SAMBO'S RESTAURANTS, INC., and Sambar Properties, Inc., Plaintiffs-Appellants, v. The CITY OF ANN ARBOR; George W. Gardner and G. M. Scofield, Defendants-Appellees, 663 F.2d 686

CELEBREZZE, Senior Circuit Judge. This case raises novel freedom of speech issues regarding the standard for the waiver of first amendment rights and the scope of first amendment protection to be afforded “offensive” commercial speech. In 1971, Sambo’s Restaurants, Inc., petitioned the City of Ann Arbor, Michigan, for site plan approval for construction of a Sambo’s Restaurant. When the City Council balked at accepting the proposal, Sambo’s agreed not to use that name in connection with the restaurant. Approval by the City Council followed quickly.

After six years of operation under the name “Jolly Tiger”, the restaurant applied to the City for sign permits to display the name “Sambo’s”. Those permits were granted, the signs erected, but the permits were subsequently revoked by the City as in contravention of the earlier “agreement”. When Sambo’s refused to remove the signs, the City threatened legal action. Sambo’s then filed this diversity action seeking declaratory and injunctive relief for violations of its constitutional rights, 42 U.S.C. Sec. 1983.

The district court’s rulings that the company’s stipulation not to use the name “Sambo’s” was a valid and binding agreement, and that Sambo’s had waived whatever First Amendment rights it might possess, form the basis of this appeal. I. In order to expedite the trial on the merits, the parties provided the district court with stipulated facts which are as follows. The original Sambo’s Restaurant was opened in 1957 by Sam Battistone and F. Newell Bohnett. At that time, Sam Battistone’s son suggested the name “Sambo’s” as an appropriate title for a pancake house restaurant concept.

The name was suggested because it conjured up associations with pancakes and, coincidentally, combined the names of the founders. In the twenty-four years since its incorporation, Sambo’s Restaurants has invested substantial sums and efforts in developing the name “Sambo’s”. Substantial goodwill is attributed to that name, and it constitutes a valuable property interest which is used in interstate commerce to provide a central marketing theme for all the restaurants and to convey to the public the image of a restaurant offering uniformly good food, good service and high quality at reasonable prices.

The name “Sambo’s” is also registered with the United States Patent and Trademark Office under 15 U.S.C. Sec. 1051. The identity of the products and services of Sambo’s Restaurants is promoted by substantial advertising. Since 1971, Sambo’s has spent over $31 million in national advertising to familiarize the public with its product.

In December, 1971, in accordance with the Ann Arbor City Ordinance Code, Sambo’s Restaurants acting through its wholly owned subsidiary, Restaurant Properties, Inc., filed an application with Ann Arbor for site plan approval for the construction of a Sambo’s Restaurant within the city limits. In Ann Arbor, approval by the City Council is a condition precedent to construction of a restaurant. In accordance with the Ordinance Code, a site plan is first submitted to the Planning Commission for a recommendation.

Although the Code provides that the Planning Commission shall make its recommendation to City Council within 60 days after the filing of a site plan proposal, and that the City Council shall take final action within 30 days of the Commission’s recommendation, subject to extensions of 30 day periods if necessary for adequate review, the Sambo’s site plan was not presented to City Council until November 13, 1972. The plan offered by Sambo’s complied with all applicable city ordinances and regulations when it was submitted.

While the parties agreed that the name Sambo’s was not and is not intended to be insulting, degrading or offensive, they also stipulated that the word “Sambo” is offensive to some black people if directed at them, and that the use of the name “Sambo’s” in connection with the restaurant is offensive to some people, but that others, including blacks, are not so offended. During the fall of 1972, Sambo’s learned that some members of the City Council and the Mayor objected to the use of the name “Sambo’s” in connection with the restaurant because of its offensive connotations.

The plan was submitted to the City Council for approval, together with the proposal for a Ponderosa Steakhouse, at a meeting on November 13, 1972. At that time the May- or recommended approval for both site plans because the City Council had no legal basis for denying the plans.

During the course of that meeting, however, one member of the City Council, Norris Thomas, stated that he could not support the proposal on the basis of the name alone, and that he would personally lead an economic boycott of the restaurant if it were erected under the name “Sambo’s.” The Mayor echoed support for these comments as did other council members. Although the Ponderosa site plan was approved at that meeting, the Sambo’s Restaurant site plan and shopping center plan were tabled.

