No. 86-273
INTHE SUPREMECOURT OF THE STATE OF MONTANA
1987

CITY OF GREAT FALLS, MONTANA, amunicipal corporation, Plaintiff and Respondent,-vsM.K. ENTERPRISES, INC., a corporation, TIMWOLF and ROBERT WOLF, individuals, d/b/a RED DOORADULT BOOK STORE,et al.,
Defendants and Appellants.

APPEAL FROM: DistrictCourt of the Eighth Judicial~istr?ct, Inand for the County of Cascade, TheHonorableThomasMcKittrick, Judgepresiding.
COUNSEL OF RECORD:
ForAppellants:
Goldman & Goldman;Bernard J. Goldman argued,Missoula, Montana (M.K. Enterprises & Treasure State Sales) Datsopoulos,MacDonald & Lind; EdwardA. Murphy argued, Missoula,Montana (Wolfd/b/a Red DoorAdult Book Store)
For Respondents: David Gliko argued,CityAttorney, Great Falls, Montana

submitted: December 9, 1986 Decided: February 5, 1987
~iled:

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*H" ClerkMr. JusticeFred J. Weber delivered the Opinionof the Court.

This is an appeal from an Eighth Judicial District, Cascade County decision upholding the constitutionalityof a Great Falls city ordinance. The ordinance establishesa $300 per booth annual license fee on video booths used to view adultmovies. We affirm. The issue iswhether the trial court erred in concluding that the $300 annual fee for adult movie video booths was reasonableas a regulatorymeasure and thereforenot aviolation of the First Amendment of the United States Constitution. In January 1983 the City Commission of Great Falls adopted Ordinance No. 2311 "providing for the establishment of license fees to be paid by operators of coin-operated devices depicting sexualactivities." The annual license fee imposed under this ordinance is $300per booth. At the time of the trialof this case,therewere a total of 59booths in four adult bookstores in theCity of GreatFalls. The booths are small cubicles in which customers view movies on a television or movie screen. To view the movie, the customer is required to deposit money in a coin box. It has not been argued that any movies shown were obscene or otherwise illegal,but they are admittedly sexually explicit. This case began when the City of Great Falls (City) filed actions against two owners of adult bookstores for failing to pay the annual license fee. The actions were consolidated, together with another case filed by a third adultbookstoreowner whowas challenging the constitutionality of the ordinance. A trial was conducted at which the City presented evidence of actual and anticipated costs justifying the fee. After considering the evidence before it, the District Court concluded that the City had met itsburden of proving that the $300 fee is reasonable and "designed to further valid, nonspeech-related municipal interests." On appeal, the bookstores argue that the City has failed to prove that the $300 fee is justified by the costs established, or that it is either nominal or imposed to defray the expenses ofpolicing thebooths.

Did the trial court err in concluding that the $300 annual fee for adult movie video booths was reasonable as a regulatorymeasure and therefore not aviolationof the First Amendment of the United States Constitution? The FirstAmendment to the FederalConstitution provides that "Congress shall make no law

# . . . abridging the freedom of speech, or of the press." This right of free speech is protected from state infringement through application of the Due Process Clause of the FourteenthAmendment. Grosjeanv. American Press Co. (1936), 297 U.S. 233, 56 S.Ct. 444, 80 L.Ed. 660. Although many persons find them distasteful, booths for viewing adultoriented films which are not obscene
or otherwise illegalare protected by the FirstAmendment. A license fee on such protected activitieswillpass constitutional muster only if the fee is nominal and imposed as a regulatory measure to defray the expenses of policing the activity in question. Murdock v. Pennsylvania (1943), 319 U.S. 105, 63 S.Ct. 870, 87 L.Ed. 1292. These expenses may include more than routine processing of licenses; among permissible costs is the cost of "protecting those on the streets and at home against the abuses of solicitors." Murdock, 319U.S. at 116,citing Coxv. New Hampshire (1941), 312U.S. 569. The District Court cited cases involving fees on adult video booths and expanding the statement inMurdock that the allowable license fee may include the costs of policing theactivity being licensed. In Bayside ~nterprises,Inc. v. Carson (D.C.Fla. 1979), 470 F.Supp. 1140, 1149, the court stated:

