Judge rejects Pomona's $500-a-day billboard fine

A Los Angeles judge declined to enforce a $500-a-day fine by the City of Pomona against an outdoor advertising firm in a years-long and highly visible legal battle over the potential demolition of billboards in the city.

The April 23 decision by Judge Holly J. Fujie found that the fine for failing to remove the billboards "is an impermissible penalty, and as such the court will not enforce it."

The lawsuit has captured public attention thanks to notices posted on the billboards by their owner, Regency Outdoor Advertising, threatening legal action against anyone who tries to take them down.

The city is represented by Scott W. Ditfurth, Andrew G. Saghian and Christina M. Lee of Best Best & Krieger LLP in Riverside, while Jeffrey A. Rosenfeld and Jesse G. Steinbach of Alston & Bird LLP in Los Angeles represent Regency. Counsel for the parties did not respond to phoned or emailed requests for comment by press time on Thursday.

The city signed an agreement with Regency in 1993 allowing for the building of billboards for a 10-year period, automatically renewing for another 10 years with the possibility of more extensions.

Later that year, Pomona voters passed Proposition L, restricting the building of new billboards. The proposition did not affect the agreement, which was signed before its passing.

In 2014, the city adopted an ordinance approving a third extension of its agreement with Regency - drawing the ire of competing billboard operators, who argued in court that the new deal violated Proposition L. Citizens for Amending Proposition L, et al. v. City of Pomona, et al., BS150549 (L.A. Sup. Ct., led Aug. 13, 2014).

Superior Court Judge Amy D. Hogue ruled in favor of the plaintiffs in 2017, with 2nd District Court of Appeals Judge Audrey B. Collins writing an affirmation the following year. Citizens for Amending Proposition L, et al. v. City of Pomona, et al., B283740 (2nd Cal. App, filed Nov. 7, 2018).

Following the appellate ruling, Regency filed a cross-complaint against Pomona in 2022 for failing to approve the third extension.

Wednesday's decision concludes the first phase of trial focused on a provision of the 2013 agreement specifying payments Regency would have to make to the city if the billboards were not removed after the agreement's expiration.

The provision stipulated a fine of $500 per day following the end of the agreement term and granted the city clearance to remove the billboards and charge Regency for the cost.

The city argued that Regency met the requirements to be subject to the provision, including being adequately represented at the time of signing.

"The city's evidence will further show Regency and its representatives had many opportunities to provide substantive feedback and suggest revisions to the development agreement's various terms, including those Regency now contends are invalid," a pre-trial brief from the city read. "The city's evidence will also show the city had a legitimate reason and rationale for the liquidated damages provision."

However, Regency argued that the fine provision was illegal because it was not based on estimates of the city's damages if the billboards remain.

"The penalty is labeled a 'fine,' is designed to penalize Regency and is vastly greater than the fees the city expected to receive, or actually received, during the term of the development agreement," Regency's pre-trial brief read. "Regency's witnesses and evidence confirm that the penalty is illegal, and the city has no witnesses that have knowledge of the negotiation of the development nor do the city's witnesses provide any testimony explaining how the illegal fine could be a reasonable estimate of the city's actual damages (it cannot be)."

In her decision on Wednesday, Fujie noted that "a fee is deemed an illegal penalty if it is punitive in nature, meaning that it is intended to coerce performance rather than to compensate for actual damages, and if it bears no reasonable relationship to the anticipated damages from a breach of contract."

Fujie ruled that the fines bore no relationship to any harm to the city that could be anticipated at the time of the agreement.

"It appears from the evidence that the purpose of the structure of the fine was to be punitive rather than compensatory," Fujie said. "The city wanted to ensure that at the end of the term of the Agreement, Defendant had a financial incentive to comply with the requirements of the Agreement to remove the subject billboards in a timely manner."

A start date for the second phase of the trial has not been determined.