Court Opinion

ID: 6522
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:18:19+00
Date Added: 2024-06-11T12:38:51.211811
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                         FOR THE FIFTH CIRCUIT

                                 No. 93-4631

TK'S VIDEO, INC.,
                                                 Plaintiff-Appellant,

                                   versus

DENTON COUNTY, TEXAS,
                                                 Defendant-Appellee.

*****************************************************************

                                   93-5234

TK'S VIDEO, INC.,
                                                 Plaintiff-Appellee,

                                   versus

DENTON COUNTY, TEXAS,
                                                 Defendant-Appellant.

           Appeal from the United States District Court
                 for the Eastern District of Texas

                               (June 20, 1994)

Before GOLDBERG, HIGGINBOTHAM, and EMILIO M. GARZA, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

     TK's Video, Inc., an adult book and video store, sued Denton

County, Texas, contending its licensing requirements for "adult"

businesses violate the First and Fourteenth Amendments.1                The

district    court       held       several       licensing    requirements

     1
      This Order of Denton County is attached as Appendix A.
unconstitutional, severed them, upheld the others, and awarded

attorney's fees.         Both TK's and Denton County appealed.                  We reject

contentions that the County's licensing scheme was impermissibly

broad    and    failed      to   provide    adequate          procedural     protection,

including judicial review. We affirm except in one particular. We

find that the County regulation fails to assure maintenance of the

status quo while processing an application for a license by a

business existing when the County adopted its regulation.

                                            I.

     Erotic         nonobscene      printed        matter,          films,     and     live

entertainment are sheltered by the First Amendment, Mitchell v.

Commission on Adult Entertainment Establishments, 10 F.3d 123, 130

(3rd Cir. 1993), but enjoy less protection than some other forms of

speech such as political speech.                Young v. American Mini Theatres,

Inc., 427 U.S. 50, 70 (1976).               There is no contention that TK's

sells obscene pornographic material.                Rather, TK's is regulated as

an adult book and video store.

     We distinguish between regulating the content and regulating

the consequence of protected activity. City of Renton v. Playtime

Theatres, Inc., 475 U.S. 41, 46-48 (1986). A content-neutral time,

place,    or    manner      restriction     must        (1)    be   justified     without

reference to the content of the regulated speech; (2) be narrowly

tailored       to   serve    a   significant       or    substantial         governmental

interest;       and    (3)       preserve        ample        alternative      means    of

communication.        Id.

                                            2
     Under the first City of Renton factor, the Denton County order

must justify its restrictions by reference to effects attending the

regulated speech.    The order, by its own terms, combats pernicious

side effects of adult businesses such as prostitution, disease,

street crime, and urban blight.             It does not censor, prevent

entrepreneurs from marketing, or impede customers from obtaining

communicative material.       The County's regulation does not on its

face regulate content.        Rather, the regulation is aimed at the

impact on the surrounding community. But there are also procedural

limits to regulating even at this lesser level of protection.

     In FW/PBS, Inc. v. City of Dallas, 493 U.S. 215 (1990),

Justice O'Connor, writing for Justices Stevens and Kennedy, and

joined in the judgment by Justices Brennan, Marshall, and Blackmun,

stated that content-neutral regulations contain adequate procedural

safeguards when (1) any prior restraint before judicial review of

the licensing process is for a specified brief period during which

the status quo is maintained; and (2) there is prompt judicial

review after denial of a license.

                                      II.

     TK's   first   charges    that   the   Denton   County   order,   which

provides that a county official shall issue an operating license

within 60 days after receiving the application unless he discovers

one of several disqualifying facts, fails to provide adequate

procedural safeguards.2       TK's argues that the county must have a

     2
      The Order provides that "[a]ll decisions of the county
director of public works become final within thirty (30) days."
No one contends that this provision prevents an immediate appeal

                                       3
deadline shorter than 60 days and that it must not interfere with

normal business operation during the application process.

