NY Court of Appeals Rejects Constitutional Challenge to Adult Establishment Zoning Regulations in NYC

Bringing possible finality to a lawsuit that has been bouncing back and forth between the Supreme Court, the Appellate Division, and the Court of Appeals for the past fifteen years, the New York Court of Appeals ruled unanimously on June 6 that 2001 amendments to the City’s zoning ordinance governing “adult establishments” do not violate the constitutional rights of businesses that provide sexually explicit materials or activities. Judge Eugene M. Fahey wrote the opinion joined by five members of the seven-member court.  Chief Judge Janet DiFiore did not take part in the case, and there is one vacancy on the court.  For the People Theatres of N.Y. v. City of New York, 2017 N.Y. LEXIS 1406, 2017 WL 2427295 (June 6, 2017).

The zoning ordinance was a major project of Mayor Rudolph Giuliani’s first term, as he had run for office contending that the city had been overrun by adult businesses which were believed to cause harmful effects to the community. Under U.S. Supreme Court precedents, such businesses cannot be banned outright due to First Amendment protection for expressive activity, but they can be regulated because of the “secondary effects” they cause, such as lowering property values in a community and attracting criminal activity.   A local government can take action to restrict where such businesses may operate by documenting the adverse secondary effects and showing that any regulation leaves enough places where adult businesses can operate that consumers can still access their goods and services.

Giuliani had the City Planning Department complete a study of secondary effects of sexually focused businesses, which “identified significant negative secondary impacts, including increased crime, diminished property values, reduced shopping and commercial activity, and a perceived decline in residents’ quality of life,” wrote Judge Fahey. Based on this 1994 study, supplemented by public hearings, the City Council adopted the 1995 Zoning Ordinance, establishing “regulations barring adult establishments from residential zones and most commercial and manufacturing zones, and mandating that, where permitted, adult businesses had to be at least 500 feet from houses of worship, schools, day care centers, and other adult businesses.”

Under these regulations most of the adult business in the city would have to either close down or relocate to remote locations. However, the court mentions evidence presented by the City in the ensuing lawsuits that most of the locations where such businesses could operate were fairly accessible by public transit, albeit distant from where most people live and work.  The Zoning Ordinance applied to any commercial establishment a “substantial portion” of which was “an adult book store, adult eating or drinking establishment, adult theater, or other adult commercial establishment, or any combination thereof.”  Such establishments generally exclude minors and focus their businesses on providing consumers with pornography and sex toys, providing peep shows, lap dances, strip shows, and the like.

The ordinance did not define “substantial portion,” and some businesses proposed to reconfigure their operations to avoid being labelled as “adult establishments” in order to remain in their existing locations. There was litigation around the ordinance itself, which was upheld against a constitutional challenge by the Court of Appeals.  The City adopted procedural guidelines to determine whether a particular business should be labeled an adult establishment.  These provided that “any commercial establishment with at least 40 percent of its customer-accessible floor/cellar area or stock-intrade used for adult purposes qualified as an adult establishment.  Some businesses adjusted by toning down their advertising and signage, moving sexually-oriented materials to back of their spaces, creating separate entries, expanding their non-sexually-oriented inventory, and so forth.   These were called 60/40 businesses.

The City quickly concluded that reducing the area or inventory but continuing to offer the sexually-related materials and exhibitions did not sufficiently change the character of these businesses, and began to cite the businesses for “sham compliance,” which led to new litigation. In 1999 the Court of Appeals ruled that, “sham” or not, once the City had adopted the 60/40 rule, it had to be enforced according to its terms, so businesses that technically complied could not be excluded from their locations under the zoning ordinance.

This led the City Council to adopt amendments in 2001, providing that even an establishment that met the 60/40 test could be considered an adult business depending on a list of criteria spelled out in the amendments. For example, any business operating peep booths, defined as enclosures “where adult movies or live performances are available for viewing by customers,” would qualify as adult bookstores, regardless of compliance with the 60/40 test on floor space and stock.

