Sign installation and hanging often involve the most basic construction skills—digging a hole, dropping a couple of posts, filling the hole with concrete and attaching a board to the posts. In fact, municipalities that regulate the sign hanging occupation in the Twin Cities area generally treat the sign hanger licensing process as nothing more than ministerial. But entrepreneurs face an Alice-in-Wonderland experience in Minneapolis if they want to make a living installing or hanging simple, non-illuminated signs.
At first blush, the City Code suggests that a sign hanger’s license will be issued to any applicant who fills out a form, pays a fee and provides proof of bonding and insurance. But the law doesn’t say what it means or mean what it says.
Submitting an application that fully complies with the objective requirements of the Code does not guarantee anything. The City retains the discretion to deny or postpone the issuance of sign hanger licenses at will—and there are no legal procedures giving applicants notice or an opportunity to be heard on the postponement or impending denial of a license for cause. Anyone can be frozen-out of the sign installation business for any reason or no reason at all, without any effective recourse. And by failing to furnish basic due process to applicants, the Code has encouraged vigilante regulation.
City Zoning Inspector Stuart Roberson has injected himself into the sign hanger license application process and declared he does not “under normal circumstances” approve licensure for companies that can only install “very simple non-illuminated signs.” At the same time, Roberson has refused to explain just what skill level is acceptable to him. As a result, many license applications linger for months in zoning-inspection limbo while Roberson applies mysterious standards of competency—insisting on the delivery of resumes, photographs of past work, biographical sketches, and personal meetings with applicants.
Roberson’s intervention in the sign hanger licensure process shows that bureaucratic power-grabs inevitably result from laws that dispense standardless authority. Ironically, the City Council enacted reforms several years ago to eliminate subjective competency testing for sign hangers and other trades. The City Council’s job was obviously only half done—it removed arbitrary standards but left behind unbridled regulatory discretion. Since then, the City’s licensing regulations have devolved into the customs of a secret society.
Despite past efforts at reform, Minneapolis still has a procedural void that traps people who try in vain to play by unknowable rules. Truong Xuan Mai of Lighttech, Inc., located in Minneapolis, is one such victim. “I’ve met with Roberson twice since I first applied,” said Mai. “It is May, my license renewal application has been postponed for almost five months now. I have lost too many opportunities. I just can’t do business like this.”
Truong Xuan Mai’s experience as a “boat person” refugee who escaped communist Vietnam during the late 1970s undoubtedly gives him unusual courage to fight City Hall. But Mai is clearly not alone—license issuance to many applicants is often postponed for months or indefinitely. It is no wonder that even long-established family businesses like Dahlen Sign Company of Shakopee, Minn., see no point in pursuing opportunities that require a Minneapolis sign-hanger’s license.
“When my grandfather risked everything to start our company in 1956, he railed against the old-boys network that prevented him from getting a license in Minneapolis,” recalled Dan Dahlen, co-owner of Dahlen Sign Company. “The law was supposedly reformed a few years ago, but it sure looks like business as usual to me.”
Liberty delayed is liberty denied. Minneapolis cannot constitutionally play “hide-the-ball” with sign hanger licenses. Dan Dahlen and Truong Xuan Mai have the constitutional right to work in the occupation of their choice as sign hangers and also to maintain sign hanging businesses—not at the whim of bureaucrats, but as a matter of right subject only to reasonable regulation. And the barest minimum requirement of reasonable regulation is “procedural due process”—the right to notice, an opportunity to be heard and a timely decision based on ascertainable standards whenever the law deprives citizens of their liberty.
Dahlen and Mai have joined with the Institute for Justice Minnesota Chapter (IJ-MN) to stop the City from postponing or denying licenses to people and businesses that meet the objective requirements of the City Code. IJ-MN’s latest economic liberty case, Dahlen Sign Company v. City of Minneapolis, will have the practical effect of prohibiting arbitrary control over who can enter legitimate occupations. This case is a vivid example of the barriers to entry-level entrepreneurship examined in IJ-MN’s newly published study, The Land Of 10,000 Lakes Drowns Entrepreneurs In Regulations. Both the case and the study will show why any effort to encourage people to move from welfare to work and from poverty to wealth cannot ignore the regulatory hurdles blocking their path.
