refined in
the amended complaint. The Secretary duly responded
to these briefs and to the amended complaint. At the
request of the State, further argument was heard on
October 19, 1979, and the parties have filed further
briefs and affidavits since that time.

XXV

The court now finds and concludes that the
Secretary's order is not arbitrary and capricious and
that it is based on substantial evidence. The order is,
therefore, aifirmed.

PAGE
Issues Stated |
Decision j
I
Scope of Review 4
II
Whether the Record Justifies the Secretary's
Determination 6
A. Introduction 6
(1) Relevant Provisions of the Highway
Beautification Act 6
(2) General Considerations §
B. Whether SDCL Ch. 31-29 Complies
with the Act 9
(1) Directional Signs 10
(2) Urban Areas-Municipality Distinction 15
(3) Section 131(d) Agreements 17
a. Genera’iv 17

b. Extent of Unzoned Commercial and
Industrial Areas 18

(4) The Moratorium on Directional
Sign Removal 20)
C. The State’s Arguments Regarding
Compliance 22

XXV1
(1) The State's Record of Billboard Removal 22

(2) Flexibility of the Act 23
(3) Scenic Attractiveness 24

D. Whether the Secretary Abused his Discretion
in Failing to Suspend the Penalty on the
Fiscal Year 1978 Funds, Pursuant to

23 U.S.C.Sec. 131(b). 25

(1) Economic Impact of Compliance 26

(2) The State’s Good Faith Attempt at
Compliance 27

(3) Whether the Penalty Should be
Suspended Because Delay in Rendering
the Secretary’s Decision Allegedly
Caused the State Not to Adopt Com-
plying Legislation in 1978. 28

(4) Whether the Secretary Abused his
Discretion in Treating the Fiscal 1978

Funds Differently from the Fiscal
1979 Funds. 29

Conclusion 30

ISSUES

The following issues are presented by the record in
this case:

I. What scope of review should be employed?

II. Does the administrative record justify the
Secretary's decision and order?

DECISION
I. SCOPE OF REVIEW

The State has asked for a trial de novo in this court
case. The exact grounds are unclear. The request,

XXVIl

although contained in the complaint, is not pressed in
the State’s briefs. The State seems to reason that since
the procedure employed was a denial of due process,
and since the Secretary acted in an arbitrary and
capricious manner, the matter should be heard de
novo. This contention is without merit. The proper
remedy for any such violation would be a remand for
new and untainted fact-finding, rather than a usurpa-
tion of the Secretary's factfinding function by this
court. There is little if anything new which the State
would present to the Court on a trial de novo. Ap-
parently, the State seeks to have this court substitute
its judgment on the factual issues for that of the
Secretary. There is no statutory provision for such a
scope of review, and this court has no authority to

grant such a review of the facts. South Dakota v.
Volpe, 353 F. Supp. 338, 342 (D.S.D. 1973).

The State is, however, entitled to a review of the
Secretary's final determination under the provisions of
23 U.S.C. § 131(1). The scope of review is not specified
by Section 131(1). In the absence of any particularized
standard of review, the proper standard is the substan-
tial evidence standard found in 5 U.S.C. § 706.

The nature of the substantial evidence standard was
considered at length in Universal Camera Corp. v.
NLRB, 340 U.S. 474 (1951). Initially, the standard is
applicable only where the agency action is taken pur-
suant to the rule-making power of the Administrative
Procedure Act or when the agency action is based ona
public adjudicatory hearing. Citizens to Preserve
Overton Park Inc. v. Volpe, 401 U.S. 402 (1971). The
condition is fulfilled here, since a public adjudicatory
hearing was held in this case. In Universal Camera,
supra at 477, the Supreme Court indicated that
substantial evidence is “more than a scintilla. It means
such relevant evidence as a reasonable mind might ac-

XXVIII

cept as adequate to support a conclusion.” Substantial
evidence was also equated with the amount of evidence
necessary to deny a motion for a directed verdict and
to justify submitting a case to a jury, where a trial is
by jury. The reviewing court must draw its conclusions
by reviewing the entire record. The evidence detract-
ing from the Secretary's determination must be con-
sidered, as well as that tending to support it. This does
not mean, however, that the court is to weigh the
evidence. The only question is whether all the evidence
on the record, taken as a whole, fairly supports the
Secretary's determination. Universal Camera, supra.
The sufficiency of the evidence will be reviewed under
this standard.

The State further contends that the Secretary's
determination should be set aside because it is ar-
bitrary and capricious 5 U.S.C. 706 (2)(A). Agency ae-
tion may be arbitrary and capricious even if supported
by substantial evidence. Bowman Transportation, Inc.
v. Arkansas Best Freight System, 419 U.S. 281, 284
(1974).