Based upon the statements made by the Mayor and other City Council members at the November 13 and other public meetings, the attorneys for Restaurant Properties believed that the site plan would not be approved by City Council unless the name “Sambo’s” was not used in connection with the restaurant. This understanding was in turn conveyed to Sambo’s. As a direct result of this apprehension, Sambo’s decided to concede the name issue.

On November 21, 1972, Restaurant Properties stated on the site plan proposal that: “It is agreed that the name “Sambo’s” will not be used in regard to this restaurant.” Restaurant Properties would not have made this statement but for its belief that the site plan would be rejected under the name “Sambo’s.” At the December 4, 1972 meeting of Council — almost one year after submission of the application — the restaurant site plan was approved by a seven to four vote.

Following approval, Sambo’s Restaurants constructed the restaurant and operated it under the name “Jolly Tiger.” The operation of the restaurant under the name “Jolly Tiger” proved unprofitable, and in 1978 it lost more than $18,000.00. That experience was not isolated; in 1978, Sambo’s operated 14 Jolly Tiger Restaurants which averaged a net loss of $11,-687.00 per restaurant.

As a result of the financial losses, on December 6, 1978, Sambo’s Restaurants instructed Michigan Signs, Inc., to make an application on its behalf to the Ann Arbor Building Department for sign permits for two building signs displaying the name “Sambo’s” to be erected on the restaurant. On December 19,1978, sign permits were issued by the City of Ann Arbor, and on December 28, 1978, the two “Sambo’s” signs authorized by those permits were erected. On January 2,1979, the City of Ann Arbor revoked the sign permits on the grounds that the use of the name “Sambo’s” violated the 1972 “agreement” with the City.

Following revocation of the sign permits, the City threatened to cite Sambo’s for violation of the city sign ordinance and to take whatever further steps were necessary to force Sambo’s to remove the signs. The institution of or continuation of threatened criminal or other sanctions to prohibit the use of the Sambo’s name would have resulted in the inestimable loss of and good will and reputation to Sambo’s. Sambo’s did not petition the city to amend the site plan but rather instituted the present action on February 1,1979 seeking declaratory and injunctive relief.

Specifically, it sought a declaratory judgment holding the City’s revocation of the sign permits invalid and seeking approval for the continued operation of the Ann Arbor restaurant under the name “Sambo’s.” Sambo’s also sought preliminary and permanent injunctive relief to enjoin the city from taking any action to prohibit or restrict its use of the name “Sambo’s” in connection with the restaurant.

In its answer, the city asserted several defenses, based principally upon the claims that the use of the name “Sambo’s” was not entitled to First Amendment protection and that Sambo’s was barred from using that name because the site plan approved by the City Council in 1972 contained a binding agreement that the name “Sambo’s” would not be used.

Ann Arbor also filed a counter-claim seeking an injunction against continued use of the name “Sambo’s.” The City agreed, however, not to take any action to enforce the revocation of the sign permits pending a determination by the district court on Sambo’s motion for a preliminary injunction. Pursuant to a stipulation by the parties, the trial on the merits was consolidated with the hearing on the preliminary injunction.

The district court subsequently found that the “agreement” executed by Sambo’s contained a valid and enforceable provision proscribing use of the name “Sambo’s” and that it was not induced by economic coercion. The court also found that Sambo’s had knowingly waived any constitutional rights it may have had regarding use of the name “Sambo’s.” Accordingly, the court did not consider whether plaintiffs’ use of the trade name “Sambo’s” merited First Amendment protection. The court therefore denied Sambo’s requests for declaratory and injunctive relief.

The court also declined to assume jurisdiction over the city’s state law counter-claim, leaving that matter to be pursued in state courts. The City has permitted the continued operation of the restaurant under the name “Sambo’s” pending the outcome of this appeal. II. A. Our analysis begins with the site plan proposal executed by Restaurant Properties acting for Sambo’s and approved by the Ann Arbor City Council. The district court held that the statement not to use the name “Sambo’s” in connection with the restaurant was a valid and binding agreement enforceable by the City of Ann Arbor.

