NY Appellate Division Panel Declares Amended NYC Adult Zoning Ordinance Unconstitutional

Adding another chapter to the long-running two-decade litigation saga of New York City’s controversial adult uses zoning ordinance, a 5-judge panel of the New York Appellate Division, 1st Department, based in Manhattan, ruled  by a 3-2 vote on July 21, 2015, that the 2001 Amendments to the regulation governing location of adult eating and drinking establishments and adult video and book stores unconstitutionally abridge freedom of speech protected by the First Amendment of the U.S. Constitution.  The majority of the panel voted to affirm a 2012 ruling by the late New York County Supreme Court Justice Louis B. York, and to permanently enjoin the City from enforcing the amendments, thus tossing a political hot potato to the De Blasio Administration, which must decide whether to ask the Court of Appeals to review the decision.  For the People Theaters of N.Y., Inc. v. City of New York, 2015 N.Y. Slip Op. 06200, 2015 WL 4429048, 2015 N.Y. App. Div. LEXIS 6068.  Justice Barbara R. Kapnick wrote the opinion for the court.

Prior to 1995, New York City made no distinction between adult (sexually-oriented) businesses and other businesses under its zoning ordinances.  Such businesses could be located anywhere in the city, and some city officials thought there were too many such businesses concentrated in prime commercial and residential locations.  Responding to the direction of U.S. Supreme Court rulings that specified that local governments could impose zoning restrictions on adult businesses if the governments could show that the presence of those businesses was causing undesirable “secondary effects,” such as increased crime, decreased property values, reduced commercial activities, and erosion of community character, the Department of City Planning “began a comprehensive assessment of the impact of adult establishments on the quality of urban life” in 1993, publishing its study in 1994 documenting such effects in the city.  In 1995, the city government amended its zoning resolution to ban “adult uses” from all residential zones and most commercial and manufacturing districts.  In those non-residential areas where the adult uses were not completely banned, they were not allowed to be closer than 500 feet to a “house of worship,” a school, or a day care center.  The effect of the new zoning resolution would relegate such businesses to a handful of remote locations where it is unlikely they would attract sufficient customers to stay in business.

Key to enforcement of the ordinance, of course, was the definition of “adult establishment.”  The resolution’s definition, which was subsequently challenged as unduly vague for constitutional purposes, was a “commercial establishment” in which a “substantial portion” of the establishment includes “an adult book store, adult eating or drinking establishment, adult theater, or other adult commercial establishment, of any combination thereof.”  In the case of book stores, the resolution applied to those having a “substantial portion” of their “stock-in-trade” in printed or video depictions of “specified sexual activities” or “specified anatomical areas,” and adult eating or drinking establishments were those that “regularly” featured live performances or movies “characterized by an emphasis on. . . specified sexual activities” or “specified anatomical areas” or where employees regularly exposed “specific anatomical areas” to patrons as part of their employment.  An essential feature of an adult establishment, of course, was that minors were excluded from the premises.  The attempt to describe adult businesses without using sexually-charged language resulted in this bizarre and somewhat vague wording.

Many sexually-oriented businesses that didn’t want to be exiled to the remote areas allowed for them under the resolution decided to alter their premises in an attempt to escape the label of “adult business,” but, they argued, the resolution was so vague that they couldn’t be sure how to comply.  The city responded by adopting a “guideline” specifying that the phrase “substantial portion” meant that any business with “at least 40 percent” of its accessible floor area or stock used for “adult” purposes qualified as an adult establishment.  Many businesses then redesigned their premises so as to reduce the portion devoted to sexually-oriented goods or activities to less than 40%, although many others just went out of business, drastically reducing the number of adult businesses in the city and the virtual disappearance of porn theaters.  The City instituted legal proceedings to close down businesses that didn’t comply with the 60/40 rule, but discovered that many of the businesses in residential and prime commercial locations had successfully reduced their “adult” areas to comply, and so there were still many such businesses in areas where some city officials thought they shouldn’t be operating.

The City then came up with the “sham compliance” theory, arguing that although these businesses had technically complied with the 60/40 rule, they were nonetheless still deriving most of their revenue from sexually-oriented goods and performances, and so were really operating as adult businesses in violation of the Zoning Resolution.  In 1998 the City began to bring “nuisance” lawsuits against such businesses, attempting to get them shut down.

From the time the resolution was first passed in 1995, businesses began filing lawsuits attacking its constitutionality.  The businesses were unsuccessful at first, but finally scored with the claim that the City could not go after businesses that were in technical compliance under the “sham” theory.  The Court of Appeals ruled in 1999 in a case involving a gay-oriented adult establishment on the Upper West Side, Les Hommes, that the 60/40 guidelines must be enforced as written, and evidence that the non-adult inventory didn’t generate much revenue was irrelevant.  “Either the stock is available or accessible, or it is not,” wrote the Court of Appeals; “Either the appropriate amount of square footage is dedicated to non-adult uses, or it is not.”

