Annex Books Inc v. City of Indianapolis ( 2009 )


Menu:
  •                                      In the
    United States Court of Appeals
    For the Seventh Circuit
    ____________________
    No. 05-1926
    ANNEX BOOKS, INC., et al.,
    Plaintiffs-Appellants,
    v.
    CITY OF INDIANAPOLIS, INDIANA,
    Defendant-Appellee.
    ____________________
    Appeal from the United States District Court for the
    Southern District of Indiana, Indianapolis Division.
    No. IP 03-CV-00918 SEB VSS — Sarah Evans Barker, Judge.
    ____________________
    ARGUED SEPTEMBER 8, 2005 — DECIDED SEPTEMBER 3, 2009*
    ____________________
    Before EASTERBROOK, Chief Judge, and FLAUM and
    ROVNER, Circuit Judges.
    EASTERBROOK, Chief Judge. Indianapolis revised its adult-
    business ordinances in 2003. These amendments expanded the
    definition of “adult entertainment business” to include any re-
    tail outlet that devotes 25% of more of its space or inventory to,
    or obtains at least 25% of its revenue from, adult books, maga-
    zines, films, and devices. (Adult “devices” include vibrators, dil-
    dos, and body-piercing implements.) See Indianapolis Rev.
    Code §807-103. Until 2003 the trigger had been 50%. Any
    “adult entertainment business” needs a license, must be well lit
    and sanitary, and may not be open on Sunday or between mid-
    *   This opinion is being released in typescript. A printed copy will follow.
    No. 05-1926                                                   Page 2
    night and 10 a.m. on any other day. Indianapolis Rev. Code
    §§ 807-202(a), -301(f), -302.
    Four firms defined as “adult entertainment businesses” un-
    der the revised ordinance filed this suit, contending that the
    law violates the first and fourth amendments, applied to the
    states by the fourteenth. The district court enjoined one por-
    tion of the amended ordinance and held that plaintiffs are enti-
    tled to notice of inspections. 
    333 F. Supp. 2d 773
    , 787–89 (S.D.
    Ind. 2004). Indianapolis has not appealed from that portion of
    the decision. The district court rejected plaintiffs’ argument
    that the procedures for the issuance and judicial review of li-
    censes permit the City to take too long, or afford it too much
    discretion. 
    Id. at 778–83.
    Plaintiffs contest that portion of the
    decision, but it is supported by Littleton v. Z.J. Gifts D-4, L.L.C.,
    
    541 U.S. 774
    (2004), and Thomas v. Chicago Park District, 
    534 U.S. 316
    (2002). Indianapolis gives businesses provisional licenses
    while judicial review proceeds, Rev. Code §807-207(c), so its
    ordinance is easier to defend than the one sustained in Littleton.
    See Andy’s Restaurant & Lounge, Inc. v. Gary, 
    466 F.3d 550
    , 556
    (7th Cir. 2006). We have nothing else to add to this portion of
    the district court’s thoughtful opinion.
    That leaves plaintiffs’ challenge to the definition of “adult
    entertainment business” and the imposition of any limits on
    these firms, other than whatever rules apply to bookstores and
    video-rental outlets in general. Indianapolis justifies its restric-
    tions on the ground that they reduce crime and other secondary
    effects associated with adult businesses. See Los Angeles v.
    Alameda Books, Inc., 
    535 U.S. 425
    (2002), and Renton v. Playtime
    Theatres, Inc., 
    475 U.S. 41
    (1986). Although the restrictions are
    not as extensive as those at issue in Alameda Books and Playtime
    Theatres—the City does not, for example, limit the number of
    adult establishments by prescribing a 1,000-foot buffer zone
    around each, or require them to locate in industrial zones far
    from pedestrian traffic—the City nonetheless concedes that its
    laws are subject to “intermediate” scrutiny because plaintiffs
    sell books. This means that, to prevail, the City needs evidence
    that the restrictions actually have public benefits great enough
    to justify any curtailment of speech.
