TK's Video, Inc. v. Denton County, Tex. ( 1994 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 93-4631
TK'S VIDEO, INC.,
Plaintiff-Appellant,
versus
DENTON COUNTY, TEXAS,
Defendant-Appellee.
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93-5234
TK'S VIDEO, INC.,
Plaintiff-Appellee,
versus
DENTON COUNTY, TEXAS,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Texas
(June 20, 1994)
Before GOLDBERG, HIGGINBOTHAM, and EMILIO M. GARZA, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
TK's Video, Inc., an adult book and video store, sued Denton
County, Texas, contending its licensing requirements for "adult"
businesses violate the First and Fourteenth Amendments.1 The
district court held several licensing requirements
1
This Order of Denton County is attached as Appendix A.
unconstitutional, severed them, upheld the others, and awarded
attorney's fees. Both TK's and Denton County appealed. We reject
contentions that the County's licensing scheme was impermissibly
broad and failed to provide adequate procedural protection,
including judicial review. We affirm except in one particular. We
find that the County regulation fails to assure maintenance of the
status quo while processing an application for a license by a
business existing when the County adopted its regulation.
I.
Erotic nonobscene printed matter, films, and live
entertainment are sheltered by the First Amendment, Mitchell v.
Commission on Adult Entertainment Establishments, 10 F.3d 123, 130
(3rd Cir. 1993), but enjoy less protection than some other forms of
speech such as political speech. Young v. American Mini Theatres,
Inc., 427 U.S. 50, 70 (1976). There is no contention that TK's
sells obscene pornographic material. Rather, TK's is regulated as
an adult book and video store.
We distinguish between regulating the content and regulating
the consequence of protected activity. City of Renton v. Playtime
Theatres, Inc., 475 U.S. 41, 46-48 (1986). A content-neutral time,
place, or manner restriction must (1) be justified without
reference to the content of the regulated speech; (2) be narrowly
tailored to serve a significant or substantial governmental
interest; and (3) preserve ample alternative means of
communication. Id.
2
Under the first City of Renton factor, the Denton County order
must justify its restrictions by reference to effects attending the
regulated speech. The order, by its own terms, combats pernicious
side effects of adult businesses such as prostitution, disease,
street crime, and urban blight. It does not censor, prevent
entrepreneurs from marketing, or impede customers from obtaining
communicative material. The County's regulation does not on its
face regulate content. Rather, the regulation is aimed at the
impact on the surrounding community. But there are also procedural
limits to regulating even at this lesser level of protection.
In FW/PBS, Inc. v. City of Dallas, 493 U.S. 215 (1990),
Justice O'Connor, writing for Justices Stevens and Kennedy, and
joined in the judgment by Justices Brennan, Marshall, and Blackmun,
stated that content-neutral regulations contain adequate procedural
safeguards when (1) any prior restraint before judicial review of
the licensing process is for a specified brief period during which
the status quo is maintained; and (2) there is prompt judicial
review after denial of a license.
II.
TK's first charges that the Denton County order, which
provides that a county official shall issue an operating license
within 60 days after receiving the application unless he discovers
one of several disqualifying facts, fails to provide adequate
procedural safeguards.2 TK's argues that the county must have a
2
The Order provides that "[a]ll decisions of the county
director of public works become final within thirty (30) days."
No one contends that this provision prevents an immediate appeal
3
deadline shorter than 60 days and that it must not interfere with
normal business operation during the application process.
Under FW/PBS, the County must ensure that any restraint before
judicial review is limited to a specified brief period. In Teitel
Film Corp. v. Cusack, 390 U.S. 139, 141 (1967) (per curiam), the
Supreme Court found that 50 to 57 days is not a specified brief
period. It is true that Denton County's order placed a 60-day
limit on licensing procedures after receipt of an application. But
the regulation in Teitel was content-based. The ordinance in
Teitel also required administrators to review films before they
could be shown, a relatively easy task compared to licensing adult
businesses and the people who run them. Licensing entails
reviewing applications, performing background checks, making
identification cards, and policing design, layout, and zoning
arrangements. We are persuaded that Denton County's order creates
less of a danger to free speech and requires a more time-consuming
inquiry than screening movies. We conclude that here 60 days for
acting on license applications imposes no undue burden.
TK's also urges that the regulation is invalid for a related
reason. It urges that Denton County fails to assure maintenance of
the status quo. The contention is that the County cannot
constitutionally shut down an existing business while its
application for a license is pending and that TK's was operating
when Denton County adopted its regulation. The County points out
of a denial of license to the district court of Denton County.
