Court Opinion

ID: 3003393
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:43:20.418105+00
Date Added: 2024-06-11T11:45:52.727600
License: Public Domain

In the

       United States Court of Appeals
                     For the Seventh Circuit
                          ____________________
No. 05-1926
ANNEX BOOKS, INC., et al.,
                                                        Plaintiffs-Appellants,
                                       v.
CITY OF INDIANAPOLIS, INDIANA,
                                                         Defendant-Appellee.
                          ____________________
            Appeal from the United States District Court for the
            Southern District of Indiana, Indianapolis Division.
       No. IP 03-CV-00918 SEB VSS — Sarah Evans Barker, Judge.
                          ____________________

ARGUED SEPTEMBER 8, 2005 — DECIDED SEPTEMBER 3, 2009*
               ____________________

     Before EASTERBROOK, Chief Judge, and FLAUM and
ROVNER, Circuit Judges.
     EASTERBROOK, Chief Judge. Indianapolis revised its adult-
business ordinances in 2003. These amendments expanded the
definition of “adult entertainment business” to include any re-
tail outlet that devotes 25% of more of its space or inventory to,
or obtains at least 25% of its revenue from, adult books, maga-
zines, films, and devices. (Adult “devices” include vibrators, dil-
dos, and body-piercing implements.) See Indianapolis Rev.
Code §807-103. Until 2003 the trigger had been 50%. Any
“adult entertainment business” needs a license, must be well lit
and sanitary, and may not be open on Sunday or between mid-

   *   This opinion is being released in typescript. A printed copy will follow.
No. 05-1926                                                   Page 2

night and 10 a.m. on any other day. Indianapolis Rev. Code
§§ 807-202(a), -301(f), -302.
    Four firms defined as “adult entertainment businesses” un-
der the revised ordinance filed this suit, contending that the
law violates the first and fourth amendments, applied to the
states by the fourteenth. The district court enjoined one por-
tion of the amended ordinance and held that plaintiffs are enti-
tled to notice of inspections. 333 F. Supp. 2d 773, 787–89 (S.D.
Ind. 2004). Indianapolis has not appealed from that portion of
the decision. The district court rejected plaintiffs’ argument
that the procedures for the issuance and judicial review of li-
censes permit the City to take too long, or afford it too much
discretion. Id. at 778–83. Plaintiffs contest that portion of the
decision, but it is supported by Littleton v. Z.J. Gifts D-4, L.L.C.,
541 U.S. 774 (2004), and Thomas v. Chicago Park District, 534 U.S.
316 (2002). Indianapolis gives businesses provisional licenses
while judicial review proceeds, Rev. Code §807-207(c), so its
ordinance is easier to defend than the one sustained in Littleton.
See Andy’s Restaurant & Lounge, Inc. v. Gary, 466 F.3d 550, 556
(7th Cir. 2006). We have nothing else to add to this portion of
the district court’s thoughtful opinion.
    That leaves plaintiffs’ challenge to the definition of “adult
entertainment business” and the imposition of any limits on
these firms, other than whatever rules apply to bookstores and
video-rental outlets in general. Indianapolis justifies its restric-
tions on the ground that they reduce crime and other secondary
effects associated with adult businesses. See Los Angeles v.
Alameda Books, Inc., 535 U.S. 425 (2002), and Renton v. Playtime
Theatres, Inc., 475 U.S. 41 (1986). Although the restrictions are
not as extensive as those at issue in Alameda Books and Playtime
Theatres—the City does not, for example, limit the number of
adult establishments by prescribing a 1,000-foot buffer zone
around each, or require them to locate in industrial zones far
from pedestrian traffic—the City nonetheless concedes that its
laws are subject to “intermediate” scrutiny because plaintiffs
sell books. This means that, to prevail, the City needs evidence
that the restrictions actually have public benefits great enough
to justify any curtailment of speech.
    The sort of evidence that the Justices deemed sufficient in
Alameda Books and Playtime Theatres showed that crime is higher
in city blocks (or census tracts) in which adult establishments
are located. That could be because real estate is cheaper in
No. 05-1926                                                            Page 3

