Andy's Restaurant & Lounge, Inc. v. City of Gary ( 2006 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 05-2225, 05-2287 & 05-2288
ANDY’S RESTAURANT & LOUNGE, INC.,
and RUSBEN CORP. d/b/a/ TRUCKER’S
WORLD BOOK & VIDEO STORE,
Plaintiffs-Appellants,
PANDORA’S SHOWCLUB, K.K.S., INC. d/b/a
VARIETY VIDEO, J.A. SALES, INC. d/b/a
VIDEO HEAVEN, TERRENCE L. CROSSLEY
d/b/a/ JOKERS CLUB, PLAYERS CLUB,
AND CORVETTE CLUB,
Plaintiffs-Intervenors/Appellants,
v.
CITY OF GARY,
Defendant-Appellee.
____________
Appeals from the United States District Court
for the Northern District of Indiana, Hammond Division.
Nos. 01 C 327, 01 C 397 and 01 C 525—
Andrew P. Rodovich, Magistrate Judge.
____________
ARGUED FEBRUARY 21, 2006—DECIDED OCTOBER 11, 2006
____________
Before BAUER, KANNE, and ROVNER, Circuit Judges.
KANNE, Circuit Judge. This appeal concerns the con-
stitutionality of an ordinance enacted by the City of Gary
(“City”) affecting “sexually oriented businesses.” In a
2 Nos. 05-2225, 05-2287 & 05-2288
thorough and well reasoned opinion, Magistrate Judge
Rodovich granted summary judgment for the City on the
declaratory judgment action filed by some of the businesses
affected by the ordinance. We affirm.
I. HISTORY
The City adopted the challenged Ordinance No. 2000-83
(“the Ordinance”) on December 19, 2000. Its preamble
states the City’s concern that “sexually oriented busi-
nesses,” among other things, “have a deleterious effect on
both the existing businesses around them and the sur-
rounding residential areas adjacent to them.” By enacting
the Ordinance, the City “desire[d] to minimize and con-
trol these adverse effects and thereby protect the health,
safety, and welfare of the citizenry . . . and deter the spread
of urban blight.” The intent of the Ordinance, the preamble
states, is “to enact a content neutral ordinance which
address the secondary effects of sexually oriented business”
while not “suppress[ing] any speech activities protected by
the First Amendment of the U.S. Constitution.” In support
of its findings, the Ordinance cites a number of federal
cases dealing with similar laws affecting sexually oriented
businesses and eighteen reports detailing the secondary
effects of these businesses.
The Ordinance defines “sexually oriented business”
broadly, including a number of businesses separately de-
fined by the Ordinance, which, generally speaking, means
all manner of adult bookstores, arcades, novelty stores,
theaters, and dancing establishments. It includes operating
hours of 10:00 a.m. to 11:00 p.m., seven days a week, and a
prohibition on any physical contact between employees
appearing in a semi-nude condition (i.e., dancers) and
customers. It also has an open-booth requirement, which
prohibits the placement of doors, curtains or other materi-
als on viewing booths so that an employee of the business
Nos. 05-2225, 05-2287 & 05-2288 3
is able to look into it at all times. The Ordinance also
contains numerous sanitation provisions, including a
prohibition on rugs or carpet, a requirement of “non-
porous, easily cleanable surfaces,” and waste disposal
procedures, as well as other obligations for employees, such
as ensuring that no sexual activity occurs on the premises.
All sexually oriented businesses covered by the Ordinance
are required to obtain a license. Once an application is filed,
“the City Comptroller shall immediately issue a Temporary
License to the applicant,” which only “expire[s] upon the
final decision of the City to deny or grant the license.” The
Ordinance requires that a permanent license be issued,
unless (1) the applicant is below the age of 18, (2) the
applicant fails to provide, or provides false information on
the application, (3) the fee is not paid, (4) the applicant has
committed certain violations of the Ordinance within the
last year, or (5) the physical premises of the business do not
comply with the Ordinance’s requirements. A license can be
suspended on the basis of a knowing violation of the
Ordinance, and revoked if a knowing violation occurs within
twelve months of a suspension.