As it now stands, the Code will merely serveperfectly valid municipal interests in public safety and welfare, most notably the presence of safe and sanitary conditions and the prevention of criminal conduct. These interests are wholly unrelated to suppressing free speech and, significantly enough, the plaintiffs have presented no evidence that furthering these interests through the Code's fee system would have the effect of suppressing free speech. Put another way, there is no evidence before this Court that these fees will drive the plaintiffs out of business or in any way hamper their ability to communicate through purveying their books and films. In sum, the City has met its burden of proving that these fees are reasonable, and that they are designed to furthervalid, nonspeech-related municipal interests. Accordingly,theymust be held constitutional.
The District Court also relied upon a North Dakota case inwhich a $300per booth license fee for adult video booths

was upheld. In City of Minot v. Central Ave. News, Inc.

(N.D. 1981), 308N.W.2d 851, 860,the court stated:



# . .. Central does not point to, nor has our own research unearthed, authority to the effect that a city must, before implementing a licensing scheme with a fee, demonstrate what the administrative costs would have been in thepast had the licensing scheme been in effect. Moreover, we believe that Central's reliance upon Bayside Enterprises, Inc. v. Carson, 450 F.Supp. 696 (M.D.Fla. 1978), to 

### - support its contention is misplaced. In Bayside, the licensinq fee in question was struck down not because itwas specula<ive,but because the City of Jacksonville's projected costsof enforcing anewly enacted licensing ordinance for adult bookstores were unreasonable. Thus, regarding the licensing fee at issue in the instant case,we are left to determineonly its reasonableness.Based on evidence ofanticipated costsof routine policing of the video booths, together with anticipated costsofproceeding on violations of the law, the court upheld the $300 per booth annual fee. In the present case, the District Court's findings and conclusions outline the testimony given at the hearing as to costs of regulating and policing the booths. The evidence established past police department costs of $44 per year for routine investigation to verify licensing requirements; $1,408 in expenses incurred in 1982-83 fora stakeout related to an outbreak of venereal disease traced to one of the booths; and $220 in expenses for a child pornography check. An experienced detective testified on estimated future police department costs and expenses relating to adequate policing of thebooths. He estimated that itwould cost $1,786.88 per year to police the booths to insure adequate enforcement of the State child pornography law, S 45-5-625,MCA; $8,064per year to police the booths to insure adequate enforcement of the State deviate sexual conduct law, S 45-5-505, MCA; and $2,688 per year to police the booths to insure adequate enforcementof the State obscenity law,S 45-8-201,MCA. The officer testified that at the time of thehearing the deviate sexual conduct law and the obscenity law were not being enforced in the City of Great Falls. A second law enforcement officer testified on the need for enforcement of the lawsprohibitingminors in these establishments. TheDistrict Court alsoheard testimony that City-County health enforcement costs and expenses for the booths in 1982-83 were $2,155.19, relating to the venereal disease traced to a video booth. Therewas uncontroverted testimony of homosexual and heterosexual intimate conduct between persons either sharing a booth or using "glory holes" in the walls; between the booths. Yearly health enforcement costswere set at $551.65, plus an anticipated increase in costsof monitoring and follow up contact tracing resulting from sexual contact in the booths and the risk of sexually transferable communicable diseases. Administrative licensing expenses were established as $18.29 for the cost of issuing the original license for each establishment and estimated annual renewal expense of $29.44 for each establishment. This Court has indicated that estimates of future expensesmay be included for purposes of settinga license fee. State v. Police Court (1923), 68 Mont. 435, 443-44, 219 P. 810, 812. Until law enforcement efforts have been in effect fora substantialperiod of time,we recognize that the costs of enforcement cannot precisely be established. The cost estimates provided by the City total over $13,000per year, plus the anticipated increased health department costs. As stated previously, health department costs were over $2,000 in 1982-83 from one outbreak of venereal disease. At $300 per booth, the city will receive income of $17,700 per year
on 59 booths. We conclude that the lower courtwas correct in not requiring proof of expenses precisely equalling the amount whichwillbe collectedon 59 videobooths. The bookstores also argue that it was not proven that enforcement of the child pornography law was in any way connected with operation of the video booths. The need for enforcement of the child pornography law is not eliminated because no child pornography has been found in the booths in the past. That conclusionwould ignore the very nature and purpose of thebooths