Sambo’s attacks this holding on three counts. First, it argues that there was no legal consideration for the agreement; second, that the City unlawfully conditioned a public benefit on the relinquishment of First Amendment rights; and third, that the agreement was induced by economic coercion. The district court found that the agreement made by Sambo’s to refrain from the use of the name “Sambo’s” was supported by consideration in the form of a benefit to Sambo’s.

Specifically, the court found four distinct benefits which accrued to Sambo’s: first, Sambo’s avoided further public discussion of the sensitive issue relating to the name; second, it avoided any possibility of an economic boycott; third, Sambo’s received a speedy site approval, enabling it to open the restaurant without delay; and fourth, it avoided offending members of the City Council. The district court also rejected Sambo’s argument that the City had conditioned site plan approval upon the relinquishment of first amendment rights.

Crucial to this holding was the absence of any direct or tangible evidence indicating an extra-legal proviso by the City. Specifically, the Mayor and other members of the Council had never informed Sambo’s that forfeiture of its name was a condition precedent to acceptance of the site plan. In fact, the City Council never voted on the site plan while it contained the name “Sambo’s”; in light of the reservations voiced by certain Council members the proposal was merely tabled for further examination.

It was at this point that Sambo’s made what the district court considered to be a reasoned business decision to change the restaurant’s name in order to avoid offending members of the City Council and, hopefully, to expedite and insure passage of the proposal. Sambo’s thereby deliberately bypassed the opportunity to force a showdown on the name issue by awaiting City Council’s vote on the proposal containing the name “Sambo’s.” Finally, the court found that the agreement was not induced by economic coercion.

The court expressed its disbelief in such an argument, coming as it did from a corporation with over 1,000 operating restaurants. The cases relied upon by Sambo’s were considered inapposite by the court. In both Gordon v. Village of Wayne, 370 Mich. 329, 121 N.W.2d 823 (1963) and Ridgemont Development Co. v.

City of East Detroit, 358 Mich. 387, 100 N.W.2d 301 (1960), the Michigan Supreme Court held that the requirement by the cities that the plaintiffs provide the City with land (Ridgemont) or money (Gordon) as a condition precedent to site approval was unauthorized by the local statutes and constituted illegal coercion. B. The revocation of the sign permits clearly infringes on First Amendment rights and may permissibly do so only if it satisfies the standard for waiver of constitutional rights.

In order to determine whether Sambo’s waived its First Amendment rights then, we do not use Michigan contract law as the standard for waiver, since “the question of a waiver of a federally guaranteed constitutional right is, of course, a federal question controlled by federal law.” Brookhart v. Janis, 384 U.S. 1, 4, 86 S.Ct. 1245, 1247, 16 L.Ed.2d 314 (1966). Nor do we defer to the district court’s finding of waiver as the City urges.

Rather, whenever “constitutional rights turn on the resolution of a factual dispute we are duty bound to make an independent examination of the evidence in the record.” Brookhart, supra, at 4 n. 4, 86 S.Ct. at 1247 n. 4. Moreover, it is well established that courts closely scrutinize waivers of constitutional rights, and “indulge every reasonable presumption against a waiver.” Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 57 S.Ct. 809, 81 L.Ed. 1177 (1937); cf. Brewer v. Williams, 430 U.S. 387, 404, 97 S.Ct. 1232, 1242, 51 L.Ed.2d 424 (1977).

In the First Amendment context the evidence must be “clear and compelling” that such rights were waived. Curtis Publishing Co. v. Butts, 388 U.S. 130, 145, 87 S.Ct. 1975, 1986, 18 L.Ed.2d 1094 (1967); see also National Polymer Products v. Borg-Warner, 641 F.2d 418 (6th Cir. 1981). Our task is to determine whether the City of Ann Arbor has “adequately justified its substantial restriction of protected activity.” Schad v. Borough of Mount Ephraim, 452 U.S. 61, 101 S.Ct. 2176, 68 L.Ed.2d 671 (1981); Keego Harbor Co. v. City of Keego Harbor, 657 F.2d 94 (6th Cir. 1981).