Denial, suspension, or revocation of a license only occurs
after a hearing at which the aggrieved party has the
opportunity to be heard. If any adverse action is taken, the
party must be notified of the right to appeal to a court of
competent jurisdiction. During the pendency of any
such appeal, the City must issue the aggrieved party a
provisional license, which allows the business to stay
open until final judgment is rendered by a court.
II. ANALYSIS
We review the district court’s summary judgment ruling
de novo, viewing all material disputes of fact in the light
most favorable to the plaintiff. Moser v. Ind. Dep’t of Corr.,
406 F.3d 895, 900 (7th Cir. 2005). The plaintiffs’ arguments
4 Nos. 05-2225, 05-2287 & 05-2288
on appeal rely upon the First Amendment, Fourth Amend-
ment, and Indiana law.
A. First Amendment
The plaintiffs’ argument can be organized as follows: the
Ordinance discriminates on the basis of content, and,
therefore, should be analyzed under strict scrutiny; even
when analyzed under lesser, intermediate scrutiny, the City
has not met its burden of justifying the Ordinance; and that
the Ordinance acts as an impermissible prior restraint on
speech.
To assess whether the Ordinance violates the First
Amendment, both parties echo the district court’s analysis
by relying on the analytical framework set forth by City of
Los Angeles v. Alameda Books, Inc., 535 U.S. 425 (2002),
and City of Renton v. Playtime Theatres, Inc., 475 U.S. 41,
47-50 (1986). The Alameda Books/Renton line of cases
deal with zoning ordinances aimed at dispersing adult
entertainment businesses throughout a community, which
are considered time, place, and manner restrictions.
Alameda Books, 535 U.S. at 434 (plurality opinion). Another
line of Supreme Court cases, however, uses the intermedi-
ate scrutiny test of United States v. O’Brien, 391 U.S. 367(1968), to review public indecency statutes, which are
considered laws affecting expressive conduct. See City of
Erie v. Pap’s A.M., 529 U.S. 277, 289 (2000) (plurality
opinion); Barnes v. Glen Theatre, Inc., 501 U.S. 560, 565-66
(1991) (plurality opinion).
There is some confusion about which line of cases should
be used in evaluating laws like the Ordinance, which do not
fall neatly into either category. See Ben’s Bar, Inc. v. Village
of Somerset, 316 F.3d 702, 714 (7th Cir. 2003) (expressing
uncertainty as whether to analyze an adult entertainment
liquor regulation “as a time, place, and manner restriction
Nos. 05-2225, 05-2287 & 05-2288 5
[under Alameda Books/Renton] or as a regulation of
expressive conduct under [Pap’s A.M./Barnes]”) (citing
LLEH, Inc. v. Wichita County, Texas, 289 F.3d 358, 365 (5th
Cir. 2002)). And for most cases, it may not matter which
test is employed. Id. (noting that the analysis between the
two lines of cases may be “entirely interchangeable”). The
crucial analytical step of both tests is the same; which is to
say, that under both lines of cases, intermediate scrutiny is
applied if the challenged law is found to be either content
neutral or for the purpose of decreasing secondary effects.
See Alameda Books, 535 U.S. at 448 (Kennedy, J. concur-
ring) (“A zoning restriction that is designed to decrease
secondary effects and not speech should be subject to
intermediate rather than strict scrutiny.”); R.V.S., L.L.C. v.
City of Rockford, 361 F.3d 402, 408 (7th Cir. 2004) (“[O]nly
after confirming that a zoning ordinance’s purpose is to
combat the secondary effects of speech do we employ
Renton’s intermediate scrutiny test.”). Cf. Pap’s A.M. 529
U.S. at 289 (plurality opinion) (“We now clarify that
government restrictions on public nudity such as the
ordinance at issue here should be evaluated under the
framework set forth in O’Brien for content-neutral restric-
tions on symbolic speech.”).