      Under FW/PBS, the County must ensure that any restraint before

judicial review is limited to a specified brief period.                    In Teitel

Film Corp. v. Cusack, 390 U.S. 139, 141 (1967) (per curiam), the

Supreme Court found that 50 to 57 days is not a specified brief

period.     It is true that Denton County's order placed a 60-day

limit on licensing procedures after receipt of an application. But

the regulation in Teitel was content-based.                       The ordinance in

Teitel also required administrators to review films before they

could be shown, a relatively easy task compared to licensing adult

businesses     and    the    people      who   run   them.      Licensing      entails

reviewing      applications,       performing        background      checks,    making

identification cards, and policing design, layout, and zoning

arrangements.        We are persuaded that Denton County's order creates

less of a danger to free speech and requires a more time-consuming

inquiry than screening movies.             We conclude that here 60 days for

acting on license applications imposes no undue burden.

      TK's also urges that the regulation is invalid for a related

reason. It urges that Denton County fails to assure maintenance of

the   status    quo.        The   contention     is    that    the    County    cannot

constitutionally        shut      down    an   existing       business   while    its

application for a license is pending and that TK's was operating

when Denton County adopted its regulation. The County points out

of a denial of license to the district court of Denton County.
We read this language as setting a time within which an appeal
must be lodged.

                                           4
that    it   has   not    attempted      to    close   TK's;   that   because   its

regulation is content- neutral, it is not obligated to refrain from

regulation     during     the    licensing      period.    The   district   court

rejected TK's contention concluding that interim regulation is

implicit in a valid period for issuing a license.                This is true as

far as it goes, but it is qualified by the further limit that the

County must maintain the status quo.               We agree that an applicant

for a license not in business when the Order was adopted is not

free to operate while its license is pending.

       Maintaining the status quo means in our view that the County

cannot regulate an existing business during the licensing process.

It is no answer that the County has not elected to do so.                       The

absence of constraint internal to the regulation is no more than

open ended licensing.           Businesses engaged in activity protected by

the First Amendment are entitled to more than the grace of the

State.

         The regulating order does not address the problem.                     The

order    maintains       the    status   quo    pending   judicial    review    for

licensees facing suspension or revocation.                An applicant denied a

license has a right to de novo review by the state district court

and, by the terms of the Order, filing an appeal stays a Decision

of the Director of Public Works in suspending or revoking a license

until final decision by the state district court. Because TK's was

in business when the Order was adopted, its free speech activity

cannot be suppressed pending review of its license application by

the County.

                                           5
      TK's also contends that the Order is deficient in failing to

provide an automatic stay pending appeal of an administrative

decision denying an application for a license. This argument is in

essence a twin of the contention that the status quo must be

maintained.       We have concluded that the County cannot alter the

status quo during the licensing process.        There is then nothing to

stay except a denial of a license.         Stated another way, the issue

is whether a business must be allowed to commence operation without

a license during judicial review.        Here we agree with the district

court that a valid time period within which the County can act

carries the implicit rejection of such required interim licensing.

Nor   is   this    unduly   restrictive,    given   the   availability   of

expeditious judicial review.        A rejected license applicant has

thirty days to seek judicial relief before the order of the

Director of Public Works becomes final.         National Socialist Party

v. Village of Skokie, 432 U.S. 43, 44 (1977).

      This does not answer the further question of how much of the

total licensing process must be complete within the specified brief

period, specifically whether the brief period includes completion

of judicial review.         Despite contrary suggestions in Justice

Brennan's opinion in FW/PBS, Inc. and some uncertainty in the

language of Justice O'Connor's opinion in the same case, we read

the Supreme Court to insist that the state must offer a fair

opportunity to complete the administrative process and access the

courts within a brief period.       A "brief period" within which all

judicial avenues are exhausted would be an oxymoron.