The primary justification asserted by Ann Arbor in its attempt to legitimize its revocation of the sign permits is that Sambo’s waived its First Amendment rights. The district court agreed, finding that Sambo’s had “effectively and knowingly” forfeited its First Amendment rights through its conduct at the time of the site approval and subsequent thereto and through the explicit agreement not to use the name “Sambo’s.” The court noted that plaintiffs “were undoubtedly well advised of their constitutional rights, and were undoubtedly quite experienced in site approval situations.” Overmyer v.

Frick, 405 U.S. 174, 92 S.Ct. 775, 31 L.Ed.2d 124 (1971) was cited as the governing case. In that case, Overmyer had contracted with Frick for the manufacture and installation by Frick of an automatic refrigeration system in a warehouse under construction. When Overmyer defaulted on its payments, Frick stopped the work in progress. After Overmyer had made partial payment, Frick completed the work to Overmyer’s satisfaction.

Overmyer then requested additional time to make payments, and after extensive negotiations between counsel, the two corporations entered into a cognovit clause valid under Ohio law in which Overmyer consented to a judgment against it should it default on subsequent payments. When Overmyer defaulted in payment, Frick exercised its contractual rights and obtained a judgment without notice or hearing. The Supreme Court held that a cognovit or confession of judgment clause was not per se unconstitutional.

The Court applied the standard for determining the validity of a waiver in criminal cases — the “intentional relinquishment or abandonment of a known right or privilege,” Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 1023, 82 L.Ed. 1461 (1938), and determined that the standard was satisfied. The Court based this conclusion on the fact that both parties to the contract were corporations which had equal bargaining power and which had bargained over the inclusion of the cognovit clause.

Overmyer had also secured certain benefits such as the release of Frick’s mechanics liens, a reduction in payments, and an extension of time, in exchange for the note. Moreover, the Court emphasized that Overmyer, the debtor, was not rendered defenseless by its execution of the cognovit clause. Overmyer could vacate the judgment upon showing a valid defense and had actually had a postjudgment hearing. Unlike Overmyer, this case does not present a situation where there is an agreement which is binding as a matter of state contract law.

Overmyer indicates, however, that in the civil context the presence of consideration will constitute some evidence of a waiver. We cannot find sufficient consideration here to evidence a waiver; the district court’s findings of consideration were either inadequate as a matter of law or unsupported in the record as a matter of fact. The court first found that Sambo’s avoided further public discussion of the sensitive issue. There is no evidence in this record to indicate that no further public discourse, in fact, took place, or that Sambo’s received any benefit.

The same is true of the court’s finding that Sambo’s benefitted by not offending members of City Council. There is substantial doubt as to the validity of this finding given the four dissenting votes from the site plan approval and the clear sentiments of other members, such as the Mayor. Not only is there an absence of tangible evidence showing that City Council members were unoffended, but there is even less support for the position that a benefit flowed to Sambo’s. The only “benefit” was the approval of the site plan and that cannot constitute a consideration as it was an action required by law.

The court also found that the name change preempted the possibility of an economic boycott, a finding wholly lacking in support. The City Council members remained free to boycott the restaurant if they chose. Nothing in the “agreement” prohibited the council members from organizing a boycott or otherwise exercising their own first amendment rights. Finally, the court cited speedy site approval as a benefit to Sambo’s. This is legally inadequate insofar as the City Ordinance Code provided a timetable for resolution of site plan applications.

That timetable was not adhered to in this case and it is impermissible to find that Sambo’s benefitted by the City’s decision to approve the plan rather than engage in protracted proceedings in the state courts. The City concedes, as it must, that under the Hessee decision it possessed no legal basis for denying approval to the site plan proposal containing the name “Sambo’s.” Whether of the council’s own volition or pursuant to a court order, approval would inevitably have followed; Sambo’s had a clear right to use its name as a matter of Michigan law.

Recognizing this, the City stresses that the concession on the name issue was not a prerequisite or quid pro quo for site approval. The issue thus becomes whether there is something inherent in the stipulation not to use the name that makes it forever binding. Did Ann Arbor acquire some non-contractual authority by virtue of that stipulation which now permits it to suppress the use of the name “Sambo’s” through the denial of sign permits. We think not.