high-crime areas, and that sleazy establishments tend to con-
gregate in low-rent districts. But the fact that crime rose as
adult establishments entered the area (see 535 U.S. at 435 (de-
scribing the study)) implied that the causal arrow ran from adult
businesses to crime, rather than the other way. That could hap-
pen because adult establishments attract a particular kind of
clientele that is emboldened by association with like-minded
people, so that prostitution and public masturbation (for exam-
ple) are more acceptable near a congeries of sexually oriented
businesses than they would be elsewhere. Justice Kennedy put
it this way in Alameda Books:
   We may posit that two adult stores next door to each other attract
   100 patrons per day. The two businesses split apart might attract 49
   patrons each. (Two patrons, perhaps, will be discouraged by the in-
   convenience of the separation—a relatively small cost to speech.)
   On the other hand, the reduction in secondary effects might be
   dramatic, because secondary effects may require a critical mass.
   Depending on the economics of vice, 100 potential custom-
   ers/victims might attract a coterie of thieves, prostitutes, and other
   ne’er-do-wells; yet 49 might attract none at all. If so, a dispersal or-
   dinance would cause a great reduction in secondary effects at very
   small cost to speech. Indeed, the very absence of secondary effects
   might increase the audience for the speech; perhaps for every two
   people who are discouraged by the inconvenience of two-stop
   shopping, another two are encouraged by hospitable surroundings.
   In that case, secondary effects might be eliminated at no cost to
   speech whatsoever, and both the city and the speaker will have their
   interests well served.
535 U.S. at 452–53 (Kennedy, J., concurring in the judgment).
    Indianapolis relies on this line of argument, as well as on a
study it conducted in 1984, before adopting the original version
of the challenged ordinance. This study found higher crime
rates near businesses that were defined as “adult”. But here the
City encounters problems, for the studies on which it relies—
like Justice Kennedy’s hypothetical—deal with ordinances dis-
persing adult businesses. The 2003 revision does not require
dispersal. Instead it closes all businesses after midnight and on
Sundays, and requires bright interior lights when the businesses
are open. None of the studies on which the City relied before
enacting the law, and none introduced in this record, concerns
that kind of ordinance. Nor do the studies show that an in-
crease in adult businesses’ operating hours is associated with
more crime; the studies are simple cross-sectional analyses that
leave causation up in the air. (In other words, they may show no
No. 05-1926                                                 Page 4

more than that adult businesses prefer high-crime districts
where rents are lower.)
    More importantly, the studies to which the City points
concern adult businesses that offer live sex shows, private view-
ing booths, or both. This circuit’s decisions likewise concern
live entertainment. See, e.g., R.V.S., L.L.C. v. Rockford, 361 F.3d
402 (7th Cir. 2004) (exotic-dancing nightclubs); G.M. Enter-
prises, Inc. v. St. Joseph, 350 F.3d 631 (7th Cir. 2003) (nude danc-
ing in bars). Three of the four plaintiffs in this suit, however, do
not offer live entertainment or private viewing. They are simple
book or video outlets, brought under the regulatory umbrella
only because 25% or more of their sales come from sex-related
materials. Until the 2003 amendments, these stores were
treated the same as Barnes & Noble or Blockbuster Video. If
they were associated with significant crime or disorderly con-
duct, it should be easy for Indianapolis to show it. But the City
has not offered an iota of evidence to that effect.
    The City’s only evidence about the four plaintiffs is that
during 2002 the police made 41 arrests for public masturbation
at Annex Books, the only plaintiff that offers private booths.
(The masturbation was “public” in the sense that officers could
see what customers were doing inside the booths.) The district
court thought this datum enough, by itself, to support the 2003
amendments. Yet it is hard to grasp how misdemeanors com-
mitted in single-person booths justify the regulation of book
and video retailers that lack such booths.
    Indeed, we do not know when the arrests occurred. Unless
most of them were after midnight, or on Sunday, they don’t jus-
tify the ordinance even with respect to establishments that
supply entertainment on the premises. Nor can we tell whether
41 arrests at one business over the course of 365 days is a large
or a small number. How does it compare with arrests for
drunkenness or public urination in or near taverns, which in
Indianapolis can be open on Sunday and well after midnight? If
there is more misconduct at a bar than at an adult emporium,
how would that justify greater legal restrictions on the book-
store—much of whose stock in trade is constitutionally pro-
tected in a way that beer and liquor are not.
    Indianapolis has approached this case by assuming that any
empirical study of morals offenses near any kind of adult estab-
lishment in any city justifies every possible kind of legal restric-
No. 05-1926                                                           Page 5