                                     6
     TK's objects that the order does not provide automatic and

prompt judicial review, or an automatic stay of an order denying a

license.   As we explained, the Order provides that filing a notice

of appeal to the state district court of Denton County stays an

administrative decision revoking or suspending a license.           So the

focus of TK's contention is on the absence of a stay of an order

denying a license. FW/PBS requires only a prompt judicial hearing,

a standard that the order meets by giving an unsuccessful license

applicant 30 days to appeal to a district court in Denton County

"on a trial de novo basis."         The availability of expeditious

judicial review obviates the need for an automatic stay.        National

Socialist Party v. Village of Skokie, 432 U.S. 43, 44 (1977).

                                  III.

                                   A.

     TK's urges that the County's list of persons associated with

its business who must be licensed is impermissibly broad.           Denton

County required a license from numerous persons associated with

adult   businesses.    The   district    court,   however,   struck   down

licensing requirements for stockholders, limited partners, equity

holders and their employees, and property owners and equity holders

associated   with   adult   businesses   from   the   regulation.     This

exclusion is not at issue and the regulation now extends only to

owners, clerks, and employees of adult businesses, corporations or

directors of adult businesses and their employees, and partners in

adult businesses and their employees.

                                   7
     Under the licensing provision the County Director of Public

Works    must   approve        a   license     unless      he   finds    an    enumerated

disqualifying factor such as a prior adult business regulatory

violation or a conviction for a certain sexual offense.

     Licensing clerks and employees ensures that only persons who

satisfy    basic       legal       and    hygienic    standards         work   in   adult

businesses.       The County also requires that all adult business

employees wear an identification card at work.                          The County says

that this requirement permits it to monitor the work force of adult

businesses and to ensure that only duly authorized adults work in

these enterprises.

     While      corporations         reasonably      may    be   obliged       to   submit

detailed business information to obtain a license, the requirement

that owners and employees disclose personal information to County

officials is more burdensome.                 The Denton County order requires

owners and employees to disclose only their age, recent infractions

of certain adult business regulations, and recent convictions for

certain sexual offenses.                 The County says that their information

assists in making background checks and preparing identification

cards.

     Compelled content-neutral disclosure of owner and employee

information      can    chill       protected     expression.           See    Talley   v.

California, 362 U.S. 60, 64 (1960); NAACP v. Alabama ex rel.

Patterson, 357 U.S. 449, 461-62 (1958).                     This chill could occur

even if suppressing particular expression is unintended.                            NAACP,
357 U.S. at 461.         We insist that countervailing state interests

                                              8
must further a substantial government interest.                 Buckley v. Valeo,

424 U.S. 1, 64 (1975) (per curiam). This protective skirt requires

a "relevant correlation" or "substantial relation" between the

information required and the government interest.                  Id.

     We are persuaded that requiring owners and employees to supply

information     about    their    age       and    certain      prior    regulatory

infractions     and   sexual   offenses      substantially       relates    to   the

substantial     government     interest     of     curtailing    pernicious      side

effects of adult businesses.            The Denton County order does not

demand comprehensive disclosure of personal information, but only

information reflecting ability to function responsibly in the adult

business setting.

     The Seventh and Ninth Circuits have invalidated disclosure

requirements.     In Genusa v. City of Peoria, 619 F.2d 1203 (7th Cir.

1980), the court invalidated the required disclosure of past

aliases,   criminal      convictions,        and     ordinance     violations     as

unrelated to the city's stated goal of preventing adult businesses

from congregating in one location.            Id. at 1215-19.

     In Acorn Investments, Inc. v. City of Seattle, 887 F.2d 219,

224-26   (9th   Cir.    1989),   the    court      invalidated     a    shareholder

disclosure rule.       The city wanted to use the information to notify

shareholders of ordinance requirements and to hold them legally

responsible for violations, although officers and directors, not

shareholders, have legal responsibility for businesses.                   The court

found no logical connection between the shareholder disclosure rule

and the stated purpose for the information.               Id. at 226.

