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Federal Court Issues Preliminary Injunction against Enforcement of New York City Adult Establishment Zoning Regulations

Posted on: October 3rd, 2019 by Art Leonard No Comments

Continuing litigation efforts that date back a quarter of a century, a group of “gentlemen’s cabarets” (which the court alternatively describes as “strip clubs”) and adult bookstores located in Manhattan have brought suit to challenge the constitutionality of 2001 Amendments to the NYC Zoning Resolution as applied to “adult establishments.”  Numerous prior assaults on this measure, first passed during the Giuliani Administration in an attempt by the City to sharply reduce the number of adult establishments and to relocate them away from residential districts or close proximity to religious institutions, schools and other places where minors tend to congregate, were largely unsuccessful once they proceeded to the appellate level.  Surprisingly, however, given the City’s earnest attempts to beat back all challenges, U.S. District Judge William H. Pauley III relates that the City has not actively enforced the Resolution for eighteen years – effectively since the end of the Giuliani Administration.  Mayors Bloomberg and De Blasio turned their attentions elsewhere.  But the plaintiffs are concerned with the measure still on the books and the possibility it might be enforced against them in the future – thus this lawsuit.  725 Eatery Corp. d/b/a “Lace” v. City of New York, 2019 WL 4744218, 2019 U.S. Dist. LEXIS 169873 (S.D.N.Y., Sept. 30, 2019).

In this ruling, Judge Pauley grants the plaintiffs’ motion for a preliminary injunction against enforcement of the measure while the litigation goes forward on the merits.  This is in some sense largely symbolic, in light of the City’s prolonged failure to enforce the measure.

The list of counsel accompanying the opinion goes on for two pages, and the judge mentions that in connection with the pending motions, “the parties have offered a Homeric record of affidavits, documentary evidence, and stipulations.”  Most significant among the objections, perhaps, is that the Resolution was purportedly justified by a 1995 study of ‘secondary effects’ attributable to the presence of adult establishments, especially when several were located close together.  The reality is that, as a result of early enforcement efforts during the Giuliani Administration together with economic, residential and commercial development activity in the City over the past twenty years, the studies are clearly out-of-date and no longer easily support the Council’s conclusion that the rather drastic restrictions on the siting of adult establishments is still necessary in terms of public order and impact on property values.  Enforcement under Giuliani reduced the number of adult establishments and led to many of them significantly modifying their activities to try to avoid being labeled as adult establishments.

As Judge Pauley explains: “Tracing its origins to the City’s early 1990s crusade against adult entertainment businesses, this litigation has been ensnared in a time warp for a quarter century.  During that interval, related challenges to the City’s Zoning Resolution have sojourned through various levels of the state and federal courts.”  A major portion of the opinion is devoted to reciting in great detail the history of that litigation, from the initial 1995 enactment through the consequential 2001 amendments and a series of judicial decisions which culminated in a 2017 ruling by the New York Court of Appeals holding that the most recent version of the measure is constitutional, which was stayed until the Supreme Court denied review early in 2018.  For the People Theatres of N.Y., Inc. v. City of New York, 29 N.Y.3d 340, 57 N.Y.S.2d 69, 79 N.E.3d 461 (N.Y. 2017).

This new law suit was brought by Manhattan establishments that would not be considered “adult establishments” under the 1995 Regulation (which was construed by the courts to exempt establishments that devoted less than 40% of their space or stock to adult uses) but would be considered “adult establishments” under the 2001 amendments (which broadened coverage to deal with alleged “sham” reconfigurations that the City claimed had resulted in adult establishments continuing to operate while evading coverage).  In this case, the plaintiffs alleged deprivations of their 1st and 14th Amendment rights, arguing that if the 2001 Amendment were actively enforced, they “would decimate – and have already dramatically reduced – adult-oriented expression.”  The plaintiffs pointed out, restricting themselves to Manhattan numbers, that “the fifty-seven adult eating or drinking establishments existing at the time the City adopted the 2001 Amendments have now been culled to as few as twenty such establishments.  And for their part, the bookstore plaintiffs claim that of the roughly forty adult bookstores with booths that existed at the time of the 2001 Amendments, only twenty to twenty-five bookstores currently exist.”  They also pointed out that of these bookstores, virtually none are located in “permissible areas” under the 2001 Amendments.  The bookstore plaintiffs also pointed out that if the City were to actively enforce the 2001 rules, there would be very few places in the City, much less Manhattan, where such businesses could operate, essentially reduced to “undeveloped areas unsuitable for retail commercial enterprises, such as areas designated for amusement parks or heavy industry or areas containing toxic waste.”  They also noted yet again that the study of “secondary effects” conducted by the City prior to enactment of the 1995 measure has never been updated, never been validated in light of the 40% rule, and had addressed a Cityscape radically different from what exists today.