The arbitrary and capricious standard calls for an
“inquiry into the facts [that] is to be searching and
careful’, but “the ultimate standard of review is a nar-
row one.” Citizens to Preserve Overton Park v. Volpe,
supra at 416. In reviewing administrative action under
this standard, the court must determine whether the
decision was based on relevant factors and whether
there has been a clear error of judgment. The court
may not substitute its judgment for that of the agency,
and if the record fairly supports the Secretary's exer-
cise of discretion, that discretion is not to be interfered
with. Citizens to Preserve Overton Park, supra. The
agency must give a reasoned basis for its action. The
Court will not supply a basis on which the agency did
not rely. A decision will, however, be upheld, even

XX1X
when it is of less than ideal clarity, if the agency's path
may be reasonably discerned. Bowman Transportation
v. Arkansas Best Freight System, supra.

Il. Whether The Record Justifies the Secretary's
Determination.

A. Introduction.

(1) Relevant Provisions of the Highway Beau-
tification Act.

The Secretary of Transportation is given authority
to determine compliance with the Act. A ten percent
penalty of federal funds allocated to states for highway
construction is levied under the Act against states that
do not comply. The purpose of the Act is stated as
follows:

The Congress hereby finds and declares that the
erection and maintenance of outdoor advertising
signs, displays, and devices in areas adjacent to
the Interstate System and the primary system
should be controlled in order to protect the public
investment in such highways, to promote the sate-
ty and recreational value of public travel, and to
preserve natural beauty. 28 U.S.C. § 131 (a).

In order to comply with the Act, and avoid the ten
percent penalty, a state is required to prohibit all signs
within the control zone, with the exceptions set out
below. The control zone was initially defined as being
that within 660 feet of interstate and primary highway
rights-of-way. This was later expanded to include the
area more than 660 feet from the rights-of-way, if signs
within this later zone were visible from the highway
and erected with the purpose of being read from that
highway. The following signs may be permitted, even
though they are within the control zone:

(1) Directional and official signs in accordance with

XXX
rules promulgated by the Secretary;

Signs advertising sale or lease of the property on
which they are located;

Signs advertising activities on the property on
which they are located;

Signs in existence on October 22, 1968, determin-
ed by the State to be of intrinsic historic value,
when such determination is approved by the
Secretary; and

Signs advertising distribution of free coffee to

motorists by non-profit groups. 23 U.S.C.
§ 131(c).

These categories and the regulations under the Act,

Si

23 C.F.R. 750.153, do not authorize erection and main-
tena
under South Dakota law relevant to this action. The
Act

nce of certain types of signs which were allowed

does, however, provide the following exemption:

The Secretary may approve the request of a State
to permit retention in specific areas defined by
such State of directional signs, displays, and
devices lawfully erected under State law in force
at the time of their erection which do not conform
to the requirements of subsection (c), where such
signs, displays and devices are in existence on the
date of enactment of this subsection and where the
State demonstrates that such signs, displays, and
devices (1) provide directional information about
goods and services in the interest of the traveling
public, and (2) are such that removal would work a
substantial economic hardship in such defined
area. 23 U.S.C. § 131(o).

gns are also permitted in areas zoned commercial

or industrial, or in unzoned commercial or industrial

XXXI1

areas, in accordance with agreements between the
Secretary and the State, 23 U.S.C. § 131(d). If the
State certifies comprehensive local controls setting
size, lighting and spacing standards, these will govern
in lieu of an agreement insofar as signs are within com-
mercial and industrial areas zoned or unzoned. /d.
States are free to impose stricter controls than those
called for in the Act. 23 U.S.C. § 131(k).

Signs permitted under any of the above provisions,
except Subsection 131(o), are known as conforming
signs. These may be maintained so long as they con-
tinue to conform to state law. Non-conforming signs
(those not fitting within the above provisions) must be
removed as federal funds become available to pay com-
pensation for their removal. Signs that are non-con-
forming, but which come within the provisions of Sub-
section 131(o) are not subject to removal.

Signs erected in violation of state law at the time of
their erection (illegal signs) must also be removed, but
no compensation is paid for them. Owners of conform-
ing or non-conforming signs must be compensated if
the signs are removed, and the federal government is
required to pay seventy-five percent of the cost of
removal and compensation to sign owners, 23 U.S.C.
§§ 131(g), 131(n). This is apparently also the case if con-
forming signs are removed because the State law is
more strict than § 131.

Further, provisions of the Act and the regulations
under it will be set forth as they become relevant.

(2) General Considerations.