A Statewide Problem of Over-Regulation of Occupations
Minnesota is one of the most heavily regulated states in the nation. According to a survey conducted in 2004, Minnesota was ranked 33rd out of 49 surveyed states in economic freedom. As of 1999, Minnesota regulated “more occupations than all but 12 other states” including 31 occupations that were “regulated by fewer than nine other states.” Moreover, between 1998 and 2004, the total number of Minnesotans in a regulated occupation increased 18.4 percent.
Studies indicate that the current level of occupational regulation in Minnesota generates an unearned windfall of “between $3 and $3.6 billion” from consumers to members of regulated occupations, which reduces economic growth in Minnesota by “$901 million to $1.1 billion” annually. Despite these significant costs, IJ-MN’s barrier study reveals that no hard evidence exists that such regulation improves public health and safety beyond what free markets and legal remedies would otherwise achieve. At the same time, many entrepreneurs cannot realize their dreams because of the barriers erected by opaque and overly complex laws and regulatory practices.
IJ-MN’s barrier study, The Land Of 10,000 Lakes Drowns Entrepreneurs In Regulations, reports on a variety of local and statewide regulatory barriers to entry-level entrepreneurship. It builds upon similar studies published by the Institute for Justice dealing with the regulatory regimes of Baltimore, Boston, Charlotte, Detroit, New York, Phoenix, San Antonio, San Diego, Seattle and Tucson. Its purpose is to confront the regulatory state in its various forms to unveil its wasteful, destructive impact on upward mobility. And it appropriately sets the stage for Dahlen Sign Company v. City of Minneapolis.
No Goals, No Responsibilities
Oftentimes the barriers created by the regulatory state are built of bureaucratic inertia and arrogance. As shown by the more enlightened practices of neighboring municipalities, there is no reason why a sign hanger’s license should not be issued promptly upon proof of financial responsibility—such as bonding and insurance. Cities like Brooklyn Park typically issue licenses in three days or less based on submission of an application, a fee, and proof of bonding and insurance. St. Paul issues sign hanger licenses in minutes. And cities like Bloomington, Falcon Heights, Forest Lake, Shakopee, Prior Lake, Eagan and Chaska do not require a license at all.
By contrast, Minneapolis takes about 2 months on average to issue a sign hanger license—and that doesn’t count the applications that are denied or postponed indefinitely. And it certainly does not help that Minneapolis officially has no goals and no responsibilities when it comes to issuing licenses on a timely basis.
On December 23, 2005, Minneapolis adopted a Regulatory Services Business Plan for the years of 2006-2010. Its performance measure chart suggests that support staffs are responsible for evaluating whether the timeliness of license issuance is falling within certain benchmarks. But there is a big problem: the chart identifies no one who is responsible for tracking the actual issuance of new and renewal licenses. Moreover, the City’s 2005 Regulatory Services Mission Statement freely admits that no benchmarks have been established for determining whether “permits and licenses [were] issued within benchmarked time periods.” In other words, Minneapolis has apparently neither established a benchmark for processing licenses nor given anyone the responsibility to ascertain the necessary facts. Under these circumstances, the City’s routine postponement and delayed issuance of sign hanger licenses should come as no surprise.
Not only does the entrepreneurial spirit suffer when dreams of working in a lawful occupation can be deferred indefinitely, abuses of power can flourish in such an environment.
A Recipe for Injustice: Regulatory Discretion Without Standards or Safeguards
To legally install or hang signs in Minneapolis, the municipal code would seem to require only the submission of an application along with a fee, and proof of bonding and insurance. This appearance is misleading. The Director of Licenses and Consumer Services and the City Council retain the discretionary power to issue or deny sign hanger/billboard erector licenses and the code does not delineate any criteria governing such decisions.  The Code also requires license applications to be forwarded to various City departments for investigation and approval, but it does not say what investigatory result would constitute “cause” for postponing or denying a license. There are no safeguards imposing limits on how long a license application can be postponed before a decision is reached. And there are no legal procedures giving notice or an opportunity to be heard on the postponement or impending denial of a license for cause.