We need not choose between either line of cases (nor need
we rule that the differences between them are immaterial)
because both parties proceed under the general framework
of Alameda Books/Renton, which we will employ, while
referring to other case law as appropriate, as the parties
do.1 Moreover, all of the issues raised by plaintiffs are
1
Without any elaboration, the plaintiffs do state in the middle of
their brief, “Moreover, the District Court has completely ignored
the fact that [the Ordinance] is not a ‘land use’ regulation, as was
the regulation in Renton.” We do not, and cannot, read this mere
sentence as an argument that it is improper to apply, as the
district court did, the Alameda Books/Renton line of cases to the
(continued...)
6 Nos. 05-2225, 05-2287 & 05-2288
clearly controlled by the Court’s precedents or ours, and,
therefore, our resolution of the issues would be same under
either line of cases.
1. Secondary Effects/Content Neutrality
The plaintiffs argue that the Ordinance does not regu-
late the secondary effects of speech, but, rather, directly
regulates speech.2 This determination is crucial, because if
the Ordinance only combats secondary effects of otherwise
protected speech, then it is considered the equivalent of
content neutral, and, therefore, need only survive interme-
diate scrutiny. See Alameda Books, 535 U.S. at 448 (Ken-
nedy, J. concurring); R.V.S., 361 F.3d at 408. Cf. Pap’s A.M.
529 U.S. at 289 (plurality opinion) (explaining that restric-
tions on public nudity are content neutral and should be
analyzed under O’Brien intermediate scrutiny).
Our inquiry in this regard “is best conceived as [one] into
the purpose behind an ordinance.” R.V.S., 361 F.3d at 407-
08 (citations omitted). Our task is “to verify that the ‘predom-
inant concerns’ motivating the ordinance ‘were with the
secondary effects of the adult [speech], and not with the
content of adult [speech].’ ” Alameda Books, 535 U.S. at 440-
41 (plurality opinion) (quoting Renton, 475 U.S. at 47).
“Federal courts evaluating the ‘predominant concerns’
1
(...continued)
Ordinance. Kramer v. Banc of Am. Sec., LLC, 355 F.3d 961, 964
n.1 (7th Cir. 2004) (“We have repeatedly made clear that perfunc-
tory and undeveloped arguments that are unsupported by
pertinent authority, are waived (even where those arguments
raise constitutional issues).”) (quoting United States v. Berkowitz,
927 F.2d 1376, 1384 (7th Cir. 1991)).
2
The plaintiffs concede that the Ordinance passes the first
step of the Alameda Books/Renton analysis in that it does not ban
all speech. See Alameda Books, 535 U.S. at 434-35.
Nos. 05-2225, 05-2287 & 05-2288 7
behind the enactment of a[n] . . . ordinance . . . may do so by
examining a wide variety of materials including, but not
limited to, the text of the . . . ordinance . . ., any preamble
or express legislative findings associated with it, and
studies and information of which legislators were clearly
aware.” R.V.S., 361 F.3d 409 n.5 (citing Ben’s Bar, 316 F.3d
702, 723 n.28).
A review of those materials makes clear that the Ordi-
nance is directed toward secondary effects. The Ordinance
emphasizes that its purpose is to control the “adverse
effects” of sexually oriented businesses and the reports
before the council primarily addressed secondary effects.
Plaintiffs provide nothing of relevance in response. One
argument they do make is that the Ordinance contains a
shocking admission that it is not concerned with secondary
effects—the City’s belief that sexually oriented businesses,
because of their very nature, downgrade the quality of life.
There is no such admission in the Ordinance; plaintiffs
merely infer that this must be the City’s thought process.
More importantly, plaintiffs fail to grasp that the concept of
“secondary effects,” as developed in Renton and Alameda
Books, assumes that the properly regulated externalities
are caused by protected speech. See Alameda Books, 535
U.S. at 445-48 (Kennedy, J. concurring) (explaining that an
ordinance is content neutral and addresses secondary
effects “even if [it] identifies the [secondary effects] by
reference to the speech . . . that is, even if the measure is in
that sense content based”).