The State argues that the Federal Highway Admin.
istration was required to prove that specific signs
located on South Dakota roads at the time of the hear-
ing were out of compliance with the appropriate

XXX

federal standards. The Federal Highway Administra-
tion, on the other hand, contends that highway funds
may be withheld if South Dakota law regulating out-
door advertising does not regulate in a way compatible
with federal law. The question is essentially one of
whether Congress sought to penalize the State for fail-
ing to adopt regulations or for having improper signs
within its borders. The distinction is important since
the Highway Administration presented very little
evidence of signs actually out of compliance.

The Highway Administration's position is more
reasonable. It is clear from 23 USC § 131 that Con-
gress intended to regulate future erection of bill-
boards. If the Secretary could not find a state out of
compliance until non-conforming signs were erected
and if those non-conforming signs were not prohibited
by state law, the owners would be entitled to compen-
sation for removal of the signs. 23 U.S.C. § 131(g). If
the Secretary were not permitted to determine com-
pliance by considering whether state law conformed to
federal law, he could only judge results. He would be
forced to inspect the results of state law and not the
state law itself. This would entail waiting until after
non-conforming signs were erected to determine that
the State’s control program was insufficient. The
language of the Act makes it plain that Congress
sought the adoption of conforming laws by the States.
It the States do not adopt such laws, they are subject
to a ten percent penalty.

B. Whether SDCL Ch. 31-29 complies with the
Act.

The Secretary found that South Dakota law did not
meet federal standards in a number of specifi¢ areas:

(1) Directional signs;

XXXIlil
(2) Urban area-municipality distinction;

(3) The State’s inability to enter into a 23
U.S.C. § 131(d) agreement.

(4) The State’s statutorily mandated moratori-
um on removal of “directional” signs.

This finding will be reviewed in light of the above
standards of substantial evidence and arbitrariness.

(1) Directional Signs

As noted above, 23 USC § 131(c) allows erection of
directional and official signs and notices. The
Secretary's delegate, the Federal Highway Adminis-
tration, has promulgated regulations pursuant to this
subsection defining directional signs. 23 CFR
§ 750.153-154. The definition of directional signs is
located in § 750,153(r)' and does not include, as does
the State definition in effect at the time relevant to
this case* the advertisement of goods and services of
businesses catering to the traveling public.®

The State admits this discrepancy, but argues that
the Highway Administration had no authority to pro-
mulgate the regulations because (1) Congress intended
to leave to the states the task of defining what con-

' 23 CFR § 750.153(r): Directional signs means signs containing
directional information about public places owned or operated by
Federal, State or local governments or their agencies; publicly or
privately owned natural phenomena, historic, cultural, scientific,
educational and religious sites; and areas of natural scenic beauty
or naturally suited for outdoor recreation, deemed to be in the in-
terest of the traveling public.

* SDCL 31-29-62(2): “Directional sign, display or device pro-
viding directional information about goods and services in the in-
terest of the traveling public”, any sign, display or device giving
directional information pertaining to food services, lodging,
gasoline and automotive services, resorts, attractions, camp-

XXXIV

stitutes directional signs and (2) Congress, by amend-
ing the language of § 131(c) from “directional and
other official signs” to ‘directional and official signs”
intended to allow non-official directional signs. The Act
specifically gives the Secretary authority to pro-
mulgate regulations necessary to implement the sec-
tion. If Congress had not intended to give the
Secretary authority over such matters, it would
presumably not have granted such power. To concede
that the Secretary has power to enforce controls over
size, lighting, spacing and other sign characteristics
but not power to control the type of sign is inconsistent
with the comprehensive nature of the Act. Further,
the elimination of “other” does not dictate a contrary
result. There is little, if any, legislative history con-
cerning this amendment. The Congress considered but
rejected an amendment that would have used language
virtually identical to that contained in South Dakota
Law. S.Rep. No. 93-355, 93rd Cong. 1st Sess. 63 (1973);

grounds, truck stops, natural wonders, scenic and historical sites,
and areas suited for outdoor recreation or business catering to
the traveling public.

SDCL 31-29-63(1): Directional and official signs and notices, as
authorized or required by law, which signs may include, but shall
not be limited to, signs and notices pertaining to natural wonders,
scenic and historic attractions, and directional information con-
cerning goods and services of businesses catering to the traveling
public.

’ The House of Representatives proposed addition of the
phrase “information in the specific interest of the traveling
public, including, but not limited to, signs for rest stops, camping
grounds, truck stops, food services, gas, and automotive services,
and lodging.” This amendment was rejected by the Senate, a com-
mittee of which indicated that directional signs should be limited
to those disseminating noncommercial information. S. Rep. No.
93-1111, 93rd Cong. 2d Sess. 13 (1974); H.R. Rep. No. 93-1567, 93rd
Cong. 2d Sess. 4 (1974).