At the same time, the City Zoning Inspector Stuart Roberson has unilaterally (and without legal authority) imposed personal competency testing on many applicants—despite the repeal of competency boards by the City Council in July 2002. Applicants, however, have no idea what they must show to receive Roberson’s blessing. The Zoning Department does not maintain any written standards or guidelines, and Roberson has refused to answer IJ-MN’s request for a statement of what factors he considers. Some applicants are asked for photographs of past work, while others are asked to submit resumes or write short biographical essays about their qualifications. All are required to meet with Roberson personally at least once.
The practical effect of the Code’s lack of procedural due process is the emergence of de facto competency testing, the governing standards of which are unknown, and from which there is no effective appeal. As a result, any qualified sign hanger can be refused licensure for any reason or no reason at all—or his application can be postponed indefinitely. The resulting uncertainty keeps many suburban companies, like Dahlen Sign Company, from applying for a license. And it victimizes entrepreneurs, like Truong Xuan Mai of Lighttech, Inc., who become entrapped by interminable processing delays. Most importantly, it unjustly deprives American citizens like Mai and Dahlen of their constitutional right to earn an honest living.
Occupational Freedom and the 14th Amendment Right to Procedural Due Process
Under the federal and state constitutions, Minnesotans have the right to earn an honest living in any lawful occupation subject only to reasonable regulation. A basic requirement of “reasonable” regulation is “procedural due process.” This means that licensing laws must incorporate reasonable safeguards to ensure applicants have notice and an opportunity to be heard on ascertainable standards before they are denied access to a lawful occupation.
In Hornsby v. Allen, for example, a liquor license applicant alleged that her procedural due process rights were violated when her application was denied. She argued that the governing law was unconstitutional because it did not contain any published standards, it did not afford a hearing prior to the denial of her application, and it did not require a reason to be given for the denial of her license. In response, a federal appeals court held that “the plaintiff must have an opportunity to know the claims” of those who opposed her license and the standards being applied. The Court concluded its analysis by observing, “[i]f it develops that no ascertainable standards have been established by the Board of Aldermen by which an applicant can intelligently seek to qualify for a license, then the court must enjoin the denial of licenses under the prevailing system.”
In short, licensing laws that restrict entry into a lawful profession without setting ascertainable standards for licensure unconstitutionally deprive applicants of occupational freedom without meaningful notice or an opportunity to be heard. This principle has been repeatedly reaffirmed. Indeed, the City of Minneapolis should be well aware of this rule because there are at least three cases in the 8th Circuit that embrace it. Most notably, the U.S. District Court in Trumbull v. City of Minneapolis required Minneapolis to incorporate extensive procedural safeguards in its asphalt manufacturing licensing ordinance before “denying, refusing to reissue, or revoking licenses.”
Unbridled and arbitrary regulation is not constitutionally permitted. Minneapolis must, at the very least, create ascertainable standards for licensure, as well as notice and an opportunity to be heard. The lack of procedural due process in the City’s sign hanger ordinance violates due process just like the de facto licensing process struck down in Phillips v. Vandygriff. In Phillips, the plaintiff alleged that the Commissioner of the Texas Savings and Loan Department had established an unconstitutional de facto licensing scheme whereby savings and loans would not hire anyone as a manager without his letter of recommendation. In sustaining the plaintiff’s procedural due process claim, the 5th Circuit observed “[i]f a Texas statute required that savings and loan managerial officers be screened by the Commissioner, and the Commissioner denied entry into the profession without notice or an opportunity to be heard, such a procedure clearly would be actionable.” Here, Inspector Roberson has established exactly the same sort of unreviewable, subjective screening process. This conduct not only violates procedural due process on its own, it concretely illustrates what mischief can happen when a licensing law fails to furnish notice and a hearing based on ascertainable standards.
Given Inspector Roberson’s meddling, procedural due process clearly requires the establishment of safeguards against the indefinite or unreasonable postponement of license applications. No entrepreneur’s dream should be deferred by the denial of procedural due process.
