Arkansas State Highway & Transportation Department v. RAM Outdoor Advertising

Cite as 2015 Ark. App. 713

ARKANSAS COURT OF APPEALS
DIVISION IV
No. CV-15-404

ARKANSAS STATE HIGHWAY & Opinion Delivered December 16, 2015
TRANSPORTATION DEPARTMENT
APPELLANT APPEAL FROM THE SEBASTIAN
COUNTY CIRCUIT COURT,
V. FORT SMITH DISTRICT
[NO. CV-14-1007]

RAM OUTDOOR ADVERTISING HONORABLE J. MICHAEL
APPELLEE FITZHUGH, JUDGE

REVERSED

BART F. VIRDEN, Judge

Appellee RAM Outdoor Advertising (RAM) received a conditional-use permit from

the City of Fort Smith to convert an existing billboard along Interstate Highway 540 from

a static display to a digital display. RAM then applied for a permit from appellant, the

Arkansas State Highway & Transportation Department (the Department or AHTD), to

convert the sign to an electronic message device (EMD). The Department denied the

application, and RAM requested an administrative hearing before the Arkansas State

Highway Commission (the agency). The hearing officer upheld the Department’s decision,

and RAM appealed to the Sebastian County Circuit Court. The circuit court reversed the

agency’s decision, and the Department has appealed to this court. We reverse the circuit

court and affirm the agency’s decision.
 Cite as 2015 Ark. App. 713

I. Overview

The 1965 Federal Highway Beautification Act (Federal Act) provides for the control

of billboards in an effort to maintain natural beauty along American interstate and primary

highway systems. 23 U.S.C. § 131 et seq. The federal law requires the states to provide

“effective control” along interstate and primary highway systems as a condition of receiving

all of each state’s federal highway funds, or else the United States Secretary of Transportation

will withhold ten percent of those funds. 23 U.S.C. § 131(b).

The Arkansas Highway Beautification Act, codified at Ark. Code Ann. § 27-74-101

et seq., was enacted by Act 640 of 1967 to further the goals of the Federal Act and ensure

continued funding for roads. Ark. State Highway & Transp. Dep’t v. Kidder, 326 Ark. 595, 933

S.W.2d 794 (1996). Arkansas Code Annotated sections 27-74-203(a) and -211(b) (Repl.

2010) impose a duty on the Arkansas State Highway Commission to regulate the erection

and maintenance of outdoor advertising devices and to adopt and promulgate regulations

governing the issuance of permits for erecting outdoor advertising devices. The agency has

promulgated and adopted Regulations for the Control of Outdoor Advertising on Arkansas

Highways. The General Assembly has declared that the erection and maintenance of outdoor

advertising devices shall be controlled in accordance with the terms of this chapter and

regulations promulgated pursuant thereto, in order to protect the public interest; promote

the public health, safety, and welfare; to preserve natural beauty; and to promote reasonable,

orderly, and effective display of outdoor advertising in Arkansas. Ark. Code Ann. § 27-74-

201(a) (Repl. 2010).

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Arkansas Code Annotated section 27-74-204(a) (Repl. 2010) provides that nothing

contained in this chapter shall prohibit the erection and maintenance of outdoor advertising

signs, displays, and devices consistent with customary use within 660 feet of the nearest edge

of the right-of-way of interstate, primary, and other state highways designated by the

commission (1) within those areas which are zoned industrial or commercial under authority

of the laws of this state, or (2) within those unzoned commercial or industrial areas which

may be determined by agreement between the commission and the United States Secretary

of Transportation. As set forth in Appendix 3 section (E) of the agency’s regulations, the

State of Arkansas and local political subdivisions shall have full authority under their own

zoning laws to zone areas for commercial or industrial purposes and that action in this regard

will be accepted for the purposes of this agreement. The regulations define “commercial or

industrial activities” as those activities generally recognized as commercial or industrial by

public zoning authorities in Arkansas, except that transient or temporary activities and

activities not visible from the main traveled way shall not be considered commercial or

industrial. 001-00-005-7 Ark. Code R. 3 § 1(F)(3) & (4) (Weil 2008).

Section 7(B)(8) of the revised regulations for EMDs provides that a sign owner may

modify existing, legal, conforming structures to an EMD only after filing an application and

receiving approval by the Department. RAM applied for such a permit, and the Department

denied the application because (1) the sign site is not located in a commercial/industrial area;

(2) the property was zoned industrial, and, although three billboards were built over thirty

years ago, there has been no industrial development of the property; (3) the property is a

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forested tract of land located in a floodplain, where there has been no development, and no

development is likely to occur; and (4) the Sebastian County Assessor’s Office lists the

landowner as “Fort Smith Riverfront/Jack White,” but the application does not have a

landowner’s permission statement.1

Following the Department’s denial of its application, RAM requested an

administrative hearing before the Arkansas State Highway Commission, which appointed a

hearing officer.