XXXV

S.Rep. No. 93-1111, 93rd Cong. 2d Sess. 13 (1974); H.R.
Rep. No. 93-1567, 93rd Cong., 2d Sess. 4 (1974); H.R.
Rep. No. 94-716, 94th Cong., Ist Sess. 12 (1975); S. Rep.
No. 94-741, 94th Cong., 2d Sess. 48-49 (1976). Also, the
definition in § 750.153(r) does include non-official
signs. It is thus not inconsistent with § 131(c), even
after Congress eliminated the “other’’.*

South Dakota law on directional signs also fails to
comply with federal standards on size, lighting,
spacing and number of signs permitted. South Dakota
standards are set forth in SDCL 31-29-64 to 67. Section
31-29-64 applies to all outdoor advertising and requires
that there be no signs erected within 500 feet of an
interchange on certain interstate and limited access
highways. The federal standards, 23 CFR 750.154(d)(2)
and (3) prohibit signs within 2,000 feet of such inter-
changes, and include parks, scenic areas and rest areas
on unlimited access primary highways.

In addition, the South Dakota size, (SDCL 31-29-65)
lighting, (SDCL 31-29-60) and spacing (SDCL 31-29-67)
criteria do not conform to the federal criteria in a
number of respects. The most serious discrepancy is
that they fail to apply to any sign located outside a
zoned or unzoned commercial or industrial area. Thus,
any sign erected outside commercial or industrial
areas is not subject to any size, lighting or spacing
requirement. Other respects in which the South
Dakota statutes fail to conform are as follows:

a. SDCL 31-29-65 permits signs to a size of 1,200

* This amendment was adopted subsequent to the Highway
Administration's promulgation of the regulations. The Highway
Administration made no change in its regulations, since it did not
believe that the amendment required a change. Congress has not
amended § 131(c) since 1975. See 40 Fed. Reg. 21934 (1974).

XXXVI

square feet. The federal standards, 23 CFR
750.154(b)(1)i) permit a maximum size of 150
square feet;

b. SDCL 31-29-67(2) allows signs to be erected
within 500 feet of one another on interstate high-
ways and within 300 feet of one another on
primary highways. The federal standards, 23
CFR 750.154(d)\(4)(i) require at least a mile be-
tween the signs.

ce. SDCL 31-29-64 to 67 do not prohibit more than
three directional signs in the same direction of
travel relating to the same activity, as does 23
CFR 750.154(d)(4)(ii). South Dakota also does not
prohibit directional signs more than seventy-five
(interstate system) or fifty (primary system) air
miles from the activity. 23 CFR 750.154(d)(4)(iii)
and (iv).

d. South Dakota does not limit message content on
directional signs to identification and directional
information, as do the federal standards 23 CFR
750.154(e).

The State admits these discrepancies, as it must,
since they are plain on the face of the statutes and
regulations. The State contends, however, that the
regulations are inconsistent with 23 USC § 131 and
the legislative intent behind the Act, that the
discrepancies are minor in nature, and that the
discrepancies can be reconciled by application of 23
USC § 131(0). The § 131(0) issue is discussed later in
this opinion.

The Highway Beautification Act explicitly gives the
Secretary authority to promulgate regulations

relative to directional signs. 23 U.S.C. § 131(c)(1). This
authority has been delegated to the Federal Highway

XXXVII

Administration, which has duly promulgated the regu-
lations found at 23 CFR 750.153-54. When authority is
thus expressly delegated, a reviewing court does not
have the power to set aside the regulations simply
because the court might have interpreted the statute
in a manner different from the agency’s interpretation.
Batterton v. Francis, 432 U.S. 416, 425-26, (19 7). The
regulations under § 131(c)(1) are not merely inter-
pretative, but rather, legislative regulations. They
have the force and effect of law and can be set aside
only if they clearly exceed the Secretary’s statutory
authority or are arbitrary, capricious, an abuse of
discretion or otherwise not in accordance with law. 5
U.S.C. §§ 706(2)(A) and (c); Batterton v. Francis, supra,
at 425-26. The record is barren of any evidence that the
rules constitute this type of abuse. The court might
have adopted different standards, but Congress did
not assign the task of adopting such standards to the
court. The regulations were adopted under express
authority and have been in place since 1973. Congress
has not acted to change them. Since their adoption is
not clearly outside the statutory mandate, the regula-
tions cannot now be set aside merely because this
Court might interpret § 131(c)(1) differently. Batter-
ton v. Francis, supra.