tion in every city. That might be so if the rational-relation test
governed, for then all a court need do is ask whether a sound
justification of a law may be imagined. See, e.g., Vance v. Brad-
ley, 440 U.S. 93 (1979); Massachusetts Board of Retirement v. Mur-
gia, 427 U.S. 307 (1976). But because books (even of the “adult”
variety) have a constitutional status different from granola and
wine, and laws requiring the closure of bookstores at night and
on Sunday are likely to curtail sales, the public benefits of the
restrictions must be established by evidence, and not just as-
serted. The evidence need not be local; Indianapolis is entitled
to rely on findings from Milwaukee or Memphis (provided that
a suitable effort is made to control for other variables). See
Andy’s Restaurant, 466 F.3d at 554–55. But there must be evidence;
lawyers’ talk is insufficient.
     Alameda Books establishes that much. Four Justices would
have ruled for the plaintiff, without need for a trial, even
though the empirical support for the Los Angeles ordinance
was materially stronger than the data that Indianapolis proffers.
535 U.S. at 453–66 (Souter, J., joined by Stevens, Ginsburg &
Breyer, JJ.). (The Los Angeles study was stronger because it im-
plied causation and not just correlation.) The other five Justices
concluded that a hearing was necessary to determine whether
the evidence that Los Angeles offered was strong enough. None
of the Justices thought that summary judgment could be
granted in the municipality’s favor when the strength of, and
appropriate inferences from, the studies were contested. (Well,
“none” is an overstatement. Justice Scalia concluded that pan-
dering may be prohibited without any need for evidence. 535
U.S. at 443–44 (concurring opinion). But Indianapolis does not
defend its ordinance on that basis.) Justice O’Connor’s plurality
opinion (joined by Chief Justice Rehnquist and Justices Scalia
and Thomas) was explicit (535 U.S. at 438–39):
   [A] municipality [cannot] get away with shoddy data or reasoning.
   The municipality’s evidence must fairly support the municipality’s
   rationale for its ordinance. If plaintiffs fail to cast direct doubt on
   this rationale, either by demonstrating that the municipality’s evi-
   dence does not support its rationale or by furnishing evidence that
   disputes the municipality’s factual findings, the municipality meets
   the standard set forth in [Playtime Theatres]. If plaintiffs succeed in
   casting doubt on a municipality’s rationale in either manner, the
   burden shifts back to the municipality to supplement the record
   with evidence renewing support for a theory that justifies its ordi-
   nance.
No. 05-1926                                                 Page 6

    Instead of adducing data to support the regulation of book-
stores that do not furnish on-site viewing, Indianapolis is con-
tent to belittle plaintiffs’ evidence. Plaintiffs offered a study by
Daniel Linz, a professor at the University of California, Santa
Barbara. Linz first examined the relation between crime and
adult establishments in Indianapolis, using smaller units than
the City had done. (Linz used census tracts, while the City used
whole city blocks or larger districts.) He found little relation—
and he added a time series, while the City relied on a cross sec-
tion. In other words, Linz conducted the same kind of analysis
as the Los Angeles study in Alameda Books, asking whether
crime went up in a given census tract when new adult estab-
lishments opened, or down when they closed. Linz concluded
that these openings and closings did not materially affect crime.
Linz also critiqued the methodology of studies conducted by
Indianapolis and other cities.
    One may doubt that Linz’s work is the last word; a multi-
variate regression would provide a better foundation than ei-
ther a time series or a geographic cross-section. See Daniel L.
Rubinfeld, Reference Guide on Multiple Regression, Reference
Manual on Scientific Evidence (2d ed.) (Federal Judicial Center
2000). Linz also disregards some sex-linked crimes, such as ex-
posure and prostitution. That’s like studying the effects of tav-
erns while ignoring arrests for drunk driving. (Linz does con-
sider arrests for rape and child molestation, however.) But the
City, which offered only the simple cross-section, is in no posi-
tion to complain. Instead the City observed that Linz com-
pared differences between 2001 and 2003, ignoring 2002, which
(apparently) was a peak year for arrests in Annex Books. Yet
the City did not apply Linz’s methods to the time series 2001,
2002, 2003 to see whether the omission mattered; instead it
just asserted that the choice of years automatically invalidated
the study, which is not a sound conclusion.
    Instead of adducing a serious critique of Linz’s work, or
tackling the subject directly (Linz’s data and methods were dis-
closed in his study), the City asserts that the federal judiciary
has already decided that all of Linz’s work must be ignored. It
contends that, in G.M. Enterprise, 350 F.3d at 640, we called
Linz’s methods “completely unfounded.” Not at all. What we
called “completely unfounded” was counsel’s assertion that a
city’s justifications have to satisfy the Daubert standard for ex-
pert testimony. (See Daubert v. Merrell Dow Pharmaceuticals, Inc.,
No. 05-1926                                                  Page 7

509 U.S. 579 (1993).) Linz had observed that some studies of-
fered in that case were not “reliable,” as Fed. R. Evid. 702 uses
that word. We thought that Alameda Books allows municipali-
ties to take all kinds of evidence into account; this differs from
saying that nothing Linz writes may be credited.
    Counsel for Indianapolis conceded at oral argument that
none of the studies that the City has offered in defense of its
ordinance deals with the secondary effects of stores that lack
private booths. Nor do the studies assess the effects of stores
that sell as little as 25% adult products. These shortcomings,
plus Linz’s work, call the City’s justifications into question and
require an evidentiary hearing at which the City must support
its ordinance under the intermediate standard of Alameda Books.
See also Abilene Retail #30, Inc. v. Dickinson County, 492 F.3d 1164
(10th Cir. 2007) (reaching the same conclusion on a similar re-
cord). The Supreme Court decided Playtime Theatres more than
30 years ago, and since then adult-entertainment ordinances
have become common. There must be some pertinent data to
be gathered, if not in Indianapolis then elsewhere. (Some can
be         found         in          a        bibliography        at
http://www.secondaryeffectsresearch.com.) But if, as is possible,
there is simply no sound basis for a conclusion that book or
video stores (without live entertainment or private booths)
open after midnight, or on Sunday, cause adverse secondary ef-
fects, then Indianapolis must revert to its pre-2003 system of
regulation.
    We are conscious that “hold an evidentiary hearing and ap-
ply intermediate scrutiny” is not very helpful to the district
judge, or for that matter the lawyers. It is possible to be a little
more concrete, however, thanks to Justice Kennedy’s opinion
in Alameda Books. Because the other Justices divided 4 to 4, and
Justice Kennedy was in the middle, his views establish the hold-
ing. See Marks v. United States, 430 U.S. 188 (1977). He con-
cluded that a regulation of adult bookstores “can be consistent
with the First Amendment if it is likely to cause a significant
decrease in secondary effects and a trivial decrease in the quan-
tity of speech.” 535 U.S. at 445 (concurring opinion). “[A] city
must advance some basis to show that its regulation has the
purpose and effect of suppressing secondary effects, while leav-
ing the quantity and accessibility of speech substantially intact.
… A city may not assert that it will reduce secondary effects by
reducing speech in the same proportion.” Id. at 449. Justice
No. 05-1926                                                  Page 8

Kennedy insisted that the benefits (less crime) be compared
with the detriments (less speech) and added that a given regula-
tory system is easier to justify if it works in the same way as the
regulation of other, similar, businesses, for then it is harder to
conclude that the government has set out to curtail speech be-
cause of its subject matter. Id. at 447–49.
    These thoughts should give some structure to the hearing
on remand—though we recognize that, because crime and
speech cannot be reduced to a common metric, a direct com-
parison (how much speech should be sacrificed to achieve how
much reduction in crime?) is difficult if not impossible. Here it
matters that both Justice O’Connor’s opinion for the plurality,
and Justice Kennedy’s concurrence, conclude that municipali-
ties should get the benefit of the doubt. Principles of federal-
ism support experimentation, and one aspect of freedom is the
power to be different. The standards of Manhattan, New York,
need not be followed in Manhattan, Kansas. See 535 U.S. at 439
(plurality opinion), 451 (Kennedy, J., concurring). See also Illi-
nois One News, Inc. v. Marshall, 477 F.3d 461 (7th Cir. 2007) (abil-
ity of a small town’s residents to obtain adult materials outside
its borders may show that no material curtailment of expression
has occurred). Cf. National Rifle Association of America, Inc. v.
Chicago, 567 F.3d 856, 860 (7th Cir. 2009).
    The parties have pressed on us dozens of precedents, from
this circuit and elsewhere, that do more to show the problems
of interpretation and application created by the fractured deci-
sion in Alameda Books than to establish any concrete legal rule.
Few of these decisions offer much guidance, either to us or to
the district court on remand, because few deal with hours-of-
operation rules applicable to businesses that do not offer on-
site viewing. It is accordingly unnecessary for us to canvass the
dozens of appellate decisions that have struggled to understand
and apply Alameda Books. For example, Center for Fair Public Pol-
icy v. Maricopa County, 336 F.3d 1153 (9th Cir. 2003), and Richland
Bookmart, Inc. v. Knox County, 555 F.3d 512 (6th Cir. 2009), both
sustained regulations applicable to book and video stores, but
only after concluding that the plaintiffs had not undermined
No. 05-1926                                                           Page 9

the justifications for the laws.† We refrain from a survey, which
would lengthen this opinion without edifying the reader.
    But one of these decisions, in addition to Abilene Retail
(cited above), offers a little assistance. San Antonio adopted a
dispersal rule (1,000 feet between adult businesses) that applied
to a set of outlets defined to include stores that did nothing but
sell books, tapes, and DVDs, which customers could not watch
on premises. The fifth circuit held in Encore Videos, Inc. v. San
Antonio, 330 F.3d 288 (5th Cir. 2003), that this ordinance vio-
lated the first amendment, because San Antonio had not of-
fered any evidence that adult video stores lacking facilities for
on-premises viewing create the same secondary effects as other
establishments. If Indianapolis cannot produce such evidence,
satisfying Justice Kennedy’s cost-benefit standard, its ordinance
must meet the same fate as San Antonio’s.
    The judgment is affirmed to the extent that it sustained the
licensing procedures but is reversed to the extent it concerns
the coverage and substantive requirements, and the case is re-
manded for an evidentiary hearing consistent with this opinion.

     † Richland Bookmart and H&A Land Corp. v. Kennedale, 480 F.3d 336, 339
(5th Cir. 2007), treated the study that Indianapolis conducted in 1984 as
supporting a conclusion that stores selling adult books and videos create
adverse secondary effects. Yet Indianapolis does not deem its own study to
support that conclusion, and our review of the 1984 study confirms the
City’s understanding. The 1984 study does not differentiate by type of adult
business. The City did poll brokers to learn whether they thought that
“adult bookstores” would depress real estate prices (most answered yes), but
the study did not define “adult bookstore.” Who knows whether brokers en-
visaged on-premises entertainment, or whether they thought that 25% of
sales makes an establishment “adult”? An opinion poll differs from a con-
crete result. (The 1984 study did not limit the survey to brokers who had
experience buying or selling adult establishments, or in places near those
establishments.) The authors inquired whether real estate prices are lower
near adult businesses, but that part of the study lumps all adult establish-
ments together; it does not distinguish between bookstores and topless bars
or peepshows. This part of the study does contain a perfunctory time series
analysis, however, in an attempt to inquire whether adult businesses seek
out, rather than cause, low prices. It concludes that prices appreciate less in
parts of the city where adult businesses congregate. See Adult Entertainment
Businesses in Indianapolis: An Analysis 30–31 (1984).