Joelner, Eric v. Village Washington ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 06-2901 & 06-3252
ERIC JOELNER, FISH, INC. D/B/A
XXXTREME ENTERTAINMENT, FREE SPEECH,
INC., AND FIRST AMENDMENT, INC.,
Plaintiffs-Appellees,
v.
THE VILLAGE OF WASHINGTON PARK, ILLINOIS,
Defendant-Appellant.
____________
Appeals from the United States District Court
for the Southern District of Illinois.
No. 03 C 325—G. Patrick Murphy, Judge.
____________
ARGUED OCTOBER 3, 2007—DECIDED NOVEMBER 19, 2007
____________
Before COFFEY, RIPPLE, and KANNE, Circuit Judges.
KANNE, Circuit Judge. In this successive appeal, the
Village of Washington Park (“the Village”) challenges the
district court’s ruling that an ordinance prospectively
banning alcohol in strip clubs opened in the future, but
permanently exempting existing clubs from the ban, was
unconstitutional. We previously determined that the
Village’s earlier restriction on the number of such clubs
was “most likely” unconstitutional because it appeared to
be “predominantly motivated by concerns about revenue
2 Nos. 06-2901 & 06-3252
and/or political patronage.” Because the district court did
not clearly err in finding that the Village passed the new
ordinance for this same impermissible purpose, we affirm.
The Village’s economy is dependent on adult entertain-
ment. As our previous opinion, Joelner v. Village of
Washington Park, 378 F.3d 613, 616 (7th Cir. 2004)
(“Joelner I”), sets forth in more detail, the Village derives
almost 100% of its income from the adult entertainment
industry, a situation that the tiny Village has admitted
it is doing little to remedy. See John McCormick, Cash-
strapped Town Relies on Strip Clubs to Pay Bills, Chi.
Trib., Apr. 29, 2003, at A1. As of June 2006, the Village
licensed eight adult cabarets in its surrounding 2.5 mile
span, including two cabarets under new construction.
The present dispute originated in early 2003 when
Joelner first applied for licenses to operate adult cabarets.
At that time a Village ordinance limited cabaret licenses
to four, all of which were already issued. In 2003 the
Village passed Ordinance 01-27, which increased the
number of available licenses to six. The amended ordi-
nance stated that the Village maintained a limit “in order
to promote the public interest in the preservation of public
health, safety and welfare . . . ,” but contained no other
statement of purpose. The Village then immediately
granted the two newly available licenses. It granted one
to the son of the Village’s former police chief even though
he, unlike Joelner, did not have an application pending
on the Village Board’s agenda, and gave the second to an
individual who applied for a license after Joelner. The
Board then denied Joelner’s application.
Joelner sought a preliminary injunction to force the
Village to grant him adult cabaret licenses, which the
district court denied. We, after balancing the equities,
affirmed the denial. See Joelner I, 378 F.3d at 627. But
we did conclude that the numerical restriction on licenses
Nos. 06-2901 & 06-3252 3
in Ordinance 01-27 was most likely unconstitutional on
its face because it “seemed to be predominantly motivated
by concerns about revenue and/or political patronage . . . .”
Id. at 624. In reaching this conclusion, we observed
that the record did not indicate that the Village relied on
any studies or findings regarding the secondary effects
associated with the adult entertainment industry when
it enacted 01-27. Id. We opined that if the Village could
not produce such evidence on remand, strict scrutiny
would apply and the ordinance would “most likely” be
struck down. Id. at 624-25.
Shortly after that opinion issued, the Village repealed
Ordinance 01-27 and replaced it in April 2005 with
Ordinance 01-63, the ordinance at issue in this appeal. It
lifts the numerical limit on licenses for adult entertain-
ment venues. The final version of the ordinance was
also amended to expand the permissible hours of opera-
tion after dark, mandating only that such establishments
close in the morning between 6:00 a.m. and 11:00 a.m.
It was further amended to allow partial nudity and on-
site masturbation but forbids both patrons and employees
from appearing in “a state of complete nudity.” Most
notably for purposes of this appeal, the ordinance bans
the sale or consumption of alcohol on site except in
“entities licensed as adult cabarets under prior Village
ordinances.”