New lawsuits were launched by business owners in 2002 contesting the constitutionality of the 2001 amendments. One lawsuit was brought by bookstores selling pornography and sex toys, most of which operated peep booths, the other by dinner clubs that provided strip shows and, in some cases, lap dances by performers.  Their central argument was that the 1994 City Planning study could not be used to justify the new definitions of adult establishments because it was conducted with reference to the old definitions.  Thus, the plaintiffs argued, the old study could not serve to document the “secondary effects” that the City was obligated to prove if it wanted to restrict businesses based on the expressive content of their goods and services.  They argued that the alterations they had made substantially changed their businesses, lessening such secondary effects.

This case first made its way to the Court of Appeals in 2005, after Supreme Court Justice Louis York found the 2001 amendments unconstitutional and was reversed by the Appellate Division, which had ruled that a new “secondary impact” study was not required because the plaintiffs’ conversion of their businesses under the 60/40 rule had not really changed the sexual character of the businesses, and that the plaintiffs’ arguments to the contrary were not back up by evidence sufficient to shift the burden back to the City to prove “secondary effects.” The Court of Appeals then disagreed with the Appellate Division’s approach and sent the case back for further proceedings.

In that case, the Court of Appeals adopted a three-stage evidentiary requirement to analyze the status of the zoning regulations. First, the City had to show that it had a “substantial interest in regulating a particular adult activity,” and as to this it seemed that the 1994 City Planning study did the trick. That put the burden on the plaintiffs to show that the City’s evidence “does not support its rationale or provide evidence disputing the municipality’s factual findings.”  If the plaintiffs met that burden, the City would then have to show that the businesses had not so transformed themselves that they “no longer resemble the kinds of adult uses found to create the secondary effects” in the original study.

Where the Court of Appeals disagreed with the Appellate Division in 2005 was on the second stage, as to which the Court then stated that “plaintiffs had furnished evidence disputing the City’s factual findings, shifting the burden back to the City to supplement the record with evidence renewing support for its rationale.” Since new evidence had to be introduced, the case was sent back to Judge York for more fact-finding.  After further discovery and new inspections of the businesses by City officials, Justice York concluded in 2010 that the City had met the evidentiary standard set by the Court of Appeals, providing “substantial evidence” as to the “dominant, ongoing focus” of the bookstores and clubs on “sexually explicit materials and activities.”  Thus, he rejected the plaintiffs’ argument and upheld the constitutionality of the regulations.

The Appellate Division disagreed with Justice York, finding in a 2011 ruling that he had failed to specify “the criteria by which [he] determined that the plaintiffs’ essential nature was similar or dissimilar to the sexually explicit adult uses” underlying the 1995 Zoning Ordinance and had “failed to state the particular facts on which” he based his judgment. The case went back to Justice York, who composed a new opinion, making detailed findings of fact based on the prior hearing record and, this time, concluded that the alterations had, indeed, changed the overall character of the businesses.  He concluded that the plaintiffs “no longer operate in an atmosphere placing more dominance of sexual matters over nonsexual ones.  Accordingly,” he wrote in 2012, “there is no need for the 2001 Amendments.  On their face, therefore, they are a violation of the free speech provisions of the U.S. and State Constitutions.”

This time the Appellate Division affirmed Justice York’s ruling in a 2015 decision, but unfortunately he was not around to learn of this vindication, having passed away in November 2014. In its 3-2 decision by a five-judge bench, the Appellate Division majority focused on four criteria to determine whether the “60/40 businesses” could be considered “adult establishments” under the Ordinance: “(1) the presence of large signs advertising adult content, (2) significant emphasis on the promotion of material 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 form the premises on the basis of age, and (4) difficulties in accessing nonadult materials.”