The City reacted to this ruling with new amendments to the zoning resolution adopted by the City Council in 2001.  Now an “adult establishment” would be a place that “regularly features in any portion of such establishment” live performances with an emphasis on “specified anatomical areas” or “specified sexual activities,” and that excluded or restricted attendance by minors, regardless of what portion of the premises were devoted to such activity.  As to book and video stores, the amendments adopted a detailed analysis attempting to get at the “sham compliance” argument, focusing on such details as whether a customer had to pass by the adult materials in order to get to the non-adult materials, whether the business included “peep booths” for viewing sexually-oriented videos, whether somebody would necessarily be exposed to “adult” materials when paying for their purchases, whether “other printed or visual material” was offered for sale only, but “adult” material was also available for rental, whether the adult titles on offer outnumbered the non-adult titles, whether minors were restricted from parts of the store that featured non-adult materials, whether signage advertising availability of adult materials is “disproportionate in size relative to a sign that advertises the availability of ‘other printed or visual material'” as compared to the proportions of each kind of material offered in the store or the proportion of floor space devoted to them, whether window displays emphasized adult materials using the same sort of proportionality test, and a catch-all provision giving the commissioner of buildings discretion to decide whether sale or rental of adult materials was “a substantial purpose of the business.”  In other words, these amendments were intended to close down the 60/40 businesses that were still trying to operate in areas restricted by the zoning resolution.

Some of the businesses mounted a new legal challenge in 2002.  Their main argument was that if the City wanted to restrict these businesses, it could not rely on the City Planning Department’s original 1994 Study, because that had documented negative secondary effects associated with the kinds of unregulated adult businesses that thrived in the city at that time.  Instead, argued the businesses, they had modified their operations in order to comply with the resolution, so a new study should be required to prove that the altered businesses also caused such secondary effects.  Otherwise, these amendments, which clearly were regulating speech-related activity because of its content, would be unconstitutional under the First Amendment.  In the absence of proof of secondary effects, they argued, the City’s enforcement activities were targeting them because of the expressive content of their goods and performances, which is not permissible under U.S. Supreme Court precedents.

The challenges ended up before Judge Louis York, who denied the City’s motion for summary judgment on September 9, 2003, ruling that the City was required to provide evidence to support its contention that these new restrictions were necessary and could not rely on the 1994 study.  The Appellate Division reversed Justice York, and the case went to the Court of Appeals, which sent it back to York for reconsideration in light of a new U.S. Supreme Court ruling from 2002.  Justice York held trials in the two pending cases involving more than twenty “60/40” bookstores and ten “60/40” clubs.  On April 8, 2010, York ruled that the City had met its burden of showing that these businesses were “adult establishments” subject to the zoning resolution, and, of course, the businesses appealed.  The Appellate Division reversed York again, stating that “while the 2001 Amendments might be constitutional in most situations, there may be instances where the application of the ordinance might be an unconstitutional abridgement of First Amendment protections,” and sent the case back to York for further proceedings.  The parties submitted to York proposed findings of fact responding to the issues posed by the Appellate Division.  The City argued that the evidence it had previously presented to York continued to justify the conclusion that all “60/40” businesses continued to have a “predominant” sexual focus. This time York, who had actually visited and personally inspected the businesses, ruled against the City on August 30, 2012, issuing an injunction against enforcement of the 2001 Amendments against the businesses that had brought these two lawsuits. The City appealed again, and while the appeal was pending Justice York passed away in November 2014.

Writing for the majority in the new decision issued on July 21, Justice Kapnick said that the question at this point, as the Court of Appeals had specified the last time it ruled on these issues, was “whether 60/40 businesses are so transformed in character that they no longer resemble the kinds of adult uses found, both in the 1994 DCP Study and in studies and court decisions around the country, to create negative secondary effects — as plaintiffs contend — or whether these businesses’ technical compliance with the 60/40 formulae is merely a sham — as the City contends.”  In its previous decision, the Appellate Division identified four criteria for Justice York to use in making this determination: (1) the presence of large signs advertising adult content, (2) significant emphasis on the promotion of materials exhibiting ‘specified sexual activities’ or ‘specified anatomical areas’ as evidence by a large quantity of peep booths featuring adult films, (3) the exclusion of minors from the premises on the basis of age, and (4) difficulties in accessing non-adult materials.  “We instructed that if the trial court found that most, if not all, 60/40 establishments featured any or all of the first three of these attributes, the City would have met its burden of proof.”