Additionally, in contrast to 01-27’s terse statement of
purpose, 01-63 contains both a separate preamble and
findings. They assert that the ordinance aims “to estab-
lish reasonable and uniform regulations to prevent the
deleterious secondary effects of sexually oriented busi-
nesses within the Village.” The ordinance does not cite
directly to any studies of these secondary effects; instead
it explains that the Village Board relied upon “findings
and narrowing constructions” in 19 listed federal court
opinions. Some of these opinions refer to the harmful
4 Nos. 06-2901 & 06-3252
effects of combining alcohol with adult entertainment. But
none claims that allowing alcohol sales to continue
at the already-operating venues and banning it only
from future clubs ameliorates the harm from combining
alcohol with nude dancing.
At a bench trial Joelner claimed that the purpose of
the prospective alcohol ban in Ordinance 01-63 is to favor
the Village’s political patrons—owners of currently li-
censed cabarets. Joelner emphasized that he could not
compete if his cabarets could not, like the others, serve
alcohol. He further testified that despite the enactment
of 01-63, all the adult cabarets in the Village continue to
feature complete nudity, and at least one operates
24 hours. He also submitted into evidence adult enter-
tainment and liquor licenses for two cabarets not yet in
existence at the time of trial that covered back prior to
Ordinance 01-63’s enactment. And finally, Joelner re-
counted that when Ordinance 01-63 was enacted he
promptly applied for a cabaret license, but the mayor
denied him the license ostensibly because he had not
appeared before the Board. As Joelner explained, Ordi-
nance 01-63 contains no such requirement and instead
provides that the Village clerk shall immediately issue
a temporary license upon receipt of a completed applica-
tion.
The Village mayor then briefly testified for the Village.
He asserted that the Village exempted current license
holders from the alcohol ban because the Board was
concerned about infringing upon their property rights. The
mayor did not otherwise address Joelner’s testimony.
After considering the ordinance and the testimony,
the district court struck down the alcohol ban in Ordi-
nance 01-63 as unconstitutional on its face. It also
ruled that the denial of cabaret licenses to Joelner under
01-63 was unconstitutional. The district court explained
Nos. 06-2901 & 06-3252 5
that the Village produced “no evidence” at trial that it
enacted Ordinance 01-63 to combat the deleterious effects
of combining alcohol and adult entertainment. The court
reasoned, no matter what level of scrutiny it applied, the
alcohol ban would be unconstitutional because it is de-
signed only to prevent Joelner from reaching “his competi-
tor’s profits.” The court ordered the Village to grant
Joelner cabaret licenses and allow him to conduct busi-
ness as do the other cabarets in the Village. Finally, the
court awarded $66,077 in attorneys’ fees to Joelner under
42 U.S.C. § 1988 because he was the “prevailing party.”
On appeal the Village challenges the district court’s
factual finding that the alcohol ban was adopted to stifle
competition with current license holders. The Village
insists that the ban was meant to curb the “secondary
effects” of adult entertainment. This factual finding, which
we accepts unless clearly erroneous, Entertainment
Software Assoc. v. Blagojevich, 469 F.3d 641, 644 (7th Cir.
2006), was critical. It determined the applicable legal
standard, which we review de novo. See id.; Andy’s Restau-
rant & Lounge, Inc. v. City of Gary, 486 F.3d 550, 554 (7th
Cir. 2006).
The applicable legal standard comes from the “44
Liquormart roadmap.”1 Under that roadmap, a reviewing
court proceeds in two stages. First it must ask if an
ordinance that bans alcohol at adult entertainment
establishments (1) is passed pursuant to a legitimate
governmental power, (2) does not completely prohibit
1
The “roadmap” is derived from 44 Liquormart, Inc. v. Rhode
Island, 517 U.S. 484 (1996). It is a confluence of the tests
formulated by the Supreme Court for analyzing adult enter-
tainment zoning ordinances and public indecency statutes. See
Ben’s Bar, Inc. v. Village of Somerset, 316 F.3d 702, 713-22
(7th Cir. 2003) (discussing cases).