Plaintiffs also posit that a city council cannot rely on
reports and studies when creating an ordinance because
such things are hearsay, or, it might be that the argument
is a city council can rely on these documents in creating
an ordinance, but cannot later use the fact of its reliance on
such reports in warding off a constitutional challenge
in court because such reports are hearsay. Plaintiffs
finish this argument by telling us we cannot look to the
8 Nos. 05-2225, 05-2287 & 05-2288
preamble of the ordinance because it is hearsay. Neverthe-
less, we feel comfortable relying on the findings and
preamble of the statute and the reports cited therein to
determine that the Ordinance is content neutral. See, e.g.,
Pap’s A.M., 529 U.S. at 296-97 (plurality opinion) (ex-
plaining that the city could “reasonably rely on the eviden-
tiary foundation set forth in Renton,” as well as examining
the findings and preamble of the city’s ordinance to deter-
mine content neutrality); Ben’s Bar, 316 F.3d at 723-24(examining the preamble and findings of the challenged
statute to determine whether the challenged statute should
be analyzed under intermediate scrutiny).
2. Intermediate Scrutiny
Laws pass this lower level of scrutiny “so long as they are
designed to serve a substantial government[al] interest and
do not unreasonably limit alternative avenues of communi-
cation.” R.V.S., 361 F.3d at 408 (quoting Renton, 475 U.S.
at 47, citing Alameda Books, 535 U.S. at 434); see also Pap’s
A.M., 529 U.S. at 296, 301-02 (plurality opinion) (explaining
that under O’Brien, a content-neutral restriction must
“further[ ] an important or substantial government interest”
and be “no greater than is essential to the furtherance of
the government interest”).
Laws are designed to serve a substantial government
interest when the “municipality can demonstrate a connec-
tion between the speech regulated by the ordinance and the
secondary effects that motivated the adoption of the ordi-
nance.” R.V.S., 361 F.3d at 408 (quoting Ben’s Bar, 316 F.3d
at 724). “In evaluating the sufficiency of this connection,
courts must ‘examine evidence concerning regulated speech
and secondary effects.’ ” Id. (quoting Alameda Books, 535
U.S. at 441). “The First Amendment does not require a city,
before enacting such an ordinance, to conduct new studies
or produce evidence independent of that already generated
Nos. 05-2225, 05-2287 & 05-2288 9
by other cities, so long as whatever evidence the city relies
upon is reasonably believed to be relevant to the problem
that the city addresses.” Renton, 475 U.S. at 51-52; see also
Alameda Books, 535 U.S. at 451 (Kennedy, J. concurring)
(“[W]e have consistently held that a city must have latitude
to experiment, at least at the outset, and that very little
evidence is required.”). A city may rely upon previous
judicial opinions evaluating secondary effects the city
desires to regulate. Pap’s A.M. 529 U.S. at 297 (plurality
opinion) (explaining that the city could “reasonably rely on
the evidentiary foundation set forth in Renton and Ameri-
can Mini Theatres to the effect that secondary effects are
caused by the presence of even one adult entertainment
establishment in a given neighborhood”).
The evidence relied upon by the City is more than
adequate to establish the secondary effects regulated by the
Ordinance. The record contains numerous studies evidenc-
ing the secondary effects of sexually oriented businesses.
Moreover, we have previously affirmed the only two
portions of the Ordinance plaintiffs specifically attack—the
hour regulation and open-booth requirement. In Schultz v.
City of Cumberland, an hour regulation similar to that
imposed by the Ordinance was upheld by this court against
a First Amendment challenge. 228 F.3d 831, 846 (7th Cir.
