Opinion ID: 2273939
Heading Depth: 1
Heading Rank: 7

Heading: Licensing Fees

Text: Metro's ordinance requires adult entertainment establishments to pay $1,000 a year for a license to do business, and employees must pay $25 a year for a license to work in those establishments. Appellants argue that the cost of those licenses operates as a prior restraint on their right to operate and work in an adult entertainment establishment. A `prior restraint' exists when speech is conditioned upon the prior approval of public officials. Nightclubs, Inc. v. City of Paducah, 202 F.3d 884, 889 (6th Cir.2000), overruled on other grounds by 729, Inc. v. Kenton County Fiscal Court, 515 F.3d 485 (6th Cir.2008) (quoting Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 553, 95 S.Ct. 1239, 43 L.Ed.2d 448 (1975)). The United States Supreme Court has decided three cases that relate to charging fees to engage in protected expression: Cox v. New Hampshire, 312 U.S. 569, 576-77, 61 S.Ct. 762, 85 L.Ed. 1049 (1941); Murdoch v. Pennsylvania, 319 U.S. 105, 114, 63 S.Ct. 870, 87 L.Ed. 1292 (1943); and Forsyth County, Ga. v. Nationalist Movement, 505 U.S. 123, 112 S.Ct. 2395, 120 L.Ed.2d 101 (1992). Those cases essentially looked at the following three factors in determining whether a license fee is an improper restraint on free speech: (1) whether the fee's maximum amount will deter the exercise of First Amendment rights, (2) whether the measures the cost of which the County seeks to transfer to licensees via its fee structures are narrowly tailored means of advancing the County's interest in curbing secondary effects, and (3) whether the County's cost estimates for those measures are reasonable. 729, Inc., 515 F.3d at 501. The Sixth Circuit in 729, Inc., distilled two general principles from Cox, Murdoch, and Forsyth County [:] First, an ordinance requiring a person to pay a license or permit fee before he can engage in a constitutionally protected activity does not violate the Constitution so long as the purpose of charging the fee is limited to defraying expenses occurred [sic] in furtherance of a legitimate state interest. In other words, in order to transfer the cost of a government measure to a licensee, the measure itself must be legitimate. Thus, the measure must not be based on the content of the message, must be narrowly tailored to serve a significant governmental interest, and must leave open ample alternatives for communication. Second, [there must be] some limit on the amount the government could charge, based on the potential for a fee to deter protected speech. 515 F.3d at 502-03 (quotations and citations omitted). Metro presented evidence of funds it would expect to spend on law enforcement, background checks, and license application processing, which would exceed projected revenue generated by the license fees. In Bright Lights, Inc. v. City of Newport, the court found that because Newport's licensing fees combat undesirable effects such as prostitution, the fees address an overriding government interest. 830 F.Supp. 378, 386 (E.D.Ky.1993) (internal quotation and citation omitted). Likewise, the fees in the case at bar were shown to be related to legitimate costs associated with adult entertainment businesses. As to the amount of the fees, licensing fees of $250 and $5,000 have been upheld in Kentucky for adult entertainment businesses. Bright Lights, Inc., 830 F.Supp. at 386 ($5,000 licensing fee upheld); Mr. B's Bar and Lounge, Inc. v. City of Louisville, 630 S.W.2d 564, 568 (Ky.App.1981) ($250 licensing fee upheld as constitutional as a matter of law); but cf., 729, Inc., 515 F.3d at 503-04 (remanding on issue of $3,000 licensing fee to determine whether amount narrowly tailored to serve a significant governmental interest). Given the evidence proffered by Metro regarding the costs of dealing with adult entertainment businesses and their secondary effects, we deem the licensing fees to be constitutionally valid.