6 Nos. 06-2901 & 06-3252
adult entertainment, and (3) is aimed at combating the
negative secondary effects caused by adult entertainment
establishments. See Ben’s Bar, 311 F.3d at 722. If so,
then the regulation is constitutional if it survives inter-
mediate scrutiny, meaning it serves a substantial govern-
mental interest, it is narrowly tailored, and reasonable
alternative avenues of communication remain available.
See generally id., 316 F.3d at 722. If, on the other hand, a
regulation is not aimed at secondary effects (it fails step
three), strict scrutiny applies. See Joelner I, 378 F.3d at
622-23; Illusions-Dallas Private Club, Inc. v. Steen, 482
F.3d 299, 308 (5th Cir. 2007). This means that the regula-
tion must “be necessary to achieve a compelling state
interest and be narrowly drawn to achieve that end.”
Joelner I, 378 F.3d at 622-23. Because the level of scrutiny
is at stake, we first address whether the district court’s
factual finding of anti-competitive purpose was clear error.
The Village, which bears the burden at step three of the
roadmap, had to demonstrate that its “predominant
concerns” motivating the ban were with secondary effects.
Andy’s Restaurant, 486 F.3d at 554. Courts may consider,
among other materials, the text of the ordinance, its
preamble or express legislative findings associated with it,
and studies and information of which legislators were
clearly aware. See R.V.S. v. City of Rockford, 361 F.3d 402,
409 n.5 (7th Cir. 2004); Ben’s Bar, 316 F.3d at 723 n.28.
Although a municipality’s burden is lax—it need not
always produce independent evidence—its position still
“must appear reasonable.” Joelner I, 378 F.3d at 624 n.7;
Ranch House, Inc. v. Amerson, 238 F.3d 1273, 1283-84
(11th Cir. 2001).
The district court did not err in finding that the Village
enacted Ordinance 01-63, exempting existing operators
from the alcohol ban, to protect those operators from
competition with Joelner. Joelner testified without contra-
Nos. 06-2901 & 06-3252 7
diction that he has been the sole applicant for a license
under the new ordinance. Without dispute he explained
that it is impossible to sustain an adult cabaret in the
Village’s present environment (consisting of other, alcohol-
dispensing venues) without also serving alcohol. It was
perfectly reasonable for the district court to infer that
potential customers for Joelner—and the secondary
effects associated with them—would just migrate to the
establishments exempted from the alcohol ban rather
than go away. As the Supreme Court has emphasized,
“[e]xemptions from an otherwise legitimate regulation of
a medium of speech may . . . diminish the credibility of the
government’s rationale for restricting speech in the first
place.” City of Ladue v. Gilleo, 512 U.S. 43, 52 (1994).
The Village argues that a city should be permitted to
experiment with gradual solutions to its problems. While
this is true, see Young v. American Mini Theaters, 427 U.S.
50, 71 (1976), we, like the district court, see no evidence
that this was the Village’s reason for banning alcohol only
prospectively. The mayor admitted that virtually all the
Village’s income is still derived from adult cabarets. From
this the district court reasonably derived that the Village
has little incentive to cure its “ills.” In fact, the Village
backdated licenses to ensure that clubs not yet in opera-
tion when 01-63 was enacted could serve alcohol. And
several additional aspects of Ordinance 01-63 belie the
Village’s purported desire to combat secondary effects
from adult entertainment. For instance, the mayor specifi-
cally amended the ordinance to expand the permissible
hours of operation for adult cabarets, by allowing them to
stay open all night, and thereby seemingly increased the
likelihood of crime, prostitution, and several of the other
secondary effects identified in the ordinance. Furthermore,
the Village has neglected to enforce most of the other
restrictions in the ordinance, such as the prohibition on
complete nudity, against current license holders. The
8 Nos. 06-2901 & 06-3252
backdated licenses, the expanded hours of operation, and
the unenforced prohibition on complete nudity permitted
the district court to conclude without clear error that the
Village was not experimenting with a gradual solution to
the secondary effects of erotic speech.
To support its claim that it enacted the prospective
alcohol ban to curb secondary effects, the Village relies, as
it did at trial, solely on Ordinance 01-63’s preamble and
findings. The Village likens this case to Ben’s Bar, Inc., v.