In deciding whether to grant a preliminary injunction – and noting that the City is not actively enforcing the current regulations – the court addressed several crucial factors: whether enforcement would inflict an irreparable injury on the plaintiffs, the likelihood the plaintiffs would succeed on their constitutional arguments, the balance of hardship on the plaintiffs and the City, and the Public Interest.

First, Judge Pauley concluded, “assuming that the 2001 Amendments – which purportedly impose a direct limitation on speech – violate the Constitution, Plaintiffs have demonstrated irreparable harm.”  This conclusion was based on many court opinions finding that monetary damages are insufficient to compensate somebody for a loss of their constitutional rights.

Turning to likelihood of success on the merits, the judge found that the weak link in the defendants’ opposition was the reduction of the number of locations where adult establishments could operate if the 2001 Regulations were enforced.  Precedents require that any regulation of adult uses must, because of its impact on freedom of speech, leave “reasonable alternative channels” for the speech to take place and be heard.  In other words, the zoning rules must allow enough appropriate locations so that adult businesses can operate and members of the public can access their goods and services.  “On this preliminary record,” wrote Pauley, “this Court is skeptical that the 2001 Amendments leave open sufficient alternative avenues of communication.  With respect to the outer boroughs, the DCP [Department of Consumer Protection] generated a map for each borough identifying the areas allowing and prohibiting adult establishments as of October 31, 2019. . . .  Compared to the maps the DCP created in connection with the 1995 Regulations, the 2019 maps appear to offer slightly less available space for adult entertainment.  But the City’s maps do not seem to indicate how the amount of available land would be affected by the requirement that adult establishments be located at least 500 feet from sensitive receptors or other adult establishments.”  After a critical analysis of the evidence presented, Pauley concluded that “plaintiffs have sufficiently demonstrated at this stage that the enforcement of the 2001 Amendments will deny them adequate alternative channels to offer their adult expression.”

Finally, the court determined “that the balance of hardships weighs in favor of Plaintiffs, and the issuance of preliminary injunctive relief would not disserve the public interest.”  The plaintiffs submitted affidavits showing that enforcement would cause them to lose their businesses, breaching contracts and leases, having to lay off employees, and suffering the financial and time costs of relocation.  Furthermore, since the City has not been actively enforcing these rules for eighteen years, according to the court, a preliminary injunction would not result in any harm to the City.  “While this Court credits Defendants’ contention that the 2001 Amendments are designed to abate the pernicious secondary effects of adult establishments,” wrote Pauley, “it also recognizes that the City ‘does not have an interest in the enforcement of an unconstitutional law.’”

Pauley’s concluding remarks leave little doubt about his skepticism about the further need for the adult zoning rules as last amended in 2001.  “The adult-use regulations that are the subject of these now-revived constitutional challenges are a throwback to a bygone era,” he wrote.  “The City’s landscape has transformed dramatically since Defendants last studied the secondary effects of adult establishments twenty-five years ago.  As Proust might say, the ‘reality that [the City] had known no longer existed,’ and ‘houses, roads, avenues are as fugitive, alas, as the years,’” quoting from Remembrance of Things Past (1913).  But, the judge was careful to caution that this was not a final ruling on the merits, and that issuing the preliminary injunction “says nothing about whether Plaintiffs will in fact succeed on the merits of their claims.” He set a status conference for October 31, and directed the parties to file a “joint status report” by October 24 “detailing their respective positions on how to proceed with the balance of this action.”  He also directed that they confer on a discover plan as the case moves forward.  Of course, in light of the passage of time and the changes in the City, what would make sense would be for the City to negotiate a settlement that would involve substantial revisions to the adult-use zoning provisions to reflect the changed situation.

The number of law firms with a piece of this case is altogether too long to list here.

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

Posted on: June 9th, 2017 by Art Leonard No Comments

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.