This situation is no different than if the original application had proffered the name “Jolly Tiger” and then in 1978, for the first time, an application to change the name to “Sambo’s” was submitted. The unilateral, gratuitous nature of the stipulation, combined with the failure of Ann Arbor to demonstrate that it relied on the stipulation to its detriment, compels us to find it non-binding. Ann Arbor has failed to come forward with clear and compelling evidence that Sambo’s waived its constitutional rights.

It has not articulated a legitimate and persuasive reason for limiting Sambo’s constitutional defenses aside from the meretricious fact that the company once made a decision not to assert its rights. We see no valid legal reason for denying Sambo’s the opportunity to attempt to assert its First Amendment rights. It is significant as well that Sambo’s could not have asserted those rights in 1972. Curtis Publishing, supra, provides another reason for concluding that Sambo’s did not waive its First Amendment rights. In Curtis Publishing, a public figure brought a libel action against a magazine publisher.

At trial the defendant asserted no constitutional defense and the jury returned a verdict of general and punitive damages. After conclusion of the trial the Supreme Court decided New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), holding that the first amendment requires proof of “actual malice” before a public figure may recover damages in a defamation case. The defendant thereupon moved for a new trial, arguing that the actual malice standard of New York Times should apply. The trial court denied the motion, holding New York Times to be inapplicable.

The court of appeals affirmed on the grounds that the defendant had waived any right to raise that challenge. The Supreme Court reversed, holding that the defendant had not waived its right to assert the previously unrecognized constitutional arguments by failing to assert them before trial. 388 U.S. at 142-45, 87 S.Ct. at 1984-86. This case presents an analogous assertion of a previously unrecognized constitutional defense. In 1972, “Sambo’s,” as a business appellation, was not protected by the First Amendment for as a matter of law commercial speech was beyond the scope of the First Amendment. Valentine v.

Chrestensen, 316 U.S. 52, 54, 62 S.Ct. 920, 921, 86 L.Ed. 1262 (1942); Breard v. Alexandria, 341 U.S. 622, 642-3, 71 S.Ct. 920, 932-3, 95 L.Ed. 1233 (1951). See also Pittsburgh Press Co. v. Pittsburgh Comm’n on Human Relations, 413 U.S. 376, 385, 93 S.Ct. 2553, 2558, 37 L.Ed.2d 669 (1973) (advertisements held not protected were “classic examples of commercial speech”). Had Sambo’s pressed the issue by insisting that the City Council vote on the site proposal containing the name “Sambo’s,” a rejection by the City Council would not have enabled Sambo’s to subsequently invoke the First Amendment as a defense.

Although the City lacked a legal basis for denying site plan acceptance — lacking legislation for regulating the content of trade names — Sambo’s, on its own initiative, volunteered to operate its restaurant under an alternative title. Several years later the Supreme Court extended the protection of the First Amendment to commercial speech. Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 96 S.Ct. 1817, 48 L.Ed.2d 346 (1976); see Metromedia Inc. v.

City of San Diego,-U.S. -, 101 S.Ct. 2882, 69 L.Ed.2d 800 (1981); Comment, First Amendment Protection for Commercial Advertising; The New Constitutional Doctrine, 44 U.Chi.L.Rev. 205 (1976). Sambo’s, an unwitting beneficiary of that new constitutional doctrine, now asserts that the revocation of the sign permits violates its First Amendment rights. The City argues that by stipulating on the site plan that the name “Sambo’s” would not be used, plaintiffs waived any First Amendment rights. This argument assumes, of course, that Sambo’s possessed First Amendment rights which it could waive.

Clearly, Sambo’s did not have First Amendment commercial speech rights in 1972 which it could waive. A waiver, at the least, is the relinquishment of a known right. Johnson, supra. Since Sambo’s had no commercial speech rights protected by the First Amendment in 1972, it could not have waived any rights by stating that the name “Sambo’s” would not be used in connection with the restaurant. See e. g. United States v. Reader’s Digest Ass’n, Inc., 464 F.Supp. 1037, 1048 (D.Del.1979).

Having concluded that Ann Arbor has not provided sufficient justification for its revocation of the sign permits on the waiver theory, we now turn to the speech itself. III. The standard for measuring restrictions on commercial speech against the first amendment was recently refined in Central Hudson Gas v. Public Service Comm., 447 U.S. 557, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). The initial step requires a court to determine whether the expression is protected by the First Amendment.