    The sort of evidence that the Justices deemed sufficient in
    Alameda Books and Playtime Theatres showed that crime is higher
    in city blocks (or census tracts) in which adult establishments
    are located. That could be because real estate is cheaper in
    No. 05-1926                                                            Page 3
    high-crime areas, and that sleazy establishments tend to con-
    gregate in low-rent districts. But the fact that crime rose as
    adult establishments entered the area 
    (see 535 U.S. at 435
    (de-
    scribing the study)) implied that the causal arrow ran from adult
    businesses to crime, rather than the other way. That could hap-
    pen because adult establishments attract a particular kind of
    clientele that is emboldened by association with like-minded
    people, so that prostitution and public masturbation (for exam-
    ple) are more acceptable near a congeries of sexually oriented
    businesses than they would be elsewhere. Justice Kennedy put
    it this way in Alameda Books:
    We may posit that two adult stores next door to each other attract
    100 patrons per day. The two businesses split apart might attract 49
    patrons each. (Two patrons, perhaps, will be discouraged by the in-
    convenience of the separation—a relatively small cost to speech.)
    On the other hand, the reduction in secondary effects might be
    dramatic, because secondary effects may require a critical mass.
    Depending on the economics of vice, 100 potential custom-
    ers/victims might attract a coterie of thieves, prostitutes, and other
    ne’er-do-wells; yet 49 might attract none at all. If so, a dispersal or-
    dinance would cause a great reduction in secondary effects at very
    small cost to speech. Indeed, the very absence of secondary effects
    might increase the audience for the speech; perhaps for every two
    people who are discouraged by the inconvenience of two-stop
    shopping, another two are encouraged by hospitable surroundings.
    In that case, secondary effects might be eliminated at no cost to
    speech whatsoever, and both the city and the speaker will have their
    interests well 
    served. 535 U.S. at 452
    –53 (Kennedy, J., concurring in the judgment).
    Indianapolis relies on this line of argument, as well as on a
    study it conducted in 1984, before adopting the original version
    of the challenged ordinance. This study found higher crime
    rates near businesses that were defined as “adult”. But here the
    City encounters problems, for the studies on which it relies—
    like Justice Kennedy’s hypothetical—deal with ordinances dis-
    persing adult businesses. The 2003 revision does not require
    dispersal. Instead it closes all businesses after midnight and on
    Sundays, and requires bright interior lights when the businesses
    are open. None of the studies on which the City relied before
    enacting the law, and none introduced in this record, concerns
    that kind of ordinance. Nor do the studies show that an in-
    crease in adult businesses’ operating hours is associated with
    more crime; the studies are simple cross-sectional analyses that
    leave causation up in the air. (In other words, they may show no
    No. 05-1926                                                 Page 4
    more than that adult businesses prefer high-crime districts
    where rents are lower.)
    More importantly, the studies to which the City points
    concern adult businesses that offer live sex shows, private view-
    ing booths, or both. This circuit’s decisions likewise concern
    live entertainment. See, e.g., R.V.S., L.L.C. v. Rockford, 
    361 F.3d 402
    (7th Cir. 2004) (exotic-dancing nightclubs); G.M. Enter-
    prises, Inc. v. St. Joseph, 
    350 F.3d 631
    (7th Cir. 2003) (nude danc-
    ing in bars). Three of the four plaintiffs in this suit, however, do
    not offer live entertainment or private viewing. They are simple
    book or video outlets, brought under the regulatory umbrella
    only because 25% or more of their sales come from sex-related
    materials. Until the 2003 amendments, these stores were
    treated the same as Barnes & Noble or Blockbuster Video. If
    they were associated with significant crime or disorderly con-
    duct, it should be easy for Indianapolis to show it. But the City
    has not offered an iota of evidence to that effect.
    The City’s only evidence about the four plaintiffs is that
    during 2002 the police made 41 arrests for public masturbation
    at Annex Books, the only plaintiff that offers private booths.
    (The masturbation was “public” in the sense that officers could
    see what customers were doing inside the booths.) The district
    court thought this datum enough, by itself, to support the 2003
    amendments. Yet it is hard to grasp how misdemeanors com-
    mitted in single-person booths justify the regulation of book
    and video retailers that lack such booths.
    Indeed, we do not know when the arrests occurred. Unless
    most of them were after midnight, or on Sunday, they don’t jus-
    tify the ordinance even with respect to establishments that
    supply entertainment on the premises. Nor can we tell whether
    41 arrests at one business over the course of 365 days is a large
    or a small number. How does it compare with arrests for
    drunkenness or public urination in or near taverns, which in
    Indianapolis can be open on Sunday and well after midnight? If
    there is more misconduct at a bar than at an adult emporium,
    how would that justify greater legal restrictions on the book-
    store—much of whose stock in trade is constitutionally pro-
    tected in a way that beer and liquor are not.