The State's contention that the discrepancies be-
tween state and federal law are minor must also be re-
jected. The Secretary, who has the initial task of fact
finding under the Act, found otherwise. This deter-
mination should not lightly be set aside, since the
Secretary has considerable experience in interpreting
and applying the Act.° In addition, the South Dakota

° The Secretary has little authority over matters of law but
some deference is due to the Secretary's interpretation of the

Highway Beautification Act. Although 5 U.S.C. § 706 requires
the court to interpret statutory provisions, the court can seek

XXXVIli

statutes, when compared with billboard regulation in
the other forty-nine states, permit far larger signs,
with much closer spacing than the regulations in any
other state. As this court stated in South Dakota v.
Volpe, supra, certain standards have been established
through experience with the Act. There can be little
doubt that South Dakota directional sign regulations
are outside these standards, and the Secretary there-
fore did not abuse his discretion in finding that South
Dakota had not complied with the Act.

(2) Urban Area — Municipality Distinction

23 U.S.C. § 131(b)° provides that certain outdoor ad-
vertising devices must be controlled, even though they
are more than 660 feet off the right-of-way of either the
interstate or primary road systems. In order to be sub-

guidance from agencies and other entities having experience in
applying and interpreting particular legislation. Vermont v.
Brinegar, 379 F.Supp. 606, 612-13 (D.Vt. 1974). The Secretary has
such experience and his interpretation should thus be given some
weight even where the Court is required to make its own inter-
pretation of the statute.

° 23 U.S.C. § 131(b):

Federal-aid highway funds apportioned on or after January 1,
1975, or after the expiration of the next regular session of the
legislature, whichever is later, to any State which the Secretary
determines has not made provision for effective control of the
erection and maintenance along the Interstate System and the
primary system of those additional outdoor advertising signs,
displays, and devices which are more than six hundred and sixty
feet off the nearest edge of the right-of-way, located outside of ur-
ban areas, visible from the main traveled way of the system and
erected with the purpose of their message being read from such
main traveled way, shall be reduced by amounts equal to 10 per
centum of the amounts which would otherwise be apportioned to
such State under Section 104 of this title, until such time as such
State shall provide for such effective control. ...[Emphasis sup-
plied]

XX XIX

ject to control, these devices must be located outside
“urban areas’. The Federal Highway Administration
has interpreted this to mean urban areas as defined by
23 U.S.C. § 101(9). 23 CFR § 750, 703(m). Such urban
areas must have populations of 5,000 or more and be
within boundaries fixed by collaboration of state and
local officials, subject to approval by the Secretary.
There are fourteen such areas in South Dakota. SDCL
31-29-63" provides that the zone beyond 660 feet is to
be controlled only outside the corporate limits of a
municipality. An exhibit prepared by the State High-
way Department shows that there are 264 incorpo-
rated municipalities in South Dakota. A municipality
may have as few as 100 residents and 30 qualified elec-
tors. SDCL 9-3-1. Although not all of the municipalities
are located on the interstate or primary systems, the
State’s highway map shows that at least twenty non-
urban area municipalities are on the interstate, and
perhaps one hundred or more are on the primary
system.

The State insists that no advertiser would erect a
sign in a municipality where the sign would have to be
more than 660 feet from the right-of-way. Such argu-
ment is irrelevant, but in any case, as the Highway Ad-
ministration points out, the possibility of such signs is
not remote. This is particularly so with the interstate
system, which often bypasses smaller towns. If the

’ SDCL 31-29-63:

No outdoor advertising shall be erected within six hundred six
ty feet of the nearest edge of the right-of-way and visible from the
main-traveled way or beyond six hundred sixty feet of the
nearest edge of the right-of-way visible from the main-traveled
way located outside the corporate limits of a municipality and
erected with the purpose of its message being read from the
main-traveled way of the interstate or primary systems.... [Em
phasis supplied].

XXXX

interstate were, for example, five hundred feet from
the corporate limits of a municipality, any advertising
¢ »vice could be erected 160 feet or more within the cor-
porate limits without being controlled under South
Dakota iaw. Yet, § 131(b) itself requires control within
this zone. It is therefore clear that South Dakota law
provides greater opportunity for construction of
advertising devices within this area than § 131(b). The
Secretary's determination was thus correct on this
phase of the case.

(3) Section 131/d) Agreements.
A. Generally

23 USC § 131(d)(10)* requires the State and the
Secretary to enter into agreement on what areas will
be considered unzoned commercial and _ industrial

* 23 U.S.C. § 131(d):

In order to promote the reasonable, orderly and effective
display of outdoor advertising while remaining consistent with
the purposes of this section, signs, ‘ splays, and devices whose
size, lighting and spacing, consistent with customary use is to be
determined by agreement between the several States and the
Secretary, may be erected and maintained within six hundred
and sixty feet of the nearest edge of the right-of-way within areas
adjacent to the Interstate and primary systems which are zoned
industrial or commercial under authority of State law, or in un-
zoned commercial or industrial areas as may be determined by
agreement between the several States and the Secretary. The
States shall have full authority under their own zoning laws to
zone areas for commercial or industrial purposes, and the actions
of the States in this regard will be accepted for the purposes of
this Act. Whenever a bona fide State, county, or local zoning
authority has made a determination of customary use, such deter-
mination will be accepted in lieu of controls by agreement in the
zoned commercial and industrial areas within the geographical
jurisdiction of such authority. Nothing in this subsection shall ap-
ply to signs, displays, and devices referred to in clauses (2) and (3)
of subsection (c) of this section. [on-premises advertising].