We read this language as setting a time within which an appeal
must be lodged.
4
that it has not attempted to close TK's; that because its
regulation is content- neutral, it is not obligated to refrain from
regulation during the licensing period. The district court
rejected TK's contention concluding that interim regulation is
implicit in a valid period for issuing a license. This is true as
far as it goes, but it is qualified by the further limit that the
County must maintain the status quo. We agree that an applicant
for a license not in business when the Order was adopted is not
free to operate while its license is pending.
Maintaining the status quo means in our view that the County
cannot regulate an existing business during the licensing process.
It is no answer that the County has not elected to do so. The
absence of constraint internal to the regulation is no more than
open ended licensing. Businesses engaged in activity protected by
the First Amendment are entitled to more than the grace of the
State.
The regulating order does not address the problem. The
order maintains the status quo pending judicial review for
licensees facing suspension or revocation. An applicant denied a
license has a right to de novo review by the state district court
and, by the terms of the Order, filing an appeal stays a Decision
of the Director of Public Works in suspending or revoking a license
until final decision by the state district court. Because TK's was
in business when the Order was adopted, its free speech activity
cannot be suppressed pending review of its license application by
the County.
5
TK's also contends that the Order is deficient in failing to
provide an automatic stay pending appeal of an administrative
decision denying an application for a license. This argument is in
essence a twin of the contention that the status quo must be
maintained. We have concluded that the County cannot alter the
status quo during the licensing process. There is then nothing to
stay except a denial of a license. Stated another way, the issue
is whether a business must be allowed to commence operation without
a license during judicial review. Here we agree with the district
court that a valid time period within which the County can act
carries the implicit rejection of such required interim licensing.
Nor is this unduly restrictive, given the availability of
expeditious judicial review. A rejected license applicant has
thirty days to seek judicial relief before the order of the
Director of Public Works becomes final. National Socialist Party
v. Village of Skokie, 432 U.S. 43, 44 (1977).
This does not answer the further question of how much of the
total licensing process must be complete within the specified brief
period, specifically whether the brief period includes completion
of judicial review. Despite contrary suggestions in Justice
Brennan's opinion in FW/PBS, Inc. and some uncertainty in the
language of Justice O'Connor's opinion in the same case, we read
the Supreme Court to insist that the state must offer a fair
opportunity to complete the administrative process and access the
courts within a brief period. A "brief period" within which all
judicial avenues are exhausted would be an oxymoron.
6
TK's objects that the order does not provide automatic and
prompt judicial review, or an automatic stay of an order denying a
license. As we explained, the Order provides that filing a notice
of appeal to the state district court of Denton County stays an
administrative decision revoking or suspending a license. So the
focus of TK's contention is on the absence of a stay of an order
denying a license. FW/PBS requires only a prompt judicial hearing,
a standard that the order meets by giving an unsuccessful license
applicant 30 days to appeal to a district court in Denton County
"on a trial de novo basis." The availability of expeditious
judicial review obviates the need for an automatic stay. National
Socialist Party v. Village of Skokie, 432 U.S. 43, 44 (1977).
III.
A.
TK's urges that the County's list of persons associated with
its business who must be licensed is impermissibly broad. Denton
County required a license from numerous persons associated with
adult businesses. The district court, however, struck down
licensing requirements for stockholders, limited partners, equity
holders and their employees, and property owners and equity holders
associated with adult businesses from the regulation. This
exclusion is not at issue and the regulation now extends only to
owners, clerks, and employees of adult businesses, corporations or
directors of adult businesses and their employees, and partners in
adult businesses and their employees.
7
Under the licensing provision the County Director of Public
Works must approve a license unless he finds an enumerated
disqualifying factor such as a prior adult business regulatory
violation or a conviction for a certain sexual offense.
Licensing clerks and employees ensures that only persons who
satisfy basic legal and hygienic standards work in adult
businesses. The County also requires that all adult business
employees wear an identification card at work. The County says
that this requirement permits it to monitor the work force of adult
businesses and to ensure that only duly authorized adults work in
these enterprises.
While corporations reasonably may be obliged to submit
detailed business information to obtain a license, the requirement
that owners and employees disclose personal information to County
officials is more burdensome. The Denton County order requires
owners and employees to disclose only their age, recent infractions
of certain adult business regulations, and recent convictions for
certain sexual offenses. The County says that their information
assists in making background checks and preparing identification
cards.
Compelled content-neutral disclosure of owner and employee
information can chill protected expression. See Talley v.