Going with a fine-tooth comb through the factual findings recorded in Justice York’s most recent opinion, the majority of the court decided that both the adult bookstores and the adult clubs had satisfied at least three out of the four criteria, and thus should not be considered adult establishments. They had reduced their signage, de-emphasized the sexually-oriented aspects, and fell short only on one aspect of the checklist: they excluded minors from admission.  The dissenters, to the contrary, concluded that the City had “sustained its burden as to sham compliance by demonstrating that by and large the essential character of the 60/40 businesses has not changed, even if their physical structure has.”

For example, the dissenters could not believe that bookstores operating numerous peep booths for viewing pornography did not meet the test of having a predominant sexual focus, even if they had reduced their signage, and rearranged their layout to make non-adult materials more accessible. Similarly, they could not believe that an establishment that providing “topless dancing by multiple dancers on a daily basis for approximately 16 to 18 hours a day with lap dancing provided in both the adult and the nonadult areas” could not be deemed to be adult establishments.

The City appealed, and the Court of Appeals now agreed with the dissenters in the Appellate Division. They criticized the majority in that court, claiming that it had placed too high an evidentiary burden on the City, misconstruing the Court of Appeals’ prior ruling. “Properly understood,” wrote Judge Fahey, “the trial court’s task was to decide whether the City had relevant evidence reasonably adequate to support its conclusion that the adult establishments retained a predominant, ongoing focus on sexually explicit activities or materials.”  Where the majority in the Appellate Division went wrong, wrote Fahey, was by a “applying a rigidly mechanical approach to the determination of whether a predominant focus on sexually explicit entertainment remained. . . .  As the dissent observed, the majority’s four-prong checklist, with each factor weighing equally, placed subsidiary considerations such as signage on equal footing with the touchstone issue of emphasis on the promotion of sexually explicit activities or materials.”

The Court also criticized the Appellate Division for losing “sight of the fact that the issue was whether there was sham compliance. A bookstore could very well engage in such a sham by removing large signs, allowing minors to enter, and ensuring that non-adult materials are accessible, and yet retain a focus on sexual materials.  A store that stocks non-adult magazines in the front of the store but contains and prominently advertises peep booths is no less sexual in its fundamental focus just because the peep booths are in the back and the copies of Time magazine in the front.  The same is true of the adult eating and drinking establishments.  A topless club is no less an adult establishment if it has small signs and the adjoining comedy club, seating area, or bikini bar is easy to access.”

The practical effect of the Court’s ruling seems to be that as long as a bookstore is selling porn and operating peep booths, it is going to be subject to the zoning ordinance, and the same is likely to be true of any club that is going to provide strip shows, regardless how it reorganizes its space, modifies its signage, or sets its policies on access by minors.

It is ironic that a nearly-quarter-century litigation battle set off by the moralistic Giuliani Administration would be resolved during the De Blasio Administration, but these things have a momentum of their own, and the City Law Department’s mandate was to defend the work product of the City Council, specifically the 2001 Amendments (also a product of the Giuliani Administration, in its final year). The Court’s decision rejecting the constitutional challenge to the 2001 Amendments does not necessarily end the matter, since the plaintiffs could seek U.S. Supreme Court review as to the 1st Amendment aspects of the ruling.  But the New York Court of Appeals has traditionally construed the state constitution to provide more protection for expression than the federal constitution.  But the Court of Appeals grounded its analysis firmly in U.S. Supreme Court decisions, so the case is subject to potential Supreme Court review.  The likelihood that the current Supreme Court would be interested in this case seems rather slim, however.

Giuliani’s efforts did have their intended effect in sharply reducing the number of businesses that could be deemed “adult establishments” by any definition. Perhaps now would be the time for the small number of remaining businesses that were attempting to avoid the zoning rules by rearranging their space, inventory and activities to go back to the political process and the consumers who want to access their goods and services to seek a legislative change.  The Court’s decision says that the City can do what it has done, but does not pose any barrier to the City adopting a less restrictive approach.

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