Once a court decides that issue in the affirmative, the state must then satisfy three requirements to justify any measure restricting commercial advertising. First, the restriction must serve a substantial state interest. Second, the regulation must directly advance the asserted governmental interest. Third, the restriction must be the least restrictive means for advancing the state’s interest. Id. at 566,100 S.Ct. at 2351. See e. g. Record Revolution v. City of Parma, 638 F.2d 916, 936-37 (6th Cir. 1980).

The City of Ann Arbor need not run the full gauntlet of this analysis, for it has not attempted to regulate trade names. It seeks only to prevent Sambo’s from using that name by arguing waiver, and in the alternative, that the trade name “Sambo’s” is not protected by the First Amendment. This confines our task to determining whether “Sambo’s” is constitutionally protected commercial speech. We do not address whether a municipality could, consistent with the First Amendment, restrict trade names it deems offensive. See Sambo’s of Ohio v. City Council of Toledo, 466 F.Supp. 177, 180 (N.D.Ohio 1979). A.

In determining whether a given commercial expression is protected by the First Amendment, the Supreme Court has identified at least two criteria: the speech cannot be deceptive or relate to unlawful activity. Central Hudson, supra, 447 U.S. at 566, 100 S.Ct. at 2351. For example, in Friedman v.

Rogers, 440 U.S. 1, 10, 99 S.Ct. 887, 894, 59 L.Ed.2d 100 (1979) the Court upheld a ban on the practice of optometry under a trade name as a permissible requirement that commercial information “ ‘appear in such a form ... as is necessary to prevent its being deceptive,’ ” quoting from Virginia Pharmacy, supra, 425 U.S. at 772 n. 24, 96 S.Ct. at 1830 n. 24. See also Ohralik v. Ohio State Bar Ass’n., 436 U.S. 447, 98 S.Ct. 1912, 56 L.Ed.2d 444 (1978). And in Pittsburgh Press Co. v.

Human Relations Comm’n., 413 U.S. 376, 388, 93 S.Ct. 2553, 2560, 37 L.Ed.2d 669 (1973), the Court sustained an ordinance that had been construed to prohibit newspapers to carry purely commercial help-wanted advertisements in sex-designated columns except where the distinction was based upon a bona fide occupational exemption. The City of Ann Arbor does not contend that the name “Sambo’s” is deceptive or relates to unlawful activity. Nor does the City deny that “Sambo’s” is a valuable trade name which communicates useful information to consumers.

To be sure, since its inception in 1957, the trade name “Sambo’s” has received substantial promotion so as to acquire an identity in the eyes of the public. It conveys information because of the associations that have grown up over time between the name and the level of price and the quality of food and service. See Friedman, 440 U.S. at 16, 99 S.Ct. at 897. Clearly it conveys the type of information protected by the First Amendment, see Virginia Bd., 425 U.S. at 765, 96 S.Ct. at 1827, as the First Amendment’s concern for commercial speech is based on the informational function of advertising.

See First National Bank of Boston v. Bellotti, 435 U.S. 765, 783, 98 S.Ct. 1407, 1419, 55 L.Ed.2d 707 (1978). It also conveys to some citizens a pernicious racial stereotype of blacks as inferior. For example, “Sambo’s” is no more than a form of latent vilification. The City, citing Chaplinsky v. New Hampshire, 315 U.S. 568, 62 S.Ct. 766, 86 L.Ed. 1031 (1949), urges that “Sambo’s” is a racist trade name and that the use of words which, by their very utterance, inflict injury are not protected by the First Amendment.

The Court in Chaplinsky affirmed a conviction under a statute that applied only to words with a direct tendency to cause violence by the persons to whom, individually, the words were addressed. Id. at 573, 62 S.Ct. at 770. The Supreme Court has refined its holding, however, so that suppression of speech which in no way tends to incite an immediate breach of the peace cannot be justified under Chaplinsky’s “fighting words” doctrine. Gooding v. Wilson, 405 U.S. 518, 524-27, 92 S.Ct. 1103, 1107-08, 31 L.Ed.2d 408 (1977); Lewis v. City of New Orleans, 415 U.S. 130, 143, 94 S.Ct. 970, 972, 39 L.Ed.2d 214 (1974).

