Pictured above, l-r: Allan Gelbard, Erica Dubno, Karen Tynan, Eric Paul Leue, J. Michael Murray; photo by Jeff Koga
LAS VEGAS, Nev.—No Adult Entertainment Expo would be complete without its legal panel, and this year is no different, bringing together several attorneys who deal with different aspects of the adult entertainment industry for an update on what happened, legally speaking, in 2017, and a preview as to how they expect governments, federal and state, to make sexual free speech as painful as possible over the coming year.
But this year's panel opened with some good news, thanks to Ohio attorney J. Michael Murray's top-notch work in pressing Free Speech Coalition's lawsuit against the federal record-keeping and labeling laws, 18 U.S.C. §§2257 and 2257A.
J. Michael Murray; photo by Jeff Koga
Murray began by asking the audience members to imagine that they're working in their office when a large van pulls up outside, disgorging a number of FBI agents who knock on the office door, flash their badges and demand to see the company's 2257 records—with no prior notice and no warrant.
Murray painted a frightening picture of a team of federal agents opening every door in the office, rifling through every filing cabinet, examining 2257 records (and in the process, strewing papers all over), copying those records with their portable photocopy machine, and photographing everything in sight. Then, after spending five hours on the premises, the "inspectors" will hand the owner a list of every 2257 "violation" they've found.
"You might have had a photo ID that wasn't legible enough, they say, or you might have a record of a performer that wasn't cross-indexed with her maiden name, or the notice that you have to put on the DVD at the beginning when the DVD began to play didn't last long enough, the 2257 notice didn't last long enough so that it could be read easily," he ticked off. "Maybe the label on the cover wasn't in 12-point type. So they list these violations, they give them to you and they turn them over to the U.S. Attorney's office for him or her to decide whether they're going to prosecute you under this federal criminal law. You think that can't happen? I'll tell you something: That's exactly what happened several years ago on 29 different occasions, when the FBI was enforcing 2257 aggressively.
"Do you know why that's not happening now?" he asked. "The reason is simple: Because the Free Speech Coalition, led by Eric [Leue] has been fighting 2257 on constitutional grounds for going on nine years now in federal court in Philadelphia."
Murray then detailed the incremental victories he's scored since the lawsuit began in 2009, including getting the case reinstated after the judge had dismissed it, getting the warrantless-search clause of the law thrown out, and getting the Third Circuit Court of Appeals to recognize that the law should be examined under "strict scrutiny" rather than the lower level scrutiny which had been used during the trial.
"The reason that they don't do inspections is that as part of the result of that victory, the part of the law that entitles the FBI to show up without a warrant and to examine your records without your permission, on pain that you would be prosecuted if you didn't let them do that, we had that part of the law declared unconstitutional under the Fourth Amendment to the U.S. Constitution," Murray explained.
"What is remaining is, we still have our First Amendment freedom of speech attack upon this entire burdensome record-keeping and labeling scheme, and we've been making progress ... and the burden is now upon the government to justify 2257 under the First Amendment," he added. "We've had hearing and we've had briefs, and at the last hearing, the federal judge who has ruled against us almost each time until he's gotten reversed by the Third Circuit has now expressed a degree of skepticism about the government's case, and they had to try to come up with new evidence, which they filed on January 5th; we are preparing our last brief in response to that, and we have a very strong case under the First Amendment. We have optimistic hope that finally, the federal court will agree with us and strike this statutory scheme down in its entirety."
Murray vowed to keep fighting for the elimination of this unconstitutional law, returning again and again to the Third Circuit if necessary, and even to the U.S. Supreme Court.
But it isn't just the federal government that's the enemy of sexual speech, and the next speaker, attorney Erica Dubno of New York, told the assemblage about her fight to reform New York City's anti-adult zoning laws.
Dubno began by tracing the history of New York's adult zoning laws, beginning in 1995 when the city first defined adult businesses as "establishments which had a substantial portion of their business dedicated to adult material," a vague "definition" but one which served as the basis for future similar laws—and one which Dubno sued over, forcing the city to attempt to make the law clearer, eventually defining an adult business as one where at least 40 percent of its stock was adult. Dubno, representing several adult book and video stores which had been targeted by zoning inspectors, consistently won those cases—even though the city claimed that a lot of that 60 percent non-adult material was in there as a "sham," since customers almost overwhelmingly bought the adult material.