                                        9
      Genusa and Acorn are not apposite.              The Denton County order

outlines the ambitious agenda of curtailing negative side effects

not simply of clusters of adult businesses, but of each adult

business.        Disclosure of owner and employee personal history might

not be tailored to locating adult businesses, but it does monitor

persons     with     a   history   of    regulatory       violations    or   sexual

misconduct who would manage or work in them.                These histories are

plainly correlated with the side effects that can attend these

businesses, the regulation of which was the legislative objective.

In   more       legalistic   and   abstract      terms,    ends   and   means     are

substantially related.           Insisting on this fit of ends and means

both assures a level of scrutiny appropriate to the protected

character of the activities and sluices regulation away from

content, training it on business offal.

                                          B.

      An applicant requesting a license must post a sign on the

business premises disclosing his request.                 An applicant must also

disclose his request by advertising in local newspapers.                          The

district court upheld these disclosure requirements, while striking

down a requirement requiring applicants to notify property owners

within      a    specified      radius   of     the   proposed     enterprise.

      The two notice provisions that survived challenge in the

district court ensure that potential neighbors know about the

impending arrival of adult businesses. Notice to others of pending

zoning regulation is supported by a substantial state interest,

serving     the     practical    role    of    allowing    effected     persons    an

                                          10
opportunity to examine the request and test its accuracy.                   These

notice requirements are not onerous.                  Nor are they disguised

censorship. Rather, they are typical of notices routinely required

in   zoning      regulations.      We   are    persuaded    that     the   notice

requirements are sufficiently tailored to the regulatory objective.

                                        C.

      Government cannot tax First Amendment rights, but it can exact

narrowly tailored fees to defray administrative cost of regulation.

Cox v. New Hampshire, 312 U.S. 569, 576-77 (1941).                 Denton County

requires each business and individual requesting a license to pay

annual fees of $500 and $50, respectively.                 The district court

found these amounts tied to the cost of investigating applicants

and processing licenses.         We agree.

                                        D.

      We have upheld design and layout regulations for adult film

and video theaters.        See FW/PBS, Inc. v. City of Dallas, 837 F.2d
1298, 1304 (5th Cir. 1988), aff'd in part, rev'd in part, vacated

in part, 493 U.S. 215 (1990).           The Denton County order contains

specifications identical to those previously upheld.                 Completely

private    and    poorly   lit   viewing     booths    encourage    illegal   and

unsanitary sexual activity in adult theatres.              See FW/PBS 837 F.2d

at 1304.      The design and layout regulations narrowly respond to a

substantial governmental interest.

                                        E.

      The remaining requirements in the Denton County order for

issuing, suspending, or revoking licenses resemble those in the

                                        11
FW/PBS ordinance, which survived constitutional challenge. See id.

at 1305-06.       These procedures, like those in FW/PBS, can be

objectively measured and rest on adequate factual bases either

obvious by their terms or ascertainable by reference to other

sources of law.     See id. at 1306.

                                     IV.

     Denton County argues that the district court abused its

discretion by finding that TK's was entitled to attorney's fees.

See United States v. Mississippi, 921 F.2d 604, 609 (5th Cir.

1991).    To    receive    attorney's      fees,   a   plaintiff   must   be   a

prevailing     party,   that   is,   the   plaintiff     must   succeed   on   a

significant issue that achieves some of the benefit the plaintiff

sought in bringing suit.         Farrar v. Hobby, 113 S. Ct. 566, 572

(1992).      A prevailing party must effect change in the legal

relationship between plaintiff and defendant.             Id. at 572-73.

     TK's has succeeded on significant issues and has altered its

legal relationship to the County.          The district court invalidated

licensure requirements for stockholders, limited partners, equity

holders, and property owners associated with adult businesses.                 As

well, the court invalidated the notice requirement in regard to

property owners in close proximity to proposed adult businesses.

We have, in turn, insisted on a status quo provision.                     These

holdings materially alter the relationship of TK's to the county.