## - to show sexually titilating films for allmanner and persuasionof customers. The City has proposed random checks by plainclothes officers to enforce the deviate sexual conduct statute. Our conclusion that this proposal is reasonable isnot changedby the bookstores' proposal of alternative methods, which theysay infringe lesson the rightof free speech. Without going into detail, we conclude that the enforcement methods proposed by the bookstores would notbe effective. There was no evidence that the $300 per booth fee will drive the bookstores out of business or prohibit them from communicating through the films. Although the bookstores have questioned some of the enforcement cost figures, we affirm the holding of the lower court that the City has submitted sufficient evidence to justify the $300 per booth fee. We affirm the conclusionof theDistrictCourt that the City has met its burden of proving that the fee imposed is justified by the costs established and is set at an amount designed to defray the expensesofpolicing thebooths. Affirmed.

JusticesMr. Justice JohnC. Sheehy,dissenting:

It is not an easy or pleasant task to defend the purveyors of sexually-explicit films from a confiscatory tax in the guise of a license fee. Yet, the constitutional protection of the FirstAmendment is like the airwebreathe, it is there for the good and the bad. For the same reasons that I would strike down a law that levied a $2,000 annual license fee on individual lawyers (proposed in the 50th Legislature) Imust urge striking down the exorbitant license fee in this case. License fees are levied under the police power of the state and their assessment cannot go beyond the cost of policing the activity licensed, otherwise exorbitant fees violate the principle ofuniform taxation, and are held to be confiscatory. If the First Amendment is involved, there is additionally a problem of prior constraint. Once permitted, exorbitant license fees will be enacted on the wildest speculation and spread to other, perhaps cleaner endeavors. As the Spanish proverb said, "Whenyou see your neighbor being shaved, prepare yourself for the barber." The claimed costs by the city in justifying the license fee are exaggerated or illusory. For example, of the 455 venereal disease cases in Cascade County in 1982, two were traced to contacts at an adult bookstore. No further incidence of venereal disease traceable to adult bookstores
or adult filmbooths have occurred in that county to the time of trialhere. Yet themajority allow $1,400.00 per year in expenses for a stakeout, and $2,155.19 in annual city and county health costs as if these were annual recurring costs. The detectives in this case have acknowledged that they found no instances of child pornography in the time that these booths have existed in Great Falls. It is a crime inMontana, § 45-5-625,MCA, touse a child for or to exposehim to pornographic material anywhere in the State. At the present time the City of Great Falls has no program for enforcement of this act. If the statutewere to be enforced by the City ofGreat Falls,the cost of enforcement should be

an obligation of the general taxpayers. Likewise it is a crime under 5 45-8-201,MCA,purposely

or knowingly to provide, sell or deliver obscene material to anyone under age 18. This statute applies everywhere in the State of Montana. The City of Great Falls has no present program for the enforcement of the obscenity statute. Again the enforcement, if and when it occurs in the City of Great Falls should be an obligation of the general taxpayers. It is likewise a crime in the State ofMontana to engage indeviate sexual conduct under § 45-5-505,MCA. No instance of a prosecution for such conduct related to the booths appears in the evidence of this case. If there is a program for enforcement of this statute in the City of Great Falls, again it should be the obligation of the general taxpayers. In Wendling v. City of Duluth (D.C. Minn. 1980), 495 F.Supp 1380, 1384, 1385,the Court said: The narrow question here is whether the imposition of a license fee to finance enforcemeit of a separate obscenity ordinance can be considered the permissible policing of activitiesasprescribed in the Murdock case, or whether Murdock requires that the fee be no greater than is necessary to administer and enforce the licensing ordinance itself. A review of the case law suggests that the latter is the correctview.
The majority rely upon Bayside Enterprises, Inc. v. Carson (D.C. Fla. 1979), 470 F.Supp. 1140. In that case, the Courtupheld a $35 license fee. It was a follow-up case from

an earlier one, Rayside Enterprises, Inc. v. Carson (M.D. Fla. 1978), 450 F.Supp. 696, that struck down a $100 fee onthe grounds that the fee was speculative because the projected costs of enforcing a licensing ordinance for adult bookstoreswasunreasonable. I would strike down the $300 fee as unreasonable, and because of its unreasonableness, a prior constraint on the FirstAmendment rights of the $-kenees. (. I,

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Justice

Mr. JusticeWilliam E. Hunt, Sr.:


### I concur in the dissent of Mr. Justice Sheehy.