2000) (upholding a portion of an ordinance “limiting the
business hours for sexually oriented businesses to between
10 a.m. and midnight, Monday through Saturday.”). And we
have also upheld open-booth requirements similar to the
one in the Ordinance. See Pleasureland Museum, Inc. v.
Beutter, 288 F.3d 988, 1003-04 (7th Cir. 2002) (explaining
that the open-booth requirement was a valid time, place,
and manner restriction); Matney v. County of Kenosha, 86
F.3d 692 (7th Cir. 1996) (same).
To counter these decisions the plaintiffs simply nitpick at
the relevance and reliability of the City’s studies, claiming
that they are either too old or inapplicable because they
10 Nos. 05-2225, 05-2287 & 05-2288
discuss problems in other cities and not Gary. All of these
arguments are without merit. Renton, 475 U.S. at 51-52;
G.M. Enterprises, Inc. v. Town of St. Joseph, 350 F.3d 631,
639-40 (7th Cir. 2003); Ben’s Bar, 316 F.3d at 725.
Faced with our precedent and the City’s substantial
evidentiary record, the plaintiffs present nothing of rele-
vance. “Instead, [they] have simply asserted that the
council’s evidentiary proof is lacking. In the absence of any
reason to doubt it, the city’s expert judgment should be
credited.” Pap’s A.M., 529 U.S. at 298 (plurality opinion);
see also Alameda Books, 535 U.S. at 438-39 (plurality
opinion) (“If plaintiffs fail to cast direct doubt on [the city’s]
rationale, either by demonstrating that the municipality’s
evidence does not support its rationale or by furnishing
evidence that disputes the municipality’s factual findings,
the municipality meets the standard set forth in Renton.”).
We also reject plaintiffs’ argument that the Ordinance
is not sufficiently narrow. See Alameda Books, 535 U.S. at
434 (plurality opinion) (explaining that a content neutral
ordinance designed to serve a substantial government
interest must still leave “reasonable alternative avenues of
communication.”); Pap’s A.M., 529 U.S. at 301-02 (plurality
opinion) (noting that the fourth factor of the O’Brien test is
“that the restriction is no greater than is essential to the
furtherance of the government interest”). We have previ-
ously held that similar hour restrictions and open-booth
requirements are narrowly tailored, and we stick to those
rulings here. Pleasureland Museum, Inc., 288 F.3d at 1004(“[W]e have repeatedly held that regulations like the Open
Booth Restrictions leave open ample alternative channels
of communication.”) (citations omitted); Schultz, 228 F.3d at
846 (explaining that an hour restriction similar to that of
this case was “not ‘substantially broader than necessary,’
even if more restrictive than absolutely necessary”) (quoting
Ward v. Rock Against Racism, 491 U.S. 781, 800 (1989)).
Nos. 05-2225, 05-2287 & 05-2288 11
3. Prior Restraint/Prompt Judicial Review
Plaintiffs argue that the Ordinance is invalid because
it does not demand prompt judicial review of a decision to
deny, suspend, or revoke a license. Plaintiffs also concede
that this argument is foreclosed by our decision in Graff
v. City of Chicago, but nevertheless ask us to reconsider. 9
F.3d 1309 (7th Cir. 1993) (en banc) (holding that common
law review of a licensing decision was sufficient). We see no
reason to reconsider Graff on this record, especially where
the Ordinance requires continuous operation under a
provisional license until the culmination of judicial review.
See also City of Littleton v. Z.J. Gifts D-4, L.L.C., 541 U.S.
774, 781-84 (2004) (explaining that ordinary judicial review
of a licensing decision was sufficient where the ordinance
was content neutral and only conditioned operation on
neutral, nondiscriminatory criteria).