XXXXI

areas for purposes of the Act. The Secretary states in
his final determination that a state cannot provide for
effective control without the agreement. The State of
South Dakota had no such agreement with the Secre-
tary or his delegate following Hogan v. S.D. State
Dept. of Transportation, supra, until December, 1979.

The State contends that the absence of an agree-
ment is due to the refusal of the Secretary or his dele-
gate to negotiate with the State. The State in argu-
ment has admitted, however, that the only terms it
would or could accept in such an agreement were those
contained in SDCL Ch. 31-29.° Both the Federal High-
way Administration and the Secretary found these
terms totally unacceptable, and so informed the Legis-
lature both before and after passage of the 1977
amendments to Ch. 31-29.

The State, in effect, offered to enter into an agree-
ment based on the provisions of Ch. 31-29 (as amended
1977). If these provisions are sufficient to comply with
the Act, the Secretary or his delegate was not justified
in refusing to enter into an agreement. If, on the other
hand, SDCL 31-29 is not sufficient to constitute effec-
tive control, the Secretary would not be required to
agree to its terms.

The areas for agreement under § 131(d) are the ex-
tent of “unzoned commercial and industrial areas” and
the size, lighting and spacing criteria within such
areas. The Secretary, in his final determination, found
South Dakota size, lighting and spacing standards suf-

* Presumably the State and the Secretary could now enter into
an agreement on terms more acceptable to the Secretary, pur-
suant to 1979 S.D. Sess. L. Ch. 202 (approved March 13, 1979).
That chapter is irrelevant to the present case, however, since it
was approved after the Secretary made his final determination.

XXXXIi

ficient insofar as they regulated signs in zoned and un-
zoned commercial and industrial areas.

B. Extent of unzoned commercial and industrial
areas.

SDCL 31-29-70 defines unzoned commercial and in-
dustrial areas. It permits outdoor advertising on both
sides of the highway, and within one mile on either side
of any commercial or industrial activity except other
outdoor advertising. All land within one thousand feet
of any highway, if traversed by any railroad right-of-
way, is also included. In addition, if any “pockets” of
land not considered zoned or unzoned commercial or in-
dustrial of 1,000 feet or less are between areas con-
sidered zoned or unzoned commercial or industrial,
such “pockets” are also unzoned commercial or in-
dustrial for outdoor advertising purposes. Finally, any
board of county commissioners is given power to deter-
mine what additional areas are appropriate for outdoor
advertising, and to declare these areas to be unzoned
classification. The commissioners also have the power
under SDCL 31-29-70 to determine that certain parts of
the county are not appropriate for outdoor adver-
tising, even though they would otherwise be appropri-
ate under SDCL Ch. 31-29. The total effect of SDCL
31-29-70 would appear similar to that of the strip
zoning rejected in South Dakota v. Volpe, supra.

The Federal Highway Administration refused to
agree to the above provisions because the provisions
allegedly made effective control impossible, because
the provisions were inconsistent with regulations
implementing 23 USC § 131(d)'® and because they did
not conform to the broad outlines of agreements made

” 23 C.F.R. 750.703(1):

Unzoned commercial or industrial areas are unzoned areas ac-

XXXXIll

with other states. 23 CFR 750.703(1) requires that the
areas be unzoned, that they actually be used for com-
mercial or industrial purposes, and that the areas be
defined in agreements between the Secretary and the
states. SDCL 31-29-70 violates at least the first two of
these conditions, since it gives local authorities the
right to convert zoned areas into ‘“unzoned commercial
or industrial” areas and because it authorizes non-
commercial or industrial areas to be used for outdoor
advertising if they fall into “pockets” of less than 1,000
feet. It also gives local authorities the power to allow
outdoor advertising in any area that they feel is appro-
priate for such advertising, regardless of any zoning or
planning for other purposes.

The State contends that Congress intended to allow
individual states to determine the zoned and unzoned
areas for themselves, and that any national standards
on the matter are outside the authority of the Secre-
tary. The legislative history cited in support of this
proposition, however, referred to zoned areas not un-
zoned areas. Further, as this Court said in South
Dakota v. Volpe, supra, at 341:

But through experience gained in
administering the Act criteria of
general applicability nationally [have]
been formulated for comparison with those
state standards submitted for approval.
Charged with administering the Act and pre-
serving the stated purpose from the caprice
of the individual states, the Secretary estab-
lished these generally accepted criteria as a
floor to acceptable alternatives. This court
tually used for commercial or industrial purposes as defined in

agreements made between the Secretary,...and each state pur
suant to 23 U.S.C. § 131(d) [emphasis supplied].

