While the ruling was a victory for New York City in its efforts to restrict tobacco advertising, the battle is far from over. In its decision, the Second Circuit Court of Appeals did not address a key argument alleging the restrictions violate advertisers' commercial free speech rights. Instead, the appeals court sent the First Amendment challenge back to the trial court for consideration. ``They cleared the stage for judicial consideration of the First Amendment issue,'' said Floyd Abrams, a free speech specialist representing advertising groups fighting the city restrictions. ``The most important part of the challenge is on First Amendment grounds.'' The U.S. Supreme Court is also expected to hear arguments later this year over whether the Food and Drug Administration has the power to regulate tobacco. The nation's highest court agreed in April to review a ruling that the FDA overstepped its authority in 1996 when it issued sweeping regulations involving cigarettes, including limiting advertising and marketing by tobacco companies. The focus of the appeals court ruling on Monday was whether the Federal Cigarette Labeling and Advertising Act preempts the city restrictions enacted in early 1998. On the day that Mayor Rudolph Giuliani signed the law, the city was sued by various supermarket and advertising associations. The plaintiffs alleged that the city law was preempted by the federal act and that it also restricts commercial speech. A trial court had ruled against the city on grounds that it could not impose restrictions beyond the federal law. Because it threw out the restrictions based on the preemption challenge, it did not consider the commercial speech arguments. That issue, therefore, did not go before the appeals panel. City lawyers had argued that that the courts should look to congressional intent to determine whether the federal act was preemptive . The appeals court agreed and reversed most of the trial court's ruling. It found that New York City was not prevented by the federal advertising law from barring outdoor advertising of tobacco products within one thousand feet of any school building, playground, child day care center, amusement arcade or youth center. The ruling also allows the city to prohibit most indoor advertising in the same areas if the advertisements can be seen from the streets. ``Divergent local zoning restrictions on the location of sign advertising are a commonplace feature of the national landscape and cigarette advertisers have always been bound to observe them,'' the appeals panel said. It said that even without the city law aimed specifically at tobacco products, cigarette advertisers would still have to abide by local zoning ordinances before placing outdoor ads. ``Zoning regulations on the placement of outdoor advertisements have long been held to lie peculiarly within the states' historic police powers,'' the court held.

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