Opinion ID: 2273939
Heading Depth: 1
Heading Rank: 9

Heading: Principal Disclosure Provision

Text: The ordinance requires that an application for an adult entertainment license contain the name, address, date of birth, and a copy of a government-issued photo identification card or a set of fingerprints of all principal owners, if the applicant is an individual. If the applicant is other than an individual, such as a corporation or partnership, each officer, director, general partner, principal owner, and each other person who will participate directly in decisions relating to the management of the business shall provide the above-listed information. A principal owner is defined in the ordinance as any person owning, directly or beneficially, twenty percent or more of the business. Appellants argued that the disclosure requirement for corporate shareholders owning only twenty percent of an adult-oriented business is a prior restraint on free speech, as well as a violation of their fundamental right to privacy. Although the trial court acknowledged that government has a legitimate interest in knowing the identity of those individuals who have direct legal responsibility for the operations of adult oriented businesses, the court determined that the disclosure requirement for those owning only a twenty percent interest in the business was overbroad and, thus, did not meet the fourth prong of the O'Brien test. The trial court reasoned that [a] twenty percent or less shareholder would normally have little, if any, responsibility for the everyday operations of the business, and twenty percent is generally not a controlling or significant share in the business. The Court of Appeals reversed the lower court's ruling, finding that the requirement of disclosure of twenty percent shareholders furthered Metro's interest in combating organized crime associated with the adult entertainment industry, which was one of the stated purposes of the ordinance. The United States Supreme Court has recognized that compelled disclosure, in itself, can have a chilling effect and seriously infringe on one's right to free speech guaranteed by the First Amendment. Buckley, 424 U.S. at 64, 96 S.Ct. 612 (1976). However, the right to anonymously exercise one's right to free speech is not absolute. A disclosure requirement will be upheld if the countervailing state interests in the information sought is shown to further a substantial government interest. Id. This requires a relevant correlation or substantial relation between the information required and the government interest. Id. Here, Metro maintains they are entitled to disclosure of the information regarding twenty percent or more shareholders and those involved in the day-to-day operation of the business to further their interest in combating the crime, in particular organized crime, associated with adult oriented businesses. In Envy, Ltd. v. City of Louisville, a similar disclosure provision was upheld in a prior ordinance enacted by the City of Louisville regulating adult entertainment establishments. 734 F.Supp. 785 (W.D.Ky. 1990). In that case, the more detailed personal information (name, address, date of birth, social security number and photograph of applicant) was required of majority shareholders and those involved in the day-to-day operations of the business, while only basic information (name and address) was required of all officers and directors. Id. at 787-89. The court found that evidence of the extensive involvement of organized crime in adult entertainment activities necessitated disclosure of the true owners of these establishments to aid in enforcement of criminal laws, public and safety regulations, and income tax laws. Id. at 790. Hence, the court held that the disclosure requirement was rationally related to and furthered the government's substantial interest in reducing the secondary effects resulting from adult entertainment businesses. Id. The question before us is whether the disclosure requirement for only twenty percent shareholders is overbroad. In Tee & Bee, Inc. v. City of West Allis, 936 F.Supp. 1479 (E.D.Wis.1996), a disclosure requirement for ten percent or more shareholders in adult oriented businesses was held to be constitutional, and in Dumas v. City of Dallas, 648 F.Supp. 1061 (N.D.Tex.1986), reversed in part on other grounds sub nom. EFW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 110 S.Ct. 596, 107 L.Ed.2d 603 (1990), a disclosure requirement for twenty percent or more shareholders was upheld. But see East Brooks Books, Inc. v. City of Memphis, 48 F.3d 220, 226 (6th Cir.1995) (disclosure requirement for any shareholder held to be impermissibly broad). The controlling principle in these cases appears to be the setting of a minimum level of interest in the adult-oriented establishment in order to ensure that an individual shareholder is not subjected to regulation when he or she possesses a mere de minimus interest. Tee & Bee, Inc., 936 F.Supp. at 1488; see also East Brooks Books, Inc., 48 F.3d at 226. As to Metro's disclosure requirement in the present case, in view of the minimum level of a twenty percent interest and the government's interest in curbing organized crime, which can be difficult even when there are no unknowns, we believe the disclosure provision is not overbroad. Accordingly, the disclosure provision is constitutional.