We must also reject the proposition that otherwise protected commercial speech is stripped of that protection because of its ancillary offensiveness. The Court in Virginia Board noted that much commercial speech may be “tasteless and excessive,” 425 U.S. at 765, 96 S.Ct. at 1827, but those characteristics alone could not justify repression of the speech. And in Carey v.

Population Services Int’l., 431 U.S. 678, 97 S.Ct. 2010, 52 L.Ed.2d 675 (1977), the Court stated: Appellants contend that advertisements of contraceptive products would be offensive and embarrassing to those exposed to them, and that permitting them would legitimize sexual activity of young people. But these are classically not justifications validating the suppression of expression protected by the First Amendment. At least where obscenity is not involved, we have consistently held that the fact that protected speech may be offensive to some does not justify its suppression. Id. at 701, 97 S.Ct. at 2024.

In similar vein, Ann Arbor contends that the use of the name “Sambo’s” to advertise a restaurant offends certain citizens and frustrates the City’s policy of racial harmony and equality. Plainly, racial harmony and equality is a substantial state interest. Cf. Linmark Associates, Inc. v. Willingboro, 431 U.S. 85, 94-5, 97 S.Ct. 1614, 1619, 52 L.Ed.2d 155 (1977) (promoting stable, racially integrated housing a “vital goal”).

Significantly, however, the City has produced no evidence to demonstrate that the actual operation of the restaurant under the name “Sambo’s” has retarded or impeded achievement or furtherance of its goal or racial equality. Tangible evidence of the disruption of racial harmony in Ann Arbor because of the presence of a restaurant named “Sambo’s” is not present in this record. The impact on these laudable goals by “Sambo’s” is speculative at best.

Much more than a speculative casual relationship is required for even though exposure to the “Sambo’s” signs may offend some citizens, the ability of the City “to shut off discourse solely to protect others from hearing it is dependent upon a showing that substantial privacy interests are being invaded in an essentially intolerable manner.” Cohen v. California, 403 U.S. 15, 21, 91 S.Ct. 1780, 1786, 29 L.Ed.2d 284 (1971) quoted with approval in Consolidated Edison v. Public Service Comm’n., 447 U.S. 530, 541, 100 S.Ct. 2326, 2335, 65 L.Ed.2d 319 (1980). See also Erznoznik v.

City of Jacksonville, 422 U.S. 205, 209, 95 S.Ct. 2268, 2272, 45 L.Ed.2d 125 (1975); Police Dept. of Chicago v. Mosley, 408 U.S. 92, 95, 92 S.Ct. 2286, 2289, 33 L.Ed.2d 212 (1972). Having made no such showing, the City may not deny plaintiffs the constitutional right to use the trade name “Sambo’s.” The decision of the district is reversed and the case is remanded for issuance of an order enjoining the City of Ann Arbor from denying plaintiffs the use of the trade name “Sambo’s” or from revoking the sign permits heretofore issued. .

The pancake image derives from The Story of Little Black Sambo written in 1899 by Helen Bannerman. A childhood narrative, it is the tale of a small boy, Little Black Sambo, who loses his red coat, blue trousers, purple shoes and green umbrella to marauding tigers. In fighting among. themselves, the tigers chase each other in a ring around a tree, running so fast that they melt away leaving nothing but a big pool of butter. Little Black Sambo and his parents then use that butter in preparing a delicious pancake supper. .

The Mayor also objected to the proposed restaurant and to proposals for a shopping center and a Ponderosa Steakhouse because of his reservations about strip zoning along West Stadium Blvd., the proposed location of all three concerns. . The. City does not contend, nor could it, that the approval of the site proposal constituted consideration for the stipulation that the name “Sambo’s” would not be employed in connection with the restaurant. Michigan law is clear that the performance of an existing legal obligation does not constitute consideration or sufficient consideration for a promise. Ruffin v.

Mercury Record Productions, Inc., 513 F.2d 222, 224 (6th Cir.), cert. denied, 423 U.S. 914, 96 S.Ct. 219, 46 L.Ed.2d 142 (1975); Gordon v. Village of Wayne, 370 Mich. 329, 121 N.W.2d 823, 824-25 (1963); Puett v. Walker, 332 Mich. 117, 50 N.W.2d 740, 743 (1952); Green v. Millman Bros., Inc., 7 Mich.App. 450, 151 N.W.2d 860, 863 (1967). Michigan law is equally clear that once an applicant has complied with all applicable statutes and ordinances, as here site plan approval must be given. Hessee Realty, Inc. v.