    Indianapolis has approached this case by assuming that any
    empirical study of morals offenses near any kind of adult estab-
    lishment in any city justifies every possible kind of legal restric-
    No. 05-1926                                                           Page 5
    tion in every city. That might be so if the rational-relation test
    governed, for then all a court need do is ask whether a sound
    justification of a law may be imagined. See, e.g., Vance v. Brad-
    ley, 
    440 U.S. 93
    (1979); Massachusetts Board of Retirement v. Mur-
    gia, 
    427 U.S. 307
    (1976). But because books (even of the “adult”
    variety) have a constitutional status different from granola and
    wine, and laws requiring the closure of bookstores at night and
    on Sunday are likely to curtail sales, the public benefits of the
    restrictions must be established by evidence, and not just as-
    serted. The evidence need not be local; Indianapolis is entitled
    to rely on findings from Milwaukee or Memphis (provided that
    a suitable effort is made to control for other variables). See
    Andy’s 
    Restaurant, 466 F.3d at 554
    –55. But there must be evidence;
    lawyers’ talk is insufficient.
    Alameda Books establishes that much. Four Justices would
    have ruled for the plaintiff, without need for a trial, even
    though the empirical support for the Los Angeles ordinance
    was materially stronger than the data that Indianapolis 
    proffers. 535 U.S. at 453
    –66 (Souter, J., joined by Stevens, Ginsburg &
    Breyer, JJ.). (The Los Angeles study was stronger because it im-
    plied causation and not just correlation.) The other five Justices
    concluded that a hearing was necessary to determine whether
    the evidence that Los Angeles offered was strong enough. None
    of the Justices thought that summary judgment could be
    granted in the municipality’s favor when the strength of, and
    appropriate inferences from, the studies were contested. (Well,
    “none” is an overstatement. Justice Scalia concluded that pan-
    dering may be prohibited without any need for 
    evidence. 535 U.S. at 443
    –44 (concurring opinion). But Indianapolis does not
    defend its ordinance on that basis.) Justice O’Connor’s plurality
    opinion (joined by Chief Justice Rehnquist and Justices Scalia
    and Thomas) was explicit (535 U.S. at 438–39):
    [A] municipality [cannot] get away with shoddy data or reasoning.
    The municipality’s evidence must fairly support the municipality’s
    rationale for its ordinance. If plaintiffs fail to cast direct doubt on
    this rationale, either by demonstrating that the municipality’s evi-
    dence does not support its rationale or by furnishing evidence that
    disputes the municipality’s factual findings, the municipality meets
    the standard set forth in [Playtime Theatres]. If plaintiffs succeed in
    casting doubt on a municipality’s rationale in either manner, the
    burden shifts back to the municipality to supplement the record
    with evidence renewing support for a theory that justifies its ordi-
    nance.
    No. 05-1926                                                 Page 6
    Instead of adducing data to support the regulation of book-
    stores that do not furnish on-site viewing, Indianapolis is con-
    tent to belittle plaintiffs’ evidence. Plaintiffs offered a study by
    Daniel Linz, a professor at the University of California, Santa
    Barbara. Linz first examined the relation between crime and
    adult establishments in Indianapolis, using smaller units than
    the City had done. (Linz used census tracts, while the City used
    whole city blocks or larger districts.) He found little relation—
    and he added a time series, while the City relied on a cross sec-
    tion. In other words, Linz conducted the same kind of analysis
    as the Los Angeles study in Alameda Books, asking whether
    crime went up in a given census tract when new adult estab-
    lishments opened, or down when they closed. Linz concluded
    that these openings and closings did not materially affect crime.
    Linz also critiqued the methodology of studies conducted by
    Indianapolis and other cities.
    One may doubt that Linz’s work is the last word; a multi-
    variate regression would provide a better foundation than ei-
    ther a time series or a geographic cross-section. See Daniel L.