II. Administrative Hearing

Craig Roberts, RAM’s managing partner, testified that RAM’s proposed sign site is

in an area that the City of Fort Smith has zoned Industrial Light.2 Roberts stated that he had

observed ATV (all-terrain vehicle) activity on the land—primarily, on weekends—as recently

as a few months prior. He stated that there was also a front-end loader parked at the site and

that he had seen the excavator loading dirt for construction projects. Roberts said that the

front-end loader moved dirt eight or nine times out of ten when it was not raining.

Brandy Campbell, beautification coordinator with the Department, testified that he

recommended that RAM’s application be denied because the sign was non-conforming,

meaning that it would not qualify for a new permit in its present state. He testified that when

there is doubt about the legitimacy of zoning by the city, the Department uses an unzoned

1
Counsel for the AHTD conceded at the administrative hearing that title to the
property was not in dispute.
2
City of Fort Smith Ordinance No. 15-13 (Fort Smith, Ark., Code § 27-704-4
(1976)).

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test to determine whether the zoning is consistent with the activity occurring there.

Campbell, who described the proposed site as “a forested area,” testified that there was

absolutely no industrial activity that one could observe from Interstate 540 and that the

nearest commercial activity was 1.3 miles south of the site. Campbell also testified that he had

spoken with the operator of the front-end loader and was told that there was no on-site

office.

Jeff Ingram, an administrator at the Department and head of the beautification section,

testified that the purpose of the Beautification Act is to limit signs to commercial or industrial

areas. He said that, applying the unzoned test, there was no industrial development within

600 feet of the proposed site and no infrastructure. Ingram stated that there were no

recognizable structures that would lead one to conclude that there was a dirt pit or a mining

operation on the property as one is traveling on Interstate 540. He testified that the extent

of the dirt-pit operation was one man with a front-end loader who “occasionally” got phone

calls and loaded a dump truck. He described the site, which he clarified is in a floodway, as

“nothing but vacant land growing up in trees and weeds.” Ingram stated that there was a ten-

year history of no development and that no development was likely to occur over the next

ten years. Ingram further testified that the city had a right to zone the property as industrial

but, for purposes of the Beautification Act, it did not meet the expectations of the Federal

Highway Administration.

At the conclusion of the hearing, the hearing officer upheld the Department’s

decision. The hearing officer found

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(1) that RAM’s permit application did not comply with regulations for EMDs;

(2) that the Department was not bound by the zoning classifications or decisions of
municipalities;

(3) that the activity within the zoned area did not meet the definition of “industrial”
activity set forth in the regulations; and

(4) that the regulations have been deemed constitutional by the Arkansas Supreme
Court and do not impermissibly restrict certain speech.3

RAM then appealed to the circuit court, which reversed the agency’s decision. The

Department brings this appeal to our court.

III. Argument

RAM, as the challenging party, argues that the Department did not give due

deference to the City of Fort Smith’s zoning decision and that there was no substantial

evidence that the zoning was primarily to allow billboards, as was the case in Files v. Arkansas

State Highway & Transportation Department, 325 Ark. 291, 925 S.W.2d 404 (1996). According

to RAM, the Department ignored the General Assembly’s liberal grant of authority to

municipalities regarding construction of the Arkansas Highway Beautification Act.4 RAM

further contends that the Department was unable to point to any authority for its application

of an unzoned test for areas that are in fact zoned industrial or commercial, making its

decision both arbitrary and capricious.

3
See Yarbrough v. Ark. State Highway Comm’n, 260 Ark. 161, 539 S.W.2d 419 (1976).
4
Arkansas Code Annotated section 14-56-402 (Repl. 1998) provides that cities of the
first and second class and incorporated towns shall have the power to adopt and enforce plans
for the coordinated, adjusted, and harmonious development of the municipality and its
environs.

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IV. Standard of Review

Review of administrative agency decisions, by both the circuit court and the appellate

courts, is limited in scope. Ark. State Highway & Transp. Dep’t v. Lamar Advantage Holding

Co., 2011 Ark. 195, 381 S.W.3d 787. The standard of review to be used by both courts is

whether there is substantial evidence to support the agency’s findings. Id. The appellate

court’s review is directed, not toward the circuit court, but toward the decision of the

agency, because administrative agencies are better equipped by specialization, insight through

experience, and more flexible procedures than courts, to determine and analyze legal issues

affecting their agencies. Id. When reviewing such decisions, we uphold them if they are

supported by substantial evidence and are not arbitrary, capricious, or characterized by an

abuse of discretion. Id.