XXXXI1V

concludes that the Secretary so pursuing the
Congressional policy of general uniformity
across the nation reasonably determined that
South Dakota's provisions failed to obtain the
level of any standards previously accepted and,
therefore, finds South Dakota's provisions un-
acceptable.

The same applies to this case. Not only are South
Dakota's provisions in conflict with 23 CFR 750.703(1),
but they are far from the provisions of any of the
agreements made with other states, all of which are
summarized in the record. No other state allows out-
door advertising more than 1,000 feet from commercial
and industrial activities within unzoned areas. The
other states control outdoor advertising in non-com-
mercial, non-industrial “pockets”. Some states permit
advertising only on the same side of the highway as the
commercial or industrial activity. Other states do not
allow local boards to “unzone” strictly to allow outdoor
advertising. The Secretary’s determination on this
phase of the case is, therefore, supported by the record
and in accordance with the law.

(4) The moratorium on directional sign removal.

1977 S.D. Session Laws, Ch. 247, § 3! forbids
1977 S.D. Sess. L. Ch. 247, § 3:

No outdoor advertising relating to directional information con-
cerning goods or services provided the traveling public shall be
removed or caused to be removed by the state, or by any political
subdivision without the owner's consent unless consistent with
local ordinance, until further enactment of express legislative
authority. No permit, license or other authority shali be required
for the erection or maintenance of outdoor advertising which
shall, as other land uses, be controlled exclusively by local
authority pursuant to SDCL 11.

Because this section was part of a temporary chapter, Ch. 247,

XXXXV

removal of any outdoor advertising relating to direc-
tional information in the interest of the traveling
public without prior approval of the legislature. This
section clearly conflicts with the Act, the purpose of
which is to eliminate non-conforming outdoor adver-
tising, much of which includes the type of advertising
that cannot be removed because of this section.

The State argues that the moratorium is justified by
23 U.S.C. §§ 131(q)(2) and 131(0). These arguments
must be rejected. § 131(q)(2) states that directional
signs of this type should be the last signs removed. It
does not state that their removal can be prohibited in-
definitely as does ch. 247, § 3. The Secretary has
implemented 131(q)(2) by putting this type of sign at
the bottom of the federal priority list, 23 C.F.R.
750.304(a), as has the State, SDCL 31-29-81. Neither the
Act [§ 131(q)(2)] nor the regulations under it, however,
justify a moratorium on sign removal.

The State also argues that a moratorium was neces-
sary in order to preserve signs pending an economic
hardship exemption under 23 U.S.C. § 131(o). The
moratorium is, however, much too broad to be excused
as aiding a § 131(o) application. The moratorium ap-
plies to illegal signs and to those erected after May 5,
1976, both of which are not protected under any inter-
pretation of § 131(o). Given the fact that both state and
federal law place this type of directional sign at the
bottom of the removal priority list, it does not appear
that the extreme step of a moratorium would be of any
aid to the State in a § 131(0) exemption application.

C. The State’s Arguments Regarding Com-
pliance.
requiring a Legislative Research Council study of outdoor adver-
tising, it was never codified in SDCL. Ch. 247 was House Bill 927
of the 1977 South Dakota Legislature.

XXXXVI1

The State makes several arguments on the issue of
compliance. It is argued for the following reasons that
either the State is in compliance or that it has made a
good faith attempt to comply with the Act:

(1) The State’s record of billboard removal is near
the top of the list of all the states; and

(2)The Act was not intended to apply equally to
all states, but was to be flexibly applied to
differing situations.

(1) The State’s record of billboard removal.

It is clear that the State has, since the Act was pass-
ed removed a large number of billboards. According to
exhibits offered by both the State and the Highway
Administration, over 20,000 signs have been removed
and perhaps 7,000 remain. Of these, it was estimated
that 5,000 do not comply with the Highway Beautifica-
tion Act. The State contends that this record of bill-
board or sign removal in and of itself shows compliance
with the Act, or at least a good faith attempt to com-
ply. In light of the State’s failure to enact statutes
governing outdoor advertising, however, this argu-
ment must be rejected.

It is undisputed that the State was in compliance
with the Act until the Hogan decision was rendered.
During this time, many non-conforming and illegal
signs were removed, and others were doubtless
prevented from being erected by the State’s comply-
ing regulation of outdoor advertising. Between the
date of Hogan and March 13, 1979, however, the State
was not in compliance with the Act. Pre-Hogan sign
removal cannot change the fact of non-compliance.