Village of Somerset, 316 F.3d 702, 704 (7th Cir. 2003),
which involved an ordinance that banned alcohol in all
adult entertainment establishments featuring nude
dancing. The preamble there cited several findings made
by other municipalities about the negative effects of the
combination. See id. at 705. We ruled that the preamble
sufficiently demonstrated that the ordinance was passed
to combat secondary effects. See id. at 723-25.
The Village concedes that its ordinance contains no
citations to similar findings, but argues that the citation
to Ben’s Bar itself among the 19 cases cited in the ordi-
nance is akin to citing directly to the studies themselves.
But this case differs markedly from Ben’s Bar. First, in
that case the opponent of the ordinance introduced no
evidence of a counter motive, such as anti-competition. See
Ben’s Bar, 316 F.3d at 726. Second, none of the studies
in Ben’s Bar suggested that banning alcohol at only one
of many nude dancing clubs diminishes their secondary
effects. See id. at 705.
Because the purpose of the ban on alcohol consumption
in newly licensed establishments was to prevent competi-
tion, strict scrutiny applies. And based on its anti-competi-
tive purpose, the ban is not “necessary to serve a compel-
ling state interest and narrowly drawn to that end.” See
Joelner I, 378 F.3d at 624. We therefore conclude that the
alcohol ban and the licensing scheme as a whole (from
Nos. 06-2901 & 06-3252 9
which the alcohol ban is not severable) are unconstitu-
tional on their face.
We add that even if the Village were indeed attempting
to combat secondary effects with its alcohol ban, and
intermediate scrutiny thus applied, the Ordinance could
not survive. The Village again relies on Ben’s Bar and
argues that because we there determined that a ban on
alcohol in both newly and currently licensed adult enter-
tainment establishments passed muster under intermedi-
ate scrutiny, see Ben’s Bar, 316 F.3d at 726-28, Ordinance
01-63’s ban on alcohol in only newly licensed establish-
ments can not possibly be considered less narrowly
tailored.
But the Village’s reasoning is flawed. The Supreme
Court has repeatedly recognized that an underinclusive
regulatory scheme is not narrowly tailored. See Rubin v.
Coors Brewing Co., 514 U.S. 476, 489 (1995) (concluding
that “exemptions and inconsistencies bring into question
the purpose of the labeling ban . . . [and] ensure[ ] that the
labeling ban will fail to achieve that end”); City of
Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 425
(1993) (determining that an ordinance was unconstitu-
tional when, among other reasons, “the city has asserted
an interest in esthetics, but respondent publishers’ news-
racks are no greater an eyesore than the newsracks
permitted to remain on [the city’s] sidewalks”). Here, there
is similar underinclusiveness that would be fatal to the
intermediate scrutiny-narrow tailoring analysis: the ordi-
nance permanently insulates eight concentrated estab-
lishments from the alcohol ban and leaves alcohol use
at those establishments otherwise entirely unrestricted.
In fact, in Ben’s Bar we observed that “as a practical
matter, a complete ban of alcohol on the premises of adult
entertainment establishments is the only way the Village
can advance that interest.” Ben’s Bar, 316 F.3d at 728(emphasis in original).
10 Nos. 06-2901 & 06-3252
Finally, there remains the district court’s rulings that
it was unconstitutional to deny Joelner cabaret licenses
and to award attorneys’ fees to Joelner. The Village does
not challenge the district court’s ruling as to the denial of
the licenses—which indeed appears arbitrary—so any
such challenge is waived. See Ajayi v. Aramark Bus.
Servs., Inc., 336 F.3d 520, 529 (7th Cir. 2003). And al-
though the Village does request that we reverse the
award of attorneys’ fees, it bases this request solely on its
contention that Joelner should not have been the “prevail-
ing party,” see 42 U.S.C. § 1988; Gautreaux v. Chicago
Housing Authority, 491 F.3d 649, 655 (7th Cir. 2007). Thus
any challenge to the reasonableness of the fees is also
waived.
For the foregoing reasons, we AFFIRM the judgment of
the district court striking down Ordinance 01-63 as
unconstitutional on its face and ordering the Village to
award Joelner adult cabaret licenses. We also AFFIRM
the district court’s award of attorneys’ fees.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—11-19-07