City of Ann Arbor, 61 Mich.App. 319, 232 N.W.2d 695, 698 (1975) (Construing the identical Ann Arbor ordinance applicable in the present case). In approving the site plan submitted by Restaurant Properties, the City Council did no more than what it was legally obligated to do. . The holding as to waiver in the plurality opinion authored by Justice Harlan was agreed to by two dissenting justices, see Brennan, J. dissenting joined by White, J. Id. at 172 n. 1, 87 S.Ct. at 2000 n. 1. .

In the criminal context we have held that the failure of a defendant to raise a previously unrecognized constitutional defense will not bar subsequent presentation of that claim. See Isaac v. Engle, 646 F.2d 1129 (6th Cir. 1980) (en banc), cert. granted, 451 U.S. 906, 101 S.Ct. 1973, 68 L.Ed.2d 294 (1981). Arguably, there are stronger reasons for finding waiver in the criminal context where a state has important interests in securing valid convictions and in avoiding the burden and expense of processing cases multiple times.

See generally Westen, Away From Waiver: A Rationale for the Forfeiture of Constitutional Rights in Criminal Procedure, 75 Mich.L.Rev. 1214 (1977). Ann Arbor, on the other hand, has not demonstrated that it will suffer substantial prejudice if Sambo’s is allowed to use the First Amendment to override the 1972 stipulation, nor has the City asserted any detrimental reliance on that stipulation. Since we hold that there was no valid waiver of First Amendment rights, we need not decide whether, had there been a waiver, it could be withdrawn notwithstanding the 1972 stipulation. See Stevens v.

Marks, 383 U.S. 234, 243-44, 86 S.Ct. 788, 793, 15 L.Ed.2d 724 (1966) (a defendant is generally allowed to withdraw a prior waiver of a constitutional right when there is no justification otherwise). But see Dukes v. Warden, 406 U.S. 250, 266, 92 S.Ct. 1551, 1559, 32 L.Ed.2d 45 (1972) (Marshall, J., dissenting). . Undoubtedly this test requires the court to take a long, hard look at measures restricting nondeceptive commercial speech, while placing a heavy burden on the state to justify any restraint.

See Cox, The Supreme Court, 1979 Term-Foreword: Freedom of Expression in the Burger Court, 94 Harv.L.Rev. 1, 35 (1980). Whether this is a “strict scrutiny” form of review or a quasi-deferential, intermediate level of review seems debatable. See Central Hudson, supra, 447 U.S. at 573-78, 100 S.Ct. at 2355-57 (Blackmun, J., concurring); see also Friedman v. Rogers, supra, 440 U.S. at 20, 99 S.Ct. at 899 (Blackmun, J., concurring and dissenting). . The City does not argue that use of the trade name “Sambo’s” constitutes group libel. See Beauharnais v.

Illinois, 343 U.S. 250, 72 S.Ct. 725, 96 L.Ed. 919 (1952) (affirming conviction under a state statute that proscribed public dissemination of any lithograph that vilified identifiable racial, ethnic or religious groups.) Although Beauhamais has never been overruled, its continued vitality has been questioned. See Garrison v. Louisiana, 379 U.S. 64, 82, 85 S.Ct. 209, 219, 13 L.Ed.2d 125 (1964) (Douglas, J., concurring); Collins v. Smith, 578 F.2d 1197, 1205 (7th Cir.), cert. denied, 439 U.S. 916, 99 S.Ct. 291, 58 L.Ed.2d 264 (1978); Tollett v.

United States, 485 F.2d 1087, 1094 n. 14 (8th Cir. 1973); Anti-Defamation League of B’nai B’rith v. FCC, 403 F.2d 169, 174 n. 5 (D.C.Cir. 1968), cert. denied, 394 U.S. 390, 89 S.Ct. 1190, 22 L.Ed.2d 459 (1969) (Wright, J., concurring). But see Note, Group Vilification Reconsidered, 89 Yale L.J. 308, 1450 (1979).