The question is not simply a matter of theoretical
distinction between state and federal law. SDCL Ch.
31-29 provided little protection against future erection

XXXXVii

of billboards, no matter what the record of removal in
the past might have been. In short, under Ch. 31-29, it
was reasonable for the Secretary to expect that many
non-conforming billboards would be erected to replace
those that had been removed. It is the legitimate con-
cern of the Secretary that the Highway Beautification
Act be complied with in the future as well as in the
past. Conforming state regulation, to effectuate the
public policy of the Act, must be continuous, not inter-
mittent. For these reasons, the State’s argument
based on billboard inventory statistics must be over-
ruled.

(2) Flexibility of the Act

The State’s second argument regarding compliance
with the Act is that the differences between federal
and state regulations should be disregarded because of
the unique position of South Dakota vis-a-vis other
states. It is argued that the Act, referring specifically
to subsections 131(b), 131(0) and 12 (g) was intended to
be a flexible instrument that would be applied differ-
ently to different states. Since South Dakota is a rural
state with few urban areas and relatively few indus-
trial and commercial areas, it is argued an “inflexible
national standard” should not be applied here. This is
said to be particularly the case where the state is
heavily dependent upon tourism as a source of jobs and
state revenue. It is argued that the Secretary and the
Federal Highway Administration have not taken into
account the differences between states in applying the
Act. The Highway Administration argues that there
are differences in the billboard regulations in the
several states. Differences are tolerated, it is argued,
but certain standards have emerged through experi-
ence and these are typified by Highway Administra-
tion regulations, and the agreements between all the
other states and the Highway Administration. (South

XXXXVill
Dakota v. Volpe, supra). South Dakota law is, as shown
by the discussion above, far out of line with both ex-
isting state agreements and Highway Administration
regulations.

Whatever merit the State’s flexibility argument
may have, there can be little doubt that Congress in-
tended more regulation of outdoor advertising than
was accomplished by the 1977 amendments to SDCL
Ch. 31-29. Particularly, with regard to the extent of un-
zoned commercial and industrial areas, these amend-
ments amount to no effective regulation of outdoor
advertising at all. State law, as it stood until March 13,
1979, would not place any restriction on the areas in
which outdoor advertising could be erected, provided
the local board of county commissioners agreed that all
areas within the county should be open to such adver
tising. The State is not in a good position to claim that
the Secretary shouid be “flexible” when it has failed to
prohibit outdoor advertising in any areas.

(3) Scenic Attractiveness.

The Administrative Law Judge in this case also
found that much of South Dakota is unattractive and
that billboards contributed to safety, since they gave
drivers something to look at while driving through
boring landscape. He therefore concluded that more
billboards should be allowed in places that lack scenic
merit. This appears to have been a subjective conclu-
sion, arrived at after the Administrative Law Judge
drove from the Black Hills area to Pierre. The Act con-
tains no such exception. Though the Administrative
Law Judge did cite some legislative history about bill-
boards obstructing trees, the Act was not intended to
protect the view of only those areas that a particular
judge might find to be of scenic merit. As the Secre-
tary pointed out, citing floor debate on the Act, what

XXXXIX

one person might wish to view in the way of scenery
can differ from what another would want to view.
Thus, in absence of a Congressional declaration re-
quiring that subjective impressions of scenic beauty be
considered, it is preferable to apply the law equally to
all areas. It is not the prerogative of any court or judge
to determine, other than under standards promulgated
by Congress or an agency acting under a valid Con-
gressional delegation, what portions of the landscape
should or should not be obstructed by billboards.

D. Whether the Secretary abused his discretion
in failing to suspend the penalty on the fiscal year 1978
funds, pursuant to 23 U.S.C. § 131/(b).

23 U.S.C. § 131(b) provides that the Secretary may
suspend the effect of the ten percent penalty on a find-
ing that such a suspension would be “in the public
interest”. The State argues that the penalty should
have been suspended in this case because:

(1) Compliance would have an adverse economic im-
pact on the State;

(2) The State made a “good faith attempt” to comply;

(3) The State’s failure to enact complying legislation
in 1978 was occasioned by the Secretary's delay,
until November, 1978, in rendering his final deter-
mination and order;

(4) The Secretary abused his discretion in treating
fiscal year 1978 payments (which were withheld and
redistributed to the other states) differently from
fiscal year 1979 payments (which were to be re-
turned to the State if it complied by March 31, 1979).

(1) Economic Impact of Compliance

At the administrative hearing, the State presented a
great deal of evidence on the cost of compliance. An

|

economics professor from the University of South
Dakota testified, and introduced a study indicating
that fifty million dollars in income and taxes could be
lost if the State complied fully and removed all non-
conf

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_1323%3A1. Public record. Not legal advice.