B. Fourth Amendment and Indiana Law
Plaintiffs argue that the Ordinance allows for searches in
violation of the Fourth Amendment and that the Ordinance
is preempted by Indiana Law. Both of these arguments are
waived because the plaintiff failed to raise them before the
district court. See Estremera v. United States, 442 F.3d 580,
587 (7th Cir. 2006) (“arguments not raised in the district
court are waived on appeal”) (quoting Belom v. National
Futures Ass’n, 284 F.3d 795, 799 (7th Cir. 2002)). When
moving for summary judgment, the City defended an
inspection provision in the Ordinance against a possible
Fourth Amendment challenge by arguing first, that sexu-
ally oriented businesses have no reasonable expectation of
privacy in the public areas of their premises during busi-
ness hours; and, second, that if plaintiffs were able to
establish a privacy interest implicating the Fourth Amend-
ment that the businesses were “closely-regulated indus-
12 Nos. 05-2225, 05-2287 & 05-2288
tries” for which no warrant is necessary.3 See New York v.
Burger, 482 U.S. 691, 702-03 (1987) (applying the “closely-
regulated industry” exception to the Fourth Amendment).
In response, the plaintiffs simply assumed that the inspec-
tion provision implicated the Fourth Amendment, and only
argued that sexually oriented businesses are not closely-
regulated industries— despite the fact that the Ordinance
only allows inspections in areas open to the public during
business hours.
As the district court explained, plaintiffs “simply ignore[d]
the law’s clear mandate” that the inspection provision did
not implicate a privacy interest. Finding persuasive the
City’s unrebutted argument on this point, the district court
did not address the plaintiffs’ argument that adult busi-
nesses were not “closely-regulated industries.” Plaintiffs’
failure to argue the existence of a privacy interest impli-
cated by the Ordinance below waives the issue on appeal. In
any event any concerns about privacy violations are abated
by the language of the statute that limits inspection to
assuring compliance with the specific requirements of the
Ordinance—that is the open booth requirement, the hours
of operation restrictions, the prohibition of physical contact,
and other requirements as specifically listed in the Ordi-
3
The inspection provision states:
(A) Sexually oriented business operators and sexually
oriented business employees shall permit officers or agents of
the City of Gary who are performing functions connected with
the enforcement of this Chapter to inspect the portions of the
sexually oriented business premises where patrons
are permitted, for the purpose of ensuring compliance with
this Chapter, at any time the sexually oriented business is
occupied by patrons or open for business.
(B) The provisions of this Section do not apply to areas of an
adult motel which are currently being rented by a customer
for use as a permanent or temporary habitation.
Nos. 05-2225, 05-2287 & 05-2288 13
nance. Ordinance at § 7(A). In other words, as counsel
assured the panel at oral argument, officers or agents of the
City cannot enter non-public areas of the premises, cannot
enter when the business is closed to the public, cannot
remove anything from the premises, cannot take pictures or
videos, cannot ask patrons to disclose their names, or do
anything other than check for compliance with the require-
ments of the Ordinance. (Oral argument at 25-30 min).
Accordingly, we will not disturb the district court’s rul-
ing that the Ordinance does not violate the Fourth Amend-
ment.
Plaintiffs also attempt to raise a preemption argument
relying on Indiana law. Before the plaintiffs filed their brief
in the district court, the Indiana Attorney General asked for
permission, which was granted, to file an amicus brief with
the district court addressing the issue “that state alcoholic
beverage statutes preempt local regulation of adult enter-
tainment establishments.” See Ind. Code § 7.1-3-9-6 (prohib-
iting certain local interference with liquor licenses provided
by the state).
The plaintiffs then filed their brief opposing summary
judgment without raising this issue. The very next day
the Indiana Attorney General informed the district
court that no amicus brief would be filed because no state
law issues had been raised by the briefing.
Plaintiffs now attempt to argue that the Ordinance is
preempted by Indiana law. But their earlier approach in the
district court has deprived us of an analysis by the magis-
trate judge (and the views of the Indiana Attorney General),
and, therefore, plaintiffs have waived the issue. See
Estremera, 442 F.3d at 587.
III. CONCLUSION
Accordingly, the grant of summary judgment in favor of
the City of Gary is AFFIRMED.
14 Nos. 05-2225, 05-2287 & 05-2288
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—10-11-06