Federal appeals panel strikes down city’s adult-business licensing rules

Friday, February 4, 2000

A Kentucky city's rules governing licenses for sexually oriented businesses are an unconstitutional prior restraint on free expression, a federal appeals court has ruled.

Nightclubs, Inc., which does business as Regina's House of Dolls, challenged the constitutionality of Paducah's 1998 ordinance, which imposed a host of requirements on adult-business operators and entertainers.

For example, applicants for a license to operate a sexually oriented business were required to submit a complete set of fingerprints, Social Security number, tax identification number and a description of “the nature of the activity or activities to be engaged in at the establishment.” Applicants also were required to disclose whether they had been convicted of any sexual offense within the past three years.

After an individual submitted an application to the city, the ordinance provided that the city would conduct “an investigation of the application” and approve or deny the license within 10 days after receipt of the application.

Nightclubs, Inc., contended in a federal lawsuit that the ordinance constituted a prior restraint on freedom of expression because it failed to contain certain procedural safeguards identified as necessary by the U.S. Supreme Court.

In the 1965 decision Freedman v. Maryland, the high court said that a Maryland film censorship statute needed three procedural safeguards to be constitutional. These were:

  • A decision whether to issue a license must be made in a “specified brief period,” and if someone appeals a license denial, the status quo must be preserved pending a final judicial decision.

  • The licensing scheme must assure a “prompt final judicial decision.”

  • The burden of proof must be on the city to prove that its license is constitutional.

    In the 1989 decision FW/PBS v. City of Dallas, the high court said that the first two prongs of the Freedman analysis were applicable to licensing ordinances for adult businesses.

    U.S. District Judge Thomas Russell ruled in 1998 that Paducah's ordinance contained the necessary procedural safeguards and upheld the ordinance.

    However, on appeal, a three-judge panel of the 6th U.S. Circuit Court of Appeals, by a 2-1 vote, reversed in Nightclubs, Inc. v. City of Paducah.

    The majority found in its Feb. 2 opinion that the Paducah ordinance did not contain the necessary procedural safeguards.

    Even though the ordinance says that a decision on whether to issue or deny a license must be made within 10 days, the appeals panel noted that “the ordinance also states that no license will issue unless the city executes, and the premises passes, a variety of building inspections.”

    “No specific time limits for completion of these inspections are placed” on the appropriate city officials, Judge Ann Aldrich wrote for the majority. (Aldrich is a federal district court judge from Ohio designated as one of the three panel members.)

    Aldrich also noted that “the ordinance fails to preserve the status quo, either during the administrative process for license renewals or pending judicial review of decisions to suspend, revoke, or not renew licenses.”

    The appeals panel also said that the second Freedman guarantee of “prompt judicial review” was “lacking in this case.”

    Even though the Paducah law allows individuals to appeal license denials to the courts, the ordinance “fails to guarantee judicial review of Paducah's licensing decisions within any particular period of time.”

    The city argued that the requirement of judicial review was satisfied because an aggrieved applicant could file a motion for an injunction after appealing the licensing decision in court.

    However, the appeals judges determined that “a theoretical possibility of expeditious judicial review is not constitutionally sufficient. A licensing scheme must reasonably assure a prompt judicial determination, and not mere access to judicial review,” Aldrich wrote.

    The panel noted that “as a practical matter, the requirement of prompt judicial review means that a city seeking to impose a licensing scheme must take certain steps to avoid constitutional infirmities.”

    Cities could allow the business to operate pending a final judicial decision, grant a license if a decision is not made within a reasonable amount of time or issue a provisional license.

    “While these measures may seem burdensome on first blush, they are reasonable in light of the great importance this nation attaches to the freedom of expression,” the majority wrote.

    Judge Gilbert Merritt dissented, finding that the Paducah ordinance contained the necessary procedural safeguards. Merritt noted that the language of the ordinance provided that the city will “immediately” conduct an inspection of the license application.

    Merritt also noted that the city stated that it interpreted its ordinance to mean that the city had 10 days to conduct the inspections and make a licensing decision.

    Merritt wrote that the Paducah law satisfied the prompt-judicial-determination requirement because it allowed an aggrieved license applicant to appeal in the courts. He found that FW/PBS only requires cities to provide access to the courts.

    “I do not believe the Court intended for a prompt judicial determination to be required in a situation where the city has provided for the broadest type of judicial review within its powers,” he wrote.

    Charlotte Scott, attorney for Nightclubs, Inc., said the decision was well-reasoned. “These ordinances sweep with too broad a brush,” she said. “They often give government officials the opportunity to censor the erotic expression that takes place in these clubs.”

    David Kelley, the attorney that represented the city, said that the city was considering its options, including appealing to the U.S. Supreme Court or the full 6th Circuit.

    “This is certainly the type of case that the Supreme Court would take,” Kelley said, noting that federal appeals courts have been split on the meaning of prompt judicial review under the FW/PBS decision.