    Rubinfeld, Reference Guide on Multiple Regression, Reference
    Manual on Scientific Evidence (2d ed.) (Federal Judicial Center
    2000). Linz also disregards some sex-linked crimes, such as ex-
    posure and prostitution. That’s like studying the effects of tav-
    erns while ignoring arrests for drunk driving. (Linz does con-
    sider arrests for rape and child molestation, however.) But the
    City, which offered only the simple cross-section, is in no posi-
    tion to complain. Instead the City observed that Linz com-
    pared differences between 2001 and 2003, ignoring 2002, which
    (apparently) was a peak year for arrests in Annex Books. Yet
    the City did not apply Linz’s methods to the time series 2001,
    2002, 2003 to see whether the omission mattered; instead it
    just asserted that the choice of years automatically invalidated
    the study, which is not a sound conclusion.
    Instead of adducing a serious critique of Linz’s work, or
    tackling the subject directly (Linz’s data and methods were dis-
    closed in his study), the City asserts that the federal judiciary
    has already decided that all of Linz’s work must be ignored. It
    contends that, in G.M. 
    Enterprise, 350 F.3d at 640
    , we called
    Linz’s methods “completely unfounded.” Not at all. What we
    called “completely unfounded” was counsel’s assertion that a
    city’s justifications have to satisfy the Daubert standard for ex-
    pert testimony. (See Daubert v. Merrell Dow Pharmaceuticals, Inc.,
    No. 05-1926                                                  Page 7
    
    509 U.S. 579
    (1993).) Linz had observed that some studies of-
    fered in that case were not “reliable,” as Fed. R. Evid. 702 uses
    that word. We thought that Alameda Books allows municipali-
    ties to take all kinds of evidence into account; this differs from
    saying that nothing Linz writes may be credited.
    Counsel for Indianapolis conceded at oral argument that
    none of the studies that the City has offered in defense of its
    ordinance deals with the secondary effects of stores that lack
    private booths. Nor do the studies assess the effects of stores
    that sell as little as 25% adult products. These shortcomings,
    plus Linz’s work, call the City’s justifications into question and
    require an evidentiary hearing at which the City must support
    its ordinance under the intermediate standard of Alameda Books.
    See also Abilene Retail #30, Inc. v. Dickinson County, 
    492 F.3d 1164
    (10th Cir. 2007) (reaching the same conclusion on a similar re-
    cord). The Supreme Court decided Playtime Theatres more than
    30 years ago, and since then adult-entertainment ordinances
    have become common. There must be some pertinent data to
    be gathered, if not in Indianapolis then elsewhere. (Some can
    be         found         in          a        bibliography        at
    http://www.secondaryeffectsresearch.com.) But if, as is possible,
    there is simply no sound basis for a conclusion that book or
    video stores (without live entertainment or private booths)
    open after midnight, or on Sunday, cause adverse secondary ef-
    fects, then Indianapolis must revert to its pre-2003 system of
    regulation.
    We are conscious that “hold an evidentiary hearing and ap-
    ply intermediate scrutiny” is not very helpful to the district
    judge, or for that matter the lawyers. It is possible to be a little
    more concrete, however, thanks to Justice Kennedy’s opinion
    in Alameda Books. Because the other Justices divided 4 to 4, and
    Justice Kennedy was in the middle, his views establish the hold-
    ing. See Marks v. United States, 
    430 U.S. 188
    (1977). He con-
    cluded that a regulation of adult bookstores “can be consistent
    with the First Amendment if it is likely to cause a significant
    decrease in secondary effects and a trivial decrease in the quan-
    tity of 
    speech.” 535 U.S. at 445
    (concurring opinion). “[A] city
    must advance some basis to show that its regulation has the
    purpose and effect of suppressing secondary effects, while leav-
    ing the quantity and accessibility of speech substantially intact.
    … A city may not assert that it will reduce secondary effects by
    reducing speech in the same proportion.” 
    Id. at 449.
    Justice
    No. 05-1926                                                  Page 8
    Kennedy insisted that the benefits (less crime) be compared
    with the detriments (less speech) and added that a given regula-
    tory system is easier to justify if it works in the same way as the
    regulation of other, similar, businesses, for then it is harder to
    conclude that the government has set out to curtail speech be-
    cause of its subject matter. 
    Id. at 447–49.