"In 2001, after we won a big case, where the courts basically said 'sham' was not a factor, the city decided to introduce 'sham' into it [the law], and the city enacted a resolution which got rid of the 60/40 rule altogether," Dubno explained. "The new law... kept it [the 60/40 rule] for video stores, but in addition to that, it grafted eight extra factors onto the law."
Among those factors were the presence of any viewing booths, the lack of a greater variety of non-adult titles as compared to adult, adult materials in window displays, on signage, having the cash register in the adult section, and more.
Dubno sued over the new rules, and won in every court up to the state Court of Appeals, which ruled against the stores, and Dubno has appealed to the U.S. Supreme Court.
"The main issue in there is, what is the proper standard to be applied in zoning cases all across the nation, where you have adult material in there," she explained. "There was a decision called Alameda Books involving Los Angeles a few years ago... so the question really is, what is the standard that the government must meet in an adult zoning case? In Alameda Books, what they did was, they said the first step is that a municipality must produce evidence that fairly supports its rationale for the ordinance. That's a pretty low standard. The second standard shifts the burden to us and in that situation is, the businesses have to cast direct doubt on the rationale. We did that in New York; we brought in affidavits from criminologists, a real estate expert saying there was no decrease in property value or increase in crime; and third, the burden shifts back to the municipality to supplement the record with evidence renewing support for a theory that justifies its ordinance, and we're saying, 'What does that mean?', and we're asking for greater clarity."
Fortunately, the city has agreed to suspend enforcement of the laws while the high court considers the petition, which Dubno believes may come as early as February 20. More information on this case can be found here.
On a more local level, the audience next heard from Karen Tynan, a California attorney who's defended several adult companies before a hearing officer of the California Division of Occupational Safety and Health, aka Cal/OSHA—but this day, she wanted to talk about the dangers to adult producers.
"Before the first person even walks on the set, there's lots that you're doing, right?" she asked. "You have the model releases ready, you've formed a corporation, you're operating a business—but the state of California and the feds want to regulate you and do regulate you in other ways, whether it's Cal/OSHA with your injury, illness and prevention program or the labor commissioner with how you're paying people, whether it's as an independent contractor or as employees, so what I want to share with you is three little tidbits to keep you out of trouble and hopefully have you create content or distribute content, doing your work in the adult business in a way that keeps you out of trouble."
Among the dangers facing producers, she said, are Cal/OSHA's insistence on the use of condoms, and she recommended that producers adopt the boilerplate injury, illness and prevention plan created by Free Speech Coalition and available free to all FSC members, since the law says that any employee (including performers) is entitled to a copy of that.
"The second thing I want you to do is to pay people properly," she said. "You treat a lot of people as independent contractors... What I'm telling you is, keep good records; if you're going to treat people as independent contractors dot your i's, cross your t's, make sure you're straight with EDD, have a good accountant, a good lawyer, whatever it takes."
Finally, she suggested that everyone in the industry keep their eyes open for any future regulations concerning content producers, including age regulations and how producers monetize their content.
The one non-attorney on the panel was FSC CEO Eric Paul Leue, who lauded the attorneys on the panel for the "vigor, valor and passion that it takes to fight these battles that these ladies and gentlemen fight every day for you," which he described as "incredible."
"The three things that I really want you to pay attention to on top of everything else [are] the UK DEA, the Digital Economy Act, which will go into effect probably in about April, 2018," he began. "Till today, we have no regulation in our hands that tells us what we actually are going to be required to be doing, but there's lots of people out there that are trying to sell our industry solutions on how to do that age verification. FSC in its membership area, has the presentation from the regulator himself, Murray Perkins... if you have questions. If you don't want to talk to him directly, you can ask us and we'll ask him for you. What's most important is with this going into effect in April, the UK government is not going to be immediately sending you 20 million dollar fines for not being in compliance, but what they ultimately can do if you're just ignoring the regulation and ignoring that people within the UK borders are accessing your content, no matter where you are in the world, they possibly will find a way to find you, because they'll work with payment processors and VISA and Mastercard and they'll find your information [and] they can ask VISA and Mastercard to shut down your payment processing."
Leue said FSC will be issuing guidance on how to obey the new rules.
"The next point is the EU GDPR," he continued. "It is a European Union regulation that stands for 'general data privacy regulation.' It'll go in effect in May, 2018, and it will require that any user from within the EU that accesses a website has specific rights in how their identity is protected. This is very much upside down to how U.S. law in regards to privacy works, so pay attention to that too."