In reviewing these factors, Justice York had concluded that the reconfiguration of these businesses was not “sham” compliance, noting the reduced size of signs, the toning down of window displays, the relocation of sexually-oriented materials to the back of stores, the reduced emphasis on adult materials in the overall context of the businesses, and that many of the book and video stores allowed minors on the premises, sealing off from their access only the sections with adult content.  He also noted testimony from one witness that “minors are excluded because they tend to come in groups and disrupt the store.”  “This evidence is not indicative of a predominant sexual focus in most of the stores,” wrote Justice Kapnick, “since nearly half of the stores do not restrict the admittance of minors at all.”  She also observed that the evidence in the record did not suggest that there was difficulty accessing non-adult goods in any of the stores.  Turning to the clubs, she concurred with Justice York’s conclusion that although all the clubs did feature live adult-oriented performances, the reduction of floor space devoted to that activity, together with the addition of many non-adult uses, such as restaurants, pool tables, and sports lounges, and the presentation of non-adult musical presentations, as well as changes in signage, were sufficient to escape being labeled adult businesses, even though the clubs generally excluded minors from the premises.

Justices Angela Mazzarelli and Paul Feinman joined Kapnick’s opinion.

Justice Richard T. Andrias wrote a vehement dissent, joined by Justice Leland G. DeGrasse, accusing the majority of a “mechanical and mathematical approach, under which the predominant sexual focus in the 60/40 businesses’ activities is quantitatively outweighed by signage, policies towards minors, and layouts.”  He insisted that this was “inadequate under the dictates of the Court of Appeals and this Court, and elevates the City’s burden of proof” above what had been discussed in the prior appellate rulings in this case.  “In identifying certain factors relevant in assessing the character of the adult establishments,” he continued, “this Court did not call for a mechanical application by which each factor is to be weighted equally and tallied to arrive at a quantitative conclusion.”  He contended that in its previous decision, the Appellate Division “recognized that if any one of the factors established that the 60/40 businesses displayed a predominant, ongoing focus on sexually explicit materials or activities, and that there had not been a significant change in their character, it could provide a sufficient basis to hold the 2001 Amendments constitutional.”  Andrias contended that the record “fairly supports the City’s contention that the adult establishments reviewed emphasized sexual activities or materials over nonadult materials.”

Simply stated, the intention of the City Council in adopting the 2001 Amendments, in the view of the dissent, was to rid residential and prime commercial areas of the city from sexually-related businesses.  The dissenters contend that so long as a store is selling or renting sexually-oriented goods or services as a substantial part of its business, it should be considered an adult business barred from operating in such areas, regardless whether signage and the face it presents to the street has been toned down and it has added other non-adult materials and activities to its business plan.  As a practical matter, they argue, a business that presents strippers and sells pornography is an adult business, regardless of the signage and the allocation of most of its floor space to pool tables, non-sexual videos and books and the like.  The majority, on the other hand, agreed with Justice York that these remaining 60/40 businesses, which had altered their physical layout and promotional efforts to downplay their sexually-related goods and services, should be allowed to continue to operate in the residential and commercial zones unless the City could show that these altered businesses generated the undesirable effects that were documented for their unregulated predecessors prior to 1995.

In light of the sharp split between the majority and dissent, it would not be surprising if a request by the City to the Court of Appeals to review this decision would be granted, although it is difficult to predict how that court would rule in light of the complete turnover in personnel since it last addressed these issues.  (Governor Cuomo now has two pending vacancies to fill, after which the overwhelming majority of that bench will be Democratic appointees.)  The New York Law Journal quoted a NYC Law Department spokesman’s same-day response that the decision “is under review.”  If the De Blasio Administration wants to continue the anti-sex business approach of the Giuliani and Bloomberg Administrations, an appeal would seem to be mandatory.  But this might be a good time to make a quick assessment whether in fact there are any real problems in terms of significant negative effects from the remaining 60/40 businesses that have continued to operate while the issue has been litigated, and to consider putting this long-running legal battle to rest.  The City Council might also want to play a role at this point, since the handiwork of its 2001 predecessors (who have all been superseded due to term limits) is at the center of the litigation.

The lead attorney for the businesses was Herald Price Fahringer, who passed away in February after having litigated these issues through numerous trials and appeals since 1995.  Other attorneys who have been representing the businesses include Erica T. Dubno and Nicole Neckles of Fahringer’s law firm, and Edward S. Rudofsky and Martin P. Mehler representing other businesses involved in the case.  Corporation Counsel Zachary W. Carter will undoubtedly take a lead role in advising Mayor De Blasio about how to proceed from this point.

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