Court Opinion

ID: 3003654
Source: CourtListenerOpinion
Date Created: 2015-09-24 22:30:11.22016+00
Date Added: 2024-06-11T12:33:27.322639
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

No. 05-1926

A NNEX B OOKS, INC., et al.,
                                              Plaintiffs-Appellants,
                                 v.

C ITY 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.

   A RGUED S EPTEMBER 8, 2005—D ECIDED S EPTEMBER 3, 2009

  Before E ASTERBROOK, Chief Judge, and F LAUM and
R OVNER, Circuit Judges.
  E ASTERBROOK, Chief Judge. Indianapolis revised its adult-
business ordinances in 2003. These amendments
expanded the definition of “adult entertainment busi-
ness” to include any retail outlet that devotes 25% or more
of its space or inventory to, or obtains at least 25% of its
revenue from, adult books, magazines, films, and devices.
(Adult “devices” include vibrators, dildos, and body-
2                                                   No. 05-1926

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 midnight and 10 a.m. on any other day. Indiana-
polis Rev. Code §§ 807-202(a), -301(f), -302.
  Four firms defined as “adult entertainment businesses”
under 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 portion of the amended ordinance and held
that plaintiffs are entitled 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 pro-
cedures for the issuance and judicial review of licenses
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
No. 05-1926                                                  3

apply to bookstores and video-rental outlets in general.
Indianapolis justifies its restrictions 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 exten-
sive 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 “interme-
diate” 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 high-crime areas, and that
sleazy establishments tend to congregate in low-rent
districts. But the fact that crime rose as adult establish-
ments entered the area (see 535 U.S. at 435 (describing
the study)) implied that the causal arrow ran from
adult businesses to crime, rather than the other way.
That could happen because adult establishments attract
a particular kind of clientele that is emboldened by associa-
tion with like-minded people, so that prostitution and
public masturbation (for example) are more acceptable
near a congeries of sexually oriented businesses than
4                                               No. 05-1926

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 inconvenience of the separation—a rela-
    tively 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 customers/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 ordinance would cause a great reduc-
    tion 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 judg-
ment).
  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
No. 05-1926                                                 5

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 dispersing
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 increase 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 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 viewing 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. Enterprises, Inc. v. St. Joseph, 350 F.3d
631 (7th Cir. 2003) (nude dancing 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 amend-
ments, these stores were treated the same as Barnes &
Noble or Blockbuster Video. If they were associated
with significant crime or disorderly conduct, it should
6                                             No. 05-1926

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 amend-
ments. 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 justify the ordinance even with respect to
establishments that supply entertainment on the pre-
mises. 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 drunken-
ness or public urination in or near taverns, which in
Indianapolis can be open on Sunday and well after mid-
night? If there is more misconduct at a bar than at an
adult emporium, how would that justify greater legal
restrictions on the bookstore—much of whose stock in
trade is constitutionally protected 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 establishment in any city justifies every
possible kind of legal restriction in every city. That
No. 05-1926                                              7

might be so if the rational-relation test governed, for
then all a court need do is ask whether a sound justifi-
cation of a law may be imagined. See, e.g., Vance v.
Bradley, 440 U.S. 93 (1979); Massachusetts Board of
Retirement v. Murgia, 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 asserted. 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 implied causation
and not just correlation.) The other five Justices con-
cluded that a hearing was necessary to determine
whether the evidence that Los Angeles offered was
strong enough. None of the Justices thought that sum-
mary 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 pandering
8                                                No. 05-1926

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 evidence does not support its
    rationale or by furnishing evidence that disputes
    the municipality’s factual findings, the municipal-
    ity meets the standard set forth in [Playtime Thea-
    tres]. If plaintiffs succeed in casting doubt on a
    municipality’s rationale in either manner, the
    burden shifts back to the municipality to supple-
    ment the record with evidence renewing support
    for a theory that justifies its ordinance.
   Instead of adducing data to support the regulation
of bookstores that do not furnish on-site viewing, India-
napolis is content to belittle plaintiffs’ evidence. Plain-
tiffs offered a study by Daniel Linz, a professor at the
University of California, Santa Barbara. Linz first
examined the relation between crime and adult estab-
lishments in Indianapolis, using different units than the
City had done. He found little relation—and he added
a time series, while the City relied on a cross-section. In
other words, Linz conducted the same kind of analysis
No. 05-1926                                               9

as the Los Angeles study in Alameda Books, asking
whether crime went up in a given area when new adult
establishments opened, or down when they closed. Linz
concluded that these openings and closings did not
materially affect crime. Linz also critiqued the methodol-
ogy of studies conducted by Indianapolis and other cities.
  One may doubt that Linz’s work is the last
word; a multivariate regression would provide a better
foundation than either a time series or a geographic
cross-section. See Daniel L. Rubinfeld, Reference Guide on
Multiple Regression, Reference Manual on Scientific Evi-
dence (2d ed.) (Federal Judicial Center 2000). Linz also
disregards some sex-linked crimes, such as exposure
and prostitution. That’s like studying the effects of
taverns while ignoring arrests for drunk driving. (Linz
does consider arrests for rape and child molestation,
however.) But the City, which offered only the simple
cross-section, is in no position to complain. Instead the
City observed that Linz compared 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 invali-
dated 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 disclosed 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,
10                                              No. 05-1926

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 justifica-
tions have to satisfy the Daubert standard for expert
testimony. (See Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579 (1993).) Linz had observed that some
studies offered in that case were not “reliable,” as Fed. R.
Evid. 702 uses that word. We thought that Alameda Books
allows municipalities 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 con-
clusion on a similar record). 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,
No. 05-1926                                              11

or on Sunday, cause adverse secondary effects, then
Indianapolis must revert to its pre-2003 system of regula-
tion.
   We are conscious that “hold an evidentiary hearing
and apply 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 holding. See
Marks v. United States, 430 U.S. 188 (1977). He concluded
that a regulation of adult bookstores “can be consistent
with the First Amendment if it is likely to cause a signifi-
cant decrease in secondary effects and a trivial decrease
in the quantity 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 suppress-
ing secondary effects, while leaving 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
Kennedy insisted that the benefits (less crime) be
compared with the detriments (less speech) and added
that a given regulatory 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 because of
its subject matter. Id. at 447–49.
  These thoughts should give some structure to the
hearing on remand—though we recognize that, because
12                                              No. 05-1926

crime and speech cannot be reduced to a common metric,
a direct comparison (how much speech should be sacri-
ficed 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 municipalities
should get the benefit of the doubt. Principles of
federalism 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 Illinois One News,
Inc. v. Marshall, 477 F.3d 461 (7th Cir. 2007) (ability of
a small town’s residents to obtain adult materials
outside its borders may show that no material curtail-
ment of expression has occurred). Cf. National Rifle Associa-
tion 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 decision 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 Policy 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 regula-
No. 05-1926                                                  13

tions applicable to book and video stores, but only
after concluding that the plaintiffs had not undermined the
justifications for the laws.† We refrain from a survey,
which would lengthen this opinion without edifying the
reader.

†
  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 envisaged on-premises entertainment, or whether
they thought that 25% of sales makes an establishment
“adult”? An opinion poll differs from a concrete result. (The
1984 study did not limit the survey to brokers who had ex-
perience 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 establishments together; it
does not distinguish between bookstores and topless bars or
peep shows. 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 Entertain-
ment Businesses in Indianapolis: An Analysis 30–31 (1984).
14                                              No. 05-1926

  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 busi-
nesses) 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 violated the first
amendment, because San Antonio had not offered 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 re-
quirements, and the case is remanded for an evidentiary
hearing consistent with this opinion.

                           9-15-09