     Denton County urges that TK's has not applied for a license,

so the invalidation of any part of the order has not altered any

legal relationship.       This ignores the reality that TK's must apply

                                      12
for a license to continue operation.        After the trial court's and

this court's judgment, however, TK's must meet fewer requirements.

TK's lawsuit has altered the relevant legal regime.

     In Rhodes v. Stewart, 488 U.S. 1 (1988) (per curiam), the

Court reversed an attorney's fees award after a successful lawsuit

to modify prison policies because one plaintiff had died and the

other had been released.    It found that a victory "could not have

in any way benefited either plaintiff."        Id. at 4.    Similarly, in

Texas State Teachers Ass'n v. Garland Indep. Sch. Dist., 489 U.S.
782 (1989), the Court invalidated as vague a school regulation

requiring that meetings during nonschool hours be conducted only

with prior approval of the principal.         The court suggested that

this finding alone would not support prevailing party status

without "evidence that the plaintiffs were ever refused permission

to use school premises during nonschool hours."         Id. at 792.

     In Rhodes, the plaintiffs stood little chance of benefiting

from the changed policy.    They would do so only if they returned to

prison.    That   chance   was   too    speculative   for   the   surviving

plaintiff and nonexistent for the dead one.            As a result, the

lawsuit did not materially alter the legal relationship between the

parties.   A similar rationale explains Texas State Teachers, in

which the plaintiffs failed to show that the principal had ever

withheld permission for a meeting. As the plaintiffs may have been

free to meet regardless of their suit, it was uncertain whether

success on the merits would alter any legal relationship.

                                   13
      In contrast to the plaintiffs in Rhodes and Texas State

Teachers, T.K.'s faces certain regulation.             First, TK's must seek

a license to continue operation.             The original order, partially

invalidated by the district court, would have required TK's to seek

licensure of stockholders, limited partners, equity holders, and

certain property owners, and to notify certain neighbors at its

business location.         Unlike the plaintiffs in Rhodes, TK's would

have been subject to these unconstitutional requirements with

virtual certainty.

      Second, the requirements that TK's seek licenses for certain

persons and notify certain neighbors were not vague or optional,

but   were    prerequisites      for   operation.        These     invalidated

regulations    did   not    resemble   the    school   rule   in   Texas   State

Teachers      because,       unlike    the      principal's        unstructured

decisionmaking process, they were neither indefinite by their terms

nor discretionary in their application.                TK's must meet these

requirements to remain open.

      Denton County cites LaGrange Trading Co. v. Broussard, No. 90-

2306, 1993 U.S. Dist. LEXIS 7281 (E.D. La. May 25, 1993), in which

an adult bookstore challenged a zoning ordinance to remain at its

present location.        The court upheld most of the ordinance, but

invalidated a special permit requirement.                From this partial

victory, the plaintiff sought attorney's fees.                The court denied

the request because the remaining provisions would require the

business to move anyway.       Id. at *16.     Unlike the plaintiff in that

case, TK's benefits from its lawsuit.

                                       14
     The district court entertained a request by Michael Gross for

$22,487.50 in attorney's fees, but reduced the actual award to

$7,500.   Denton County argues that the $7,500 is unreasonably high

given the degree of TK's success.     In particular, the County notes

that TK's asserted 72 constitutional challenges to the order, but

prevailed on only 5 of them, a 7% success rate, which might suggest

that $7,500 of the $22,487.50, or 33% of the requested fees, is too

generous. TK's counsel was able and the County's counting fails to

capture the success of this suit.     We do not think so, but even if

the award is generous, it is not an abuse of discretion.

     We affirm the district court's carefully crafted decree in

virtually all respects.     We remand to the district court with

instruction to enter judgment with the additional declaration that

until the order of the Director of Public Works becomes final, an

applicant for a license in business on the effective date of the

Order cannot otherwise be regulated by the Order.

     AFFIRMED in part, VACATED and REMANDED in part.

                                 15