In the Wisconsin Supreme Court’s first decision affecting the business community in the 2019-20 term, the court issued an important opinion on agency rulemaking in Lamar Central Outdoor, LLC v. Division of Hearings & Appeals (2019 WI 109). The Supreme Court held that the Department of Transportation (DOT) was required to promulgate a rule when it changed its interpretation of statutes regarding nonconforming billboards.

The billboard in this case was erected on a state highway in 1991. When the highway became an interstate in 1996, the sign was deemed legal but nonconforming according to state law. Lamar acquired the legal, nonconforming billboard in 1999. In 2012, Lamar sought a permit from DOT to remove vegetation obstructing the sign. From the photographs in Lamar’s permit application, DOT recognized that the sign had been enlarged by extensions in violation of Wis. Admin. Code § TRANS 201.10(2)(e). Although Lamar had removed the extensions, DOT determined that the previous existence of illegal enlargements to the billboard caused it to lose its legal, nonconforming status. DOT ordered Lamar to remove the sign, and Lamar appealed.

The Supreme Court decided the case in favor of Lamar on the grounds that rulemaking requirements in Wis. Stat. Ch. 227 require DOT to promulgate a rule before it changed its interpretation of the billboard nonconforming use statutes.

DOT argued that under Wis. Stat. § 84.30(11), it could order Lamar to remove the billboard because it temporarily exceeded its legal size. However, DOT had previously granted legal, nonconforming sign owners 60 days to cure violations, as Lamar did here. Lamar argued that, according to Ch. 227 rulemaking requirements, DOT could not change its interpretation of whether § 84.30(11) allows legal, nonconforming sign owners a right to cure without promulgating an administrative rule. Under Ch. 227, DOT must promulgate as a rule “each interpretation of a statute which it specifically adopts to govern its enforcement or administration of that statute” (§ 227.10(1)).

The court agreed with Lamar that Ch. 227 required DOT to promulgate a rule before it interpreted § 84.30(11) as not allowing legal, nonconforming sign owners a right to cure. The court rejected DOT’s arguments as follows:

1. DOT argued its order for Lamar to remove the sign was a contested case decision exempt from rulemaking under § 227.10(1). (“An interpretation of a statute made in the decision of a contested case…does not render it a rule or constitute specific adoption of a rule and is not required to be promulgated as a rule.”) The court said that though § 227.10(1) does not require DOT to promulgate rules for every contested case applying its interpretation of a statute, DOT must promulgate rules specifying a new interpretation of a statute before it can apply the new interpretation in a contested case. Here, the court ruled, DOT could not create a new interpretation of § 84.30(11) via the Lamar contested case before it promulgated a rule specifying its new interpretation of the statute to not allow a right to cure.
2. DOT argued § 84.30(11) is clear and unambiguous, so its interpretation that Lamar had no right to cure the violation was simply conforming to statutory requirements. According to DOT, an agency conforming to unambiguous statutory requirements does not require new rulemaking under a 1976 case, Schoolway Transportation Co. v. DMV. However, Schoolway held that rulemaking is required for agencies changing their interpretation of ambiguous statutes. Here, the court found § 84.30(11) was ambiguous as to whether Lamar had a right to cure its billboard violation, so rulemaking was required for DOT to change its interpretation of the statute.

Thus, the court unanimously decided in Lamar to require rulemaking when agencies change their interpretation of an ambiguous statute. This case could set the stage for other rulemaking cases to come in the 2019-20 term.