California, 362 U.S. 60, 64 (1960); NAACP v. Alabama ex rel.
Patterson, 357 U.S. 449, 461-62 (1958). This chill could occur
even if suppressing particular expression is unintended. NAACP,
357 U.S. at 461. We insist that countervailing state interests
8
must further a substantial government interest. Buckley v. Valeo,
424 U.S. 1, 64 (1975) (per curiam). This protective skirt requires
a "relevant correlation" or "substantial relation" between the
information required and the government interest. Id.
We are persuaded that requiring owners and employees to supply
information about their age and certain prior regulatory
infractions and sexual offenses substantially relates to the
substantial government interest of curtailing pernicious side
effects of adult businesses. The Denton County order does not
demand comprehensive disclosure of personal information, but only
information reflecting ability to function responsibly in the adult
business setting.
The Seventh and Ninth Circuits have invalidated disclosure
requirements. In Genusa v. City of Peoria, 619 F.2d 1203 (7th Cir.
1980), the court invalidated the required disclosure of past
aliases, criminal convictions, and ordinance violations as
unrelated to the city's stated goal of preventing adult businesses
from congregating in one location. Id. at 1215-19.
In Acorn Investments, Inc. v. City of Seattle, 887 F.2d 219,
224-26 (9th Cir. 1989), the court invalidated a shareholder
disclosure rule. The city wanted to use the information to notify
shareholders of ordinance requirements and to hold them legally
responsible for violations, although officers and directors, not
shareholders, have legal responsibility for businesses. The court
found no logical connection between the shareholder disclosure rule
and the stated purpose for the information. Id. at 226.
9
Genusa and Acorn are not apposite. The Denton County order
outlines the ambitious agenda of curtailing negative side effects
not simply of clusters of adult businesses, but of each adult
business. Disclosure of owner and employee personal history might
not be tailored to locating adult businesses, but it does monitor
persons with a history of regulatory violations or sexual
misconduct who would manage or work in them. These histories are
plainly correlated with the side effects that can attend these
businesses, the regulation of which was the legislative objective.
In more legalistic and abstract terms, ends and means are
substantially related. Insisting on this fit of ends and means
both assures a level of scrutiny appropriate to the protected
character of the activities and sluices regulation away from
content, training it on business offal.
B.
An applicant requesting a license must post a sign on the
business premises disclosing his request. An applicant must also
disclose his request by advertising in local newspapers. The
district court upheld these disclosure requirements, while striking
down a requirement requiring applicants to notify property owners
within a specified radius of the proposed enterprise.
The two notice provisions that survived challenge in the
district court ensure that potential neighbors know about the
impending arrival of adult businesses. Notice to others of pending
zoning regulation is supported by a substantial state interest,
serving the practical role of allowing effected persons an
10
opportunity to examine the request and test its accuracy. These
notice requirements are not onerous. Nor are they disguised
censorship. Rather, they are typical of notices routinely required
in zoning regulations. We are persuaded that the notice
requirements are sufficiently tailored to the regulatory objective.
C.
Government cannot tax First Amendment rights, but it can exact
narrowly tailored fees to defray administrative cost of regulation.
Cox v. New Hampshire, 312 U.S. 569, 576-77 (1941). Denton County
requires each business and individual requesting a license to pay
annual fees of $500 and $50, respectively. The district court
found these amounts tied to the cost of investigating applicants
and processing licenses. We agree.
D.
We have upheld design and layout regulations for adult film
and video theaters. See FW/PBS, Inc. v. City of Dallas, 837 F.2d
1298, 1304 (5th Cir. 1988), aff'd in part, rev'd in part, vacated
in part, 493 U.S. 215 (1990). The Denton County order contains
specifications identical to those previously upheld. Completely
private and poorly lit viewing booths encourage illegal and
unsanitary sexual activity in adult theatres. See FW/PBS 837 F.2d
at 1304. The design and layout regulations narrowly respond to a
substantial governmental interest.
E.
The remaining requirements in the Denton County order for
issuing, suspending, or revoking licenses resemble those in the
11
FW/PBS ordinance, which survived constitutional challenge. See id.
at 1305-06. These procedures, like those in FW/PBS, can be
objectively measured and rest on adequate factual bases either
obvious by their terms or ascertainable by reference to other
sources of law. See id. at 1306.
IV.
Denton County argues that the district court abused its
discretion by finding that TK's was entitled to attorney's fees.
See United States v. Mississippi, 921 F.2d 604, 609 (5th Cir.