        These thoughts should give some structure to the hearing
    on remand—though we recognize that, because crime and
    speech cannot be reduced to a common metric, a direct com-
    parison (how much speech should be sacrificed to achieve how
    much reduction in crime?) is difficult if not impossible. Here it
    matters that both Justice O’Connor’s opinion for the plurality,
    and Justice Kennedy’s concurrence, conclude that municipali-
    ties should get the benefit of the doubt. Principles of federal-
    ism support experimentation, and one aspect of freedom is the
    power to be different. The standards of Manhattan, New York,
    need not be followed in Manhattan, Kansas. 
    See 535 U.S. at 439
    (plurality opinion), 451 (Kennedy, J., concurring). See also Illi-
    nois One News, Inc. v. Marshall, 
    477 F.3d 461
    (7th Cir. 2007) (abil-
    ity of a small town’s residents to obtain adult materials outside
    its borders may show that no material curtailment of expression
    has occurred). Cf. National Rifle Association of America, Inc. v.
    Chicago, 
    567 F.3d 856
    , 860 (7th Cir. 2009).
    The parties have pressed on us dozens of precedents, from
    this circuit and elsewhere, that do more to show the problems
    of interpretation and application created by the fractured deci-
    sion in Alameda Books than to establish any concrete legal rule.
    Few of these decisions offer much guidance, either to us or to
    the district court on remand, because few deal with hours-of-
    operation rules applicable to businesses that do not offer on-
    site viewing. It is accordingly unnecessary for us to canvass the
    dozens of appellate decisions that have struggled to understand
    and apply Alameda Books. For example, Center for Fair Public Pol-
    icy v. Maricopa County, 
    336 F.3d 1153
    (9th Cir. 2003), and Richland
    Bookmart, Inc. v. Knox County, 
    555 F.3d 512
    (6th Cir. 2009), both
    sustained regulations applicable to book and video stores, but
    only after concluding that the plaintiffs had not undermined
    No. 05-1926                                                           Page 9
    the justifications for the laws.† We refrain from a survey, which
    would lengthen this opinion without edifying the reader.
    But one of these decisions, in addition to Abilene Retail
    (cited above), offers a little assistance. San Antonio adopted a
    dispersal rule (1,000 feet between adult businesses) that applied
    to a set of outlets defined to include stores that did nothing but
    sell books, tapes, and DVDs, which customers could not watch
    on premises. The fifth circuit held in Encore Videos, Inc. v. San
    Antonio, 
    330 F.3d 288
    (5th Cir. 2003), that this ordinance vio-
    lated the first amendment, because San Antonio had not of-
    fered any evidence that adult video stores lacking facilities for
    on-premises viewing create the same secondary effects as other
    establishments. If Indianapolis cannot produce such evidence,
    satisfying Justice Kennedy’s cost-benefit standard, its ordinance
    must meet the same fate as San Antonio’s.
    The judgment is affirmed to the extent that it sustained the
    licensing procedures but is reversed to the extent it concerns
    the coverage and substantive requirements, and the case is re-
    manded for an evidentiary hearing consistent with this opinion.
    † Richland Bookmart and H&A Land Corp. v. Kennedale, 
    480 F.3d 336
    , 339
    (5th Cir. 2007), treated the study that Indianapolis conducted in 1984 as
    supporting a conclusion that stores selling adult books and videos create
    adverse secondary effects. Yet Indianapolis does not deem its own study to
    support that conclusion, and our review of the 1984 study confirms the
    City’s understanding. The 1984 study does not differentiate by type of adult
    business. The City did poll brokers to learn whether they thought that
    “adult bookstores” would depress real estate prices (most answered yes), but
    the study did not define “adult bookstore.” Who knows whether brokers en-
    visaged on-premises entertainment, or whether they thought that 25% of
    sales makes an establishment “adult”? An opinion poll differs from a con-
    crete result. (The 1984 study did not limit the survey to brokers who had
    experience buying or selling adult establishments, or in places near those
    establishments.) The authors inquired whether real estate prices are lower
    near adult businesses, but that part of the study lumps all adult establish-
    ments together; it does not distinguish between bookstores and topless bars
    or peepshows. This part of the study does contain a perfunctory time series
    analysis, however, in an attempt to inquire whether adult businesses seek
    out, rather than cause, low prices. It concludes that prices appreciate less in
    parts of the city where adult businesses congregate. See Adult Entertainment
    Businesses in Indianapolis: An Analysis 30–31 (1984).