Substantial evidence has been defined as valid, legal, and persuasive evidence that a

reasonable mind might accept as adequate to support a conclusion and force the mind to pass

beyond conjecture. Ark. Contractors Licensing Bd. v. Pegasus Renovation Co., 347 Ark. 320, 64

S.W.3d 241 (2001). The challenging party has the burden of proving an absence of

substantial evidence. Id. To determine whether a decision is supported by substantial

evidence, the record is reviewed to ascertain if the decision is supported by relevant evidence

that a reasonable mind might accept as adequate to support a conclusion. Ark. State Racing

Comm’n v. Ward, Inc., 346 Ark. 371, 57 S.W.3d 198 (2001). When reviewing the evidence,

this court gives it its strongest probative force in favor of the agency. Id. The issue is not

whether the evidence supports a contrary finding, but whether it supports the finding that

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was made. Id. If there is substantial evidence to support even one basis for denial, this court

must affirm the agency’s decision. See, e.g., Lamar, supra. It is the prerogative of the agency

to believe or disbelieve any witness and to decide what weight to accord the evidence. Ward,

supra. We review issues of statutory interpretation de novo, however, the interpretation

placed on a statute or regulation by an agency or department charged with its administration

is entitled to great deference and should not be overturned unless clearly wrong. Lamar, supra.

V. Discussion

In Files, supra, the appellant petitioned for judicial review of the AHTD’s denial of his

application for a billboard permit. The circuit court affirmed the agency’s decision, and the

appellant appealed to the supreme court, which held (1) that the Department could look

behind a city’s zoning ordinance to examine the motivation behind the zoning decision and

(2) that the Department’s determination that land was annexed and zoned commercial for

the sole purpose of erecting billboards—contrary to the policies of the federal and state

laws—was supported by substantial evidence. While we agree that this case does not involve

“sham zoning” and that there was no evidence that the proposed site was zoned industrial

for the sole purpose of erecting billboards, Files stands for the proposition that the

Department has authority to question the validity of zoning decisions. Here, the Department

questioned the validity of Fort Smith’s zoning because it did not comport with the activities

occurring there.

The Arkansas Highway Beautification Act is remedial in nature and must be broadly

construed so as to effectuate the purpose sought to be accomplished by its enactment. Files,

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supra. The Files court cited with approval Alper v. Nevada, 96 Nev. 925, 621 P.2d 492 (1980),

which held that an inquiry into the status of billboard areas “should not be limited to a

review of the face of a zoning ordinance”; rather, the inquiry should include “reference to

actual[,] as well as contemplated[,] land uses.” Files, 325 Ark. at 298, 925 S.W.2d at 408. Our

supreme court agreed with the analysis of the Nevada Supreme Court and held that the

AHTD appropriately examined the propriety of Brinkley’s zoning ordinance. Our supreme

court concluded that

[s]ome deference must be given to the Department’s interpretation of state and federal
regulations in this area. The Department’s interpretation of its authority enables it to
review limited commercial zoning decisions relating to outdoor advertising to
determine validity. This fosters the purposes of the Highway Beautification Act and
assures compliance with federal law. The General Assembly certainly contemplated
that the Department would regulate outdoor advertising in accordance with state and
federal law.

Files, 325 Ark. at 298, 925 S.W.2d at 408–09.

Considering the deference this court gives agencies in the interpretation of their

regulations and, given our supreme court’s conclusion in Files, we hold that substantial

evidence from the administrative hearing supports the agency’s decision upholding the

Department’s denial of RAM’s application.

Moreover, we note that the agency agreed with the Department’s denial of RAM’s

application for a permit based, in part, on a determination that the activity in the zoned area

was not “industrial” according to the regulations. RAM does not challenge this finding on

appeal. While there is no bright-line standard for what constitutes industrial or commercial

activity, the regulations do provide what activity is not considered “industrial” or

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“commercial.” There was evidence from which the agency could determine that the activity

at RAM’s proposed sign site was transitory or temporary in nature and that the activity was

not visible from Interstate 540. Because we hold that there was substantial evidence to

support the agency’s decision, it automatically follows that it cannot be classified as

unreasonable or arbitrary. Capitol Zoning Dist. Comm’n v. Cowan, 2012 Ark. App. 619, 429

S.W.3d 267. We do not address RAM’s other arguments because substantial evidence

supporting only one basis for denial is sufficient to affirm. See Lamar, supra.

Accordingly, we reverse the circuit court and affirm the administrative agency’s

decision.

Reversed.

HARRISON and WHITEAKER , JJ., agree.

Rita S. Looney, Chief Counsel, by: William L. Wharton, Staff Attorney, for appellant.

Walters, Gaston, Allison & Parker, Attorney as Law, by: Troy Gaston, for appellee.

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