1991). To receive attorney's fees, a plaintiff must be a
prevailing party, that is, the plaintiff must succeed on a
significant issue that achieves some of the benefit the plaintiff
sought in bringing suit. Farrar v. Hobby, 113 S. Ct. 566, 572
(1992). A prevailing party must effect change in the legal
relationship between plaintiff and defendant. Id. at 572-73.
TK's has succeeded on significant issues and has altered its
legal relationship to the County. The district court invalidated
licensure requirements for stockholders, limited partners, equity
holders, and property owners associated with adult businesses. As
well, the court invalidated the notice requirement in regard to
property owners in close proximity to proposed adult businesses.
We have, in turn, insisted on a status quo provision. These
holdings materially alter the relationship of TK's to the county.
Denton County urges that TK's has not applied for a license,
so the invalidation of any part of the order has not altered any
legal relationship. This ignores the reality that TK's must apply
12
for a license to continue operation. After the trial court's and
this court's judgment, however, TK's must meet fewer requirements.
TK's lawsuit has altered the relevant legal regime.
In Rhodes v. Stewart, 488 U.S. 1 (1988) (per curiam), the
Court reversed an attorney's fees award after a successful lawsuit
to modify prison policies because one plaintiff had died and the
other had been released. It found that a victory "could not have
in any way benefited either plaintiff." Id. at 4. Similarly, in
Texas State Teachers Ass'n v. Garland Indep. Sch. Dist., 489 U.S.
782 (1989), the Court invalidated as vague a school regulation
requiring that meetings during nonschool hours be conducted only
with prior approval of the principal. The court suggested that
this finding alone would not support prevailing party status
without "evidence that the plaintiffs were ever refused permission
to use school premises during nonschool hours." Id. at 792.
In Rhodes, the plaintiffs stood little chance of benefiting
from the changed policy. They would do so only if they returned to
prison. That chance was too speculative for the surviving
plaintiff and nonexistent for the dead one. As a result, the
lawsuit did not materially alter the legal relationship between the
parties. A similar rationale explains Texas State Teachers, in
which the plaintiffs failed to show that the principal had ever
withheld permission for a meeting. As the plaintiffs may have been
free to meet regardless of their suit, it was uncertain whether
success on the merits would alter any legal relationship.
13
In contrast to the plaintiffs in Rhodes and Texas State
Teachers, T.K.'s faces certain regulation. First, TK's must seek
a license to continue operation. The original order, partially
invalidated by the district court, would have required TK's to seek
licensure of stockholders, limited partners, equity holders, and
certain property owners, and to notify certain neighbors at its
business location. Unlike the plaintiffs in Rhodes, TK's would
have been subject to these unconstitutional requirements with
virtual certainty.
Second, the requirements that TK's seek licenses for certain
persons and notify certain neighbors were not vague or optional,
but were prerequisites for operation. These invalidated
regulations did not resemble the school rule in Texas State
Teachers because, unlike the principal's unstructured
decisionmaking process, they were neither indefinite by their terms
nor discretionary in their application. TK's must meet these
requirements to remain open.
Denton County cites LaGrange Trading Co. v. Broussard, No. 90-
2306, 1993 U.S. Dist. LEXIS 7281 (E.D. La. May 25, 1993), in which
an adult bookstore challenged a zoning ordinance to remain at its
present location. The court upheld most of the ordinance, but
invalidated a special permit requirement. From this partial
victory, the plaintiff sought attorney's fees. The court denied
the request because the remaining provisions would require the
business to move anyway. Id. at *16. Unlike the plaintiff in that
case, TK's benefits from its lawsuit.
14
The district court entertained a request by Michael Gross for
$22,487.50 in attorney's fees, but reduced the actual award to
$7,500. Denton County argues that the $7,500 is unreasonably high
given the degree of TK's success. In particular, the County notes
that TK's asserted 72 constitutional challenges to the order, but
prevailed on only 5 of them, a 7% success rate, which might suggest
that $7,500 of the $22,487.50, or 33% of the requested fees, is too
generous. TK's counsel was able and the County's counting fails to
capture the success of this suit. We do not think so, but even if
the award is generous, it is not an abuse of discretion.
We affirm the district court's carefully crafted decree in
virtually all respects. We remand to the district court with
instruction to enter judgment with the additional declaration that
until the order of the Director of Public Works becomes final, an
applicant for a license in business on the effective date of the
Order cannot otherwise be regulated by the Order.
AFFIRMED in part, VACATED and REMANDED in part.
15