Knocking Down Barriers to Economic Liberty
This lawsuit is the third step in the Institute for Justice Minnesota Chapter’s campaign to restore economic liberty as a basic civil right under both the Minnesota and U.S. constitutions. The first was Anderson v. Minnesota Board of Barber and Cosmetologist Examiners, in which IJ-MN successfully freed African hairbraiders from the State of Minnesota’s onerous cosmetology licensing regime. The second was Crockett v. Minnesota Department of Public Safety, in which IJ-MN succeeded in obtaining consent judgment prohibiting the Minnesota Department of Public Safety from enforcing a blanket ban on advertising, soliciting or using the Internet to conduct lawful direct sales of wine. IJ-MN seeks a rule of law under which individuals can control their destinies as free and responsible members of society.
The Institute for Justice has scored significant victories on behalf of entrepreneurs. These important victories include: Cornwell v. California Board of Barbering and Cosmetology—IJ represented JoAnne Cornwell, creator of the Sisterlocks technique of hair locking, in defeating California’s cosmetology licensing requirement for African braiders in 1999. Farmer v. Arizona Board of Cosmetology—In 2003, the Institute for Justice Arizona Chapter filed a lawsuit on behalf of braider Essence Farmer to dismantle Arizona’s onerous cosmetology regime, which required braiders to attend 1,600 hours of courses that taught nothing about braiding. As a result of the case, Arizona’s legislature exempted braiders from the regime. Armstrong v. Lunsford—Filed in 2004 in the U.S. District Court for the Southern District of Mississippi, this case challenged Mississippi’s cosmetology regulations, which barred braiders from practicing their craft. Prior to receiving a ruling from the court, Mississippi’s legislature exempted braiders from the cosmetology-licensing requirement in 2005. This result allows IJ’s client to continue to practice without obtaining a license. Diaw v. Washington State Cosmetology, Barbering, Esthetics, and Manicuring Advisory Board—After being sued by the IJ Washington Chapter, Washington State’s Department of Licensing filed an “Interpretative Statement” exempting braiders from the State’s cosmetology licensing requirements. Jones, et. al. v. Temmer, et. al.—Taxi entrepreneurs Leroy Jones, Ani Ebong and Girma Molalegne opened Freedom Cabs, Inc., in Denver in 1995 after IJ helped them overcome Colorado’s protectionist taxicab monopoly. Stemming from pressure in the court of public opinion created by their lawsuit, the Colorado legislature enabled Freedom Cabs to become the first new cab company in Denver in nearly 50 years. Testimony by Jones and Institute for Justice President Chip Mellor also contributed to the breakdown of government-sanctioned taxicab monopolies in Indianapolis and Cincinnati. Ricketts v. City of New York—IJ helped commuter vans fight a public bus monopoly that would not allow the vans to put people to work and take people to work in underserved metropolitan neighborhoods in New York. Clutter v. Transportation Services Authority—IJ represented independent limousine drivers who defeated Las Vegas’ Transportation Services Authority and entrenched limousine companies that had stifled competition. Through IJ’s litigation, the once-closed market was opened in 2001. Craigmiles v. Giles—In 2003, a federal appeals court upheld a lower court ruling that found Tennessee’s government-imposed cartel on casket sales was unconstitutional. This is the highest pro-economic liberty court decision since the New Deal.
IJ-MN filed this case, Dahlen Sign Company v. City of Minneapolis, on May 4, 2006, in Hennepin County District Court in Minneapolis. The case challenges violations of the procedural due process guarantees of the Minnesota State Constitution and the 14th Amendment to the U.S. Constitution.
The attorneys in this case are Institute for Justice Minnesota Chapter Executive Director Lee McGrath and Staff Attorney Nick Dranias.
The Institute for Justice is a nonpartisan, nonprofit public interest law firm that advances a rule of law under which individuals can control their destinies as free and responsible members of civil society. Through strategic litigation, training, communication and outreach, the Institute secures greater protection for individual liberty and illustrates and extends the benefits of freedom to those whose full enjoyment is denied by the government.
Headquartered in Arlington, Virginia, the Institute for Justice has state chapters in Arizona, Washington state and Minnesota. IJ-MN was established in April 2005.
From its office in Minneapolis, the Institute for Justice Minnesota Chapter litigates under the state and federal constitutions to reinvigorate economic liberty, preserve property rights, promote educational choice and defend the free flow of information essential to informed choices in both politics and commerce.
For more information, contact:
John E. Kramer (Vice President for Communications) Lisa Knepper (Director of Communications) Institute for Justice 901 N. Glebe Road, Suite 900 Arlington, VA 22203 (703) 682-9320
Nick Dranias, Staff Attorney Lee McGrath, Executive Director Institute for Justice Minnesota Chapter 527 Marquette Avenue-Suite 1600 Minneapolis, MN 55402-1330 firstname.lastname@example.org (612) 435-3451
 November 9, 2005 email from Stuart E. Roberson to Dianne E. Papp, obtained by IJ-MN from the City of Minneapolis during March 2006 as a result of a written request made pursuant to Minnesota’s Data Practices Act.
 Based on various emails and documents sent to or by Stuart E. Roberson concerning sign hanger license applications, which were obtained by IJ-MN from the City of Minneapolis during March 2006 as a result of a written request made pursuant to Minnesota’s Data Practices Act.
 Amela Karabegovic et al., Fraser Inst., Economic Freedom of North America: 2004 Annual Report 32.
 State of Minn. Office of the Legis. Auditor, Occupational Regulation: A Program Evaluation Report xiii (Feb. 1999).
 Alexandra Broat et al., Rethinking Occupational Regulation: A Program Evaluation Report 2, 13, 19 (Dec. 2004) (prepared for the State of Minnesota Office of the Legislative Auditor).
 Id. at 3, 13, 22.
 Mnpls Code § 277.2500.
 Mnpls Code § 259.30.
 Mnpls Code §§ 277.2490 and 277.2495 (repealed July 26, 2002).
 Fosselmann v. Commissioner of Human Services, 612 N.W.2d 456, 461-62 (Minn. 2000).
 Mathews v. Eldridge, 424 U.S. 319, 332 (1976) (identifying factors that should be considered in determining the specific safeguards required by procedural due process: the private interest at issue, the risk the private interest will be deprived, the usefulness of safeguards to prevent the deprivation, and the government’s interest in not providing the safeguards); Willner v. Committee on Character and Fitness, 373 U.S. 96 (1963) (holding state cannot deny application for bar admission without a due process hearing).
 326 F.2d 605 (5th Cir. 1964).
 Id. at 608, 610 (citing Morgan v. United States, 304 U.S. 1 (1938)).
 Id. at 608-10.
See, e.g., Block v. Thompson, 427 F.2d 587 (5th Cir. 1973); Barnes v. Merritt, 428 F.2d 284, 288-89 (5th Cir. 1970); Clark v. City of Fremont 377 F. Supp. 327 (D. Neb. 1974); Smith v. Thompson, 377 F. Supp. 556, 557 (M.D. Ga. 1974); B.C. Cotton, Inc. v. Voss, 33 Cal. App. 4th 929, 954-55 (Cal. Ct. App. 1995); Detroit v. Mashlakjian, 166 N.W.2d 493, 494-95 (Mich. Ct. App. 1968); Bennett v. Arizona State Bd. of Pub. Welfare, 95 Ariz. 170, 173 (1963).
 See, e.g., Stauch v. City of Columbia Heights, 212 F.3d 425, 431 (8th Cir. 2000); Coact v. City of Duluth, 701 F.Supp. 1452 (D. Minn. 1988); Trumbull v. City of Minneapolis, 445 F.Supp. 911 (D. Minn. 1978).
 445 F.Supp. 911, 918 (D. Minn. 1978).
 711 F.2d 1217 (5th Cir. 1983).
 Id. at 1223.
 Wilkerson v. Johnson, 699 F.2d 325, 328 (6th Cir. 1983) (holding Board of Barber’s actions in obstructing and causing delay in the consideration of an application for a master barber and barber shop license constitute a “due process violation of plaintiffs’ ‘liberty’ interests”).