City of L.A. Loses <i>Alameda Books</i> Case ... Again!

LOS ANGELES - Despite all the good verbiage that came out of the U.S. Supreme Court's 2002 decision in City of Los Angeles v. Alameda Books, there are 10 words that many may not remember: "Held: The judgment is reversed, and the case is remanded."

That's "remanded," as in "sent back to the trial court for reconsideration of its summary judgment in light of the Supreme Court's ruling."

And that's exactly what happened, with First Amendment attorney and AVN columnist Clyde DeWitt representing the defendants Alameda Books and Highland Books. The case was once again assigned to U.S. District Judge Dean D. Pregerson, who decided on July 16, in response to motions for summary judgment from both sides, that once again, the City had failed to prove its case, even in light of the intervening Supreme Court ruling. That opinion, which had no clear majority, has forced lower courts and attorneys to look to the concurrence filed by Justice Anthony Kennedy as to what facets of the plurality opinion, authored by then-Justice Sandra Day O'Connor, are considered binding.

In his July 16 ruling, Judge Pregerson set forth at length his reading of how Justice Kennedy's opinion impacted the basic rules for adult business zoning set out in Renton v. Playtime Theaters, the 1986 case which allowed a city to consider secondary effects studies from other locales in forming its own zoning ordinances.

"A court must first review the ordinance to see if it completely bans the protected activity," Judge Pregerson said, summarizing Renton. "If not, then the court should determine if the regulation is designed to reduce the disfavored secondary effects associated with the regulated activity and not the content of the speech activity itself. If so, the court applies intermediate scrutiny; it determines whether the regulation is narrowly tailored to serve a substantial government interest, and whether it leaves open alternative avenues of communication. In determining whether the regulation is designed to meet a substantial government interest, courts should review the evidence relied upon by the legislating body to ensure that it provides a reasonable basis for the justification of the ordinance."

But that was the situation before Justice Kennedy's concurrence, and in fact, Judge Pregerson waited for the outcomes of three other Ninth Circuit adult zoning cases - Center for Fair Public Policy v. County of Maricopa; L.J. Concepts, Inc. v. City of Phoenix; and Dream Palace, Inc. v. County of Maricopa - before finalizing his ruling in the remanded Alameda Books case.

"[T]he Court finds that Alameda Books made three fundamental modifications to the Renton standard," Judge Pregerson wrote. "First, after Alameda Books, the classification of the regulation as content neutral or content based does not determine which level of scrutiny to apply. Thus, when reviewing zoning ordinances restricting, but not banning, the operation of adult establishments, courts should apply intermediate scrutiny. Second, at the point where courts review an ordinance to determine whether it is designed to further a substantial government interest, they should engage in the two-step inquiry articulated by Justice Kennedy.  'First, what proposition does a city need to advance in order to sustain a secondary effects ordinance?  Second, how much evidence is required to support the proposition?'" [Citations removed here and below]

"Thus, courts must first examine the justification offered by the ordinance's authors to ensure that it complies with the proportionality requirement, and then review the evidence relied upon by the legislative body to determine whether it reasonably supports the rationale," the judge continued. "As interpreted by the Ninth Circuit, in the context of zoning ordinances that require the dispersal of adult businesses, the proportionality requirement is 'shorthand' for a determination 'whether the ordinance will impose a significant or material inconvenience on the consumer of the speech.' In other words, '[a]t the time of the enactment the city must have some reasonable basis to believe that interested patrons would, for the most part, be undeterred by the geographic dispersal of the adult establishments.'"

It was at this point, however, that Judge Pregerson made a crucial distinction that, if upheld by higher courts, bodes very well for the adult industry:

"However, the Court emphasizes that although this language may sound in terms of the First Amendment rights of the patrons, in many cases - including the instant one - the rights at issue are in fact those of business-owners. In such cases, therefore, the question is not whether the patrons might access the protected speech through some other medium. The question, rather, is whether the patrons will be deterred from frequenting the establishments at issue, thereby diminishing or eliminating the ability of the business-owners to disseminate the speech of their choice." [Emphasis in original]

In other words, people have the First Amendment right to adult material, but it's adult businesses that make it possible for those people to exercise those rights. And that gives the businesses some stake in the First Amendment that previous court decisions would appear to have denied them.

"The proportionality requirement thus requires a city to justify an ordinance regulating adult entertainment establishments on the grounds that the ordinance will reduce the secondary effects associated with such commerce, and that this reduction in secondary effects will not substantially diminish the underlying speech," Judge Pregerson wrote. "Because Justice Kennedy found that the City's rationale passes the initial stage of review, the assertions attributed by Justice Kennedy to the City will be understood to be the City's position with respect to the design and effect of the ordinance."

"The third addition to the