He noted that FSC has several documents on its website on how to deal with that issue as well, and that the organization will be issuing guidance on it as well. He stated that the EU will likely send companies €40 million fines for non-compliance, which may require major revamping as to how companies handle affiliates, track IP addresses and pay out money.
Leue's final topic was net neutrality.
"Net neutrality was passed in 2015 and was a regulation... to protect us from regulation," he stated, "so that's a regulation we should like... Net neutrality was repealed under the Trump administration. It basically means that now, internet service providers, web hosts, all these people we depend on with our online traffic, they can choose which traffic gets to which consumers... But net neutrality on only the last piece of the puzzle in a very, very weird game that the Trump administration has been playing."
He noted that Trump had already signed a resolution which claimed that "porn is a public health crisis," which allowed money to be allotted to the issue. Leue then discussed the Human Trafficking Prevention Act, which he described as "a misappropriation of the term and a disgrace to the fight, that members of our industry have fought valiantly with allies in the public just the same." He said, in every state that passes that Act, the government will require that all devices which can access the internet will have anti-porn filters installed on them, and people will have to pay $20 to get the filter removed. Finally, he spoke of the Stop Enabling Sex Traffickers Act (SESTA) and the Fight Online Sex Trafficking Act (FOSTA), both of which are before Congress now, which he noted that FSC and its mainstream allies are working against because the bills would make ISPs liable for content which their users posted online.
"What the government is doing is trying to make it impossible for us to do business," he charged. He also advised people to join FSC, or at least sign up for its newsletter and follow FSC on Twitter.
The next speaker was copyright/trademark attorney Allan Gelbard, who brought some good news about what terms can now be trademarked—but began by telling the audience what an inconsistent system it is.
"Half the time, you'd file an application and it would sail right through, no problem," he said. "I literally got 'Seymore Butts' registered; no problem! You get the next examiner, he's not as nice, and all of a sudden you can't get stuff through, and this has been a problem for years and years and years."
But in January of 2017, the Supreme Court decided In Re: Tam, which involved a music group, composed entirely of Asian men, named "The Slants" which wanted to trademark its name but was refused because "slants" was considered a disparaging term under the law as it then stood.
"They sued, and they said, 'No, disparaging is such a nebulous term, the government doesn't have any business deciding whether I can say this or not; that's under my free speech rights," Gelbard explained. "This went to the Supreme Court, it went all the way up, and the reason it went up is for many years, there had been case law out there that supported a number of regulations under the trademark law that said disparaging, immoral, scandalous marks could not be registered."
Gelbard noted that while the opinion by Justice Alito ("Just goes to show, even a stopped clock is right twice a day") struck down the trademark prohibitions, a concurring opinion by Justices Kennedy, Ginsburg, Sotomayor and Kagan went even further.
"They said any government viewpoint regulation is unconstitutional," he noted. "That's not the main holding of that case but it's a good thing to keep in mind. What they basically said is, for the government to decide what it considers disparaging violates the First Amendment, so that was a really, really great thing."
One problem: The high court only struck down the "disparaging" clause, but left the "immoral" and "scandalous" prohibitions in place—and the whole process left the trademark examiners in chaos, and another court case, In Re: Brunetti, which was decided by the Federal Circuit court.
"In Re: Brunetti was a case about somebody trying to trademark the word 'fuct'," he said, "and the issue that was presented there, it took up the issue that Tam had dodged: this mark is clearly scandalous and immoral."
Gelbard noted that the government's defense in the case referenced the famous case of FCC v. Pacifica—the George Carlin "7 Dirty Words" case—and they claimed, "We are trying to keep these people from thrusting these scandalous, immoral, dirty words out into the public and hurting people with them."
"The Federal Circuit found that Pacifica simply did not apply here, because trademarks don't thrust anything into anybody; there's very little likelihood that children will be inundated viewing these scandalous trademarks," he explained.
The government also argued that trademarks are actually "government speech," referring to earlier cases that had found that what appears on license plates is government speech, since the government makes the plates and issues them. The Federal Circuit rejected that argument as well.
"With all of that stuff swept by the way, the court took up the actual central question, which is, is 'scandalous' and 'immoral' speech—is regulating that via the trademark thing unconstitutional, and the good news is, they said it is unconstitutional," Gelbard reported. "So the Federal Circuit has determined that you can now register scandalous and immoral trademarks, so those of you who might want to protect your brands that might be a little edgier, please go out and do that now."
Clyde DeWitt; photo by Jeff Koga
The final speaker was longtime AVN legal columnist Clyde DeWitt, and his topic was how to avoid conflicts in setting up and dissolving partnerships in the adult industry.
But first, DeWitt announced that he was stepping down as AVN's monthly legal columnist because "I just thought it's time for some other voices—and I want to play more golf. ... But that's not gonna shut me up; you'll see articles from me every once in a while."
"What I'm going to talk about ... is about as interesting as watching paint dry," he began. "I look at these [adult] businesses and they have this sophisticated technology and marketing plans and all that stuff, but they run their business like Lucy's Lemonade Stand; just all kinds of problems."
Among those, he said, were partnerships.
"Entering into a partnership is very analogous to getting married," he said, "and whether you have been married or not, or been divorced or not, you certainly know this: It's real easy to get married ... it's real difficult to get divorced, and I have tried a whole bunch of cases that I put in the category of 'business divorces.'"
DeWitt took such partners to task for not having subscription agreements regarding their stock, and did nothing while forming the business to deal with the possibility of the business dissolving—or if one of the partners dies.
"People say, 'Well, let's just have a partnership; we don't want to spend the money to have an LLC or a corporation,' and then they find out one partner screws up and gets sued and gets a judgment against him, and then you find out that both partners or all three partners or all five partners are all individually liable for the debts that one partner ran up—and of course, you can't sue him because he doesn't have any money and maybe he's in jail," DeWitt postulated.
DeWitt expanded on this idea, warning the audience not to use a "corporation mill" to create their corporation or partnership, and not to assume that a Nevada corporation is better than a California one for a company whose principal place of business is California. He also noted that a company's name—he referenced "Screaming Orgasms Inc."—can affect how it's dealt with by banks, the government, etc.
DeWitt's final point was, "Don't fill your own teeth. Your business needs to have at least three kinds of professions that don't have a thing to do with computers or anything like that. Obviously you need an IT guy if you don't do it yourself, but you need an insurance person—oh, yeah, you need insurance. As interesting as watching paint dry until you get sued, and you find out either you don't have insurance or your CGL policy doesn't cover what you got sued about, [because] you talked to a broker who didn't know what he or she was doing. Number two, a CPA. Difference between a CPA and an accountant: an accountant is anybody who says they're an accountant; a CPA has a license that can get taken away if they screw up or disappear into the woodwork or whatever. Same thing with attorneys: LegalWhiz can't get its license revoked; an attorney can. If LegalWhiz screws up your corporation because they didn't give you legal advice like they promised, you can't report them to the state Bar because the state Bar says, 'We don't care; they aren't licensed.' This is stuff you really ought to think about."
Kernes then opened the floor for questions, some of which dealt with freedom of speech under state versus federal law (Murray noted that most constitutional rights apply at both the state and federal levels "and municipalities and towns and school boards and public universities," thanks to the Fourteenth Amendment); advertising of cannabis products in states where it's legal (DeWitt opined that "if it's legal"—which he noted it's not under federal law—it should be okay, but he referenced the recent Ninth Circuit decision in ESPLERP v. Gascon as possibly causing a problem; Murray noted that Attorney General Sessions recently gave U.S. Attorneys the go-ahead to prosecute even legal pot shops; and Tynan, who hails from "the Emerald Triangle," said she believes "porn and cannabis are coming together, two vices that people like," and noted that "Two years from now, it'll be a different landscape. We're gonna figure out banking, which is the biggest problem.. and I think anybody that's interested in how cannabis comes together with adult content is at the forefront and maybe a little early to market, but it's there"); and what sanctions the adult industry can expect from the federal government going forward ("Talk to us on November 6th," DeWitt replied, with Gelbard adding that "Trump really, really needs those hardcore evangelicals," and that during Sessions' nomination hearings, he'd promised to target adult content); and the panel's thoughts of what we can expect from the Supreme Court (most were cautious—Murray was particularly concerned about new Justice Gorsuch, who's written virulent anti-adult opinions—and worried that the government would attempt to divide sexual liberators against each other.)
Leue got in some of the final words for the session, and they were words of unity: "This industry is more than business; this industry is a family, and sometimes we fight and it gets ugly and then we do popcorn night and go sing karaoke and have drinks and we make up. But we're more than an industry; we're a community, and I implore you to stand up for your brothers and sisters of color, to stand up for transgender people, to stand up for all of the LGBTQQIA, and to stand up united and now it's not just time to march, it's time to run, and in 2018 we'll turn it all back around and hopefully we'll get rid of the true Shithole."
