N.J. high court says club’s interior displays can be regulated as outdoor signs

Tuesday, August 3, 1999

Adult-entertainment club owner James Schad violated a Pennsauken, N.J., sign ordinance by erecting 20 displays of scantily clad women inside the windows of his clubs, the Supreme Court of New Jersey has ruled.

The ordinance requires business owners to pay permit fees for signs. Schad, owner of the Show Girl Palace and Club Can Can, never applied for any sign permits for his displays. After he was cited for violations, he contended the ordinance did not apply to his interior displays, which were visible from outside.

Schad also contended that the ordinance violated his First Amendment free-speech rights, constituted a prior restraint on speech and was impermissibly vague.

After lower courts fined Schad nearly $100,000 for violations of the ordinance, he appealed to a New Jersey appeals court.

In February 1998, the New Jersey appeals court reversed the convictions, finding that the sign ordinance did not cover the interior displays. “Simply stated, the subject of interior window displays is not covered by the existing sign ordinance,” the appeals court ruled.

However, last week the Supreme Court of New Jersey sided with town officials in State v. Schad. “Defendant's transparencies plainly are devices used for visual communication, display, identification and publicity,” the high court wrote in its July 28 decision.

To interpret the sign ordinance as not covering Schad's displays “would undermine the ordinance's objectives concerning the visual effect and environmental impact on the community,” the court wrote.

Schad and his attorneys argued that the ordinance should not apply to his displays because a part of the sign law provided that “temporary window signs shall not be considered in computing the allowable sign area provided” if they don't cover more than 10% of any single window and “are not permanently affixed to the window.”

The New Jersey high court responded that “the fact that the ordinance exempts one category of interior signage from the regulation suggests that the ordinance generally covers interior signage.”

The court then addressed Schad's constitutional arguments against the ordinance. Applying the U.S. Supreme Court's four-part test on determining whether commercial- speech restrictions pass First Amendment scrutiny, the court asked:

  • Whether the speech concerns lawful activity and is not misleading.
  • Whether the asserted governmental interest in the regulation is substantial.
  • Whether the regulation directly and materially advances the governmental interest.
  • Whether the regulation is no more extensive than necessary to further the substantial governmental interest.

The New Jersey Supreme Court focused on the second and third parts of the test because the first was not disputed and the fourth was never raised. According to the court, the township's sign ordinance served two substantial interests: traffic safety and visual appearance.

Relying on its recent opinion in another adult-entertainment sign case, Hamilton Amusement Center v. Verniero, the high court determined that “there is sufficient evidence that the regulation directly advances the interests of safety and appearance.” The court also noted that the township's sign permit law furthered its interest in “reducing the asserted negative effects of sexually oriented businesses.”

The court also rejected Schad's claims that the ordinance was an unconstitutional prior restraint on speech and was unconstitutionally vague.

First Amendment law says that a regulation is an unconstitutional prior restraint if it grants unbridled discretion to town officials or does not set time limits for permit grants or denials. However, the Pennsauken ordinance “establishes specific and objective standards for granting a permit,” the court wrote.

“As with any ordinance, officials have some inevitable margin of discretion,” the court said. “That discretion, however, is limited by the specific standards and subject to administrative and judicial review.”

The court also found that the township's sign-permit law had sufficient time limitations.

Schad had also argued that the ordinance was vague because it is not apparent on its face whether it applies to interior store displays. The court responded: “Defendant's transparencies were designed solely to advertise to the general public and attract the attention of passersby. It was reasonable for defendant to expect that his transparencies would be subjected to the signage restrictions.”

The attorney who handled the case for the township was out of the office and unavailable for comment. Calls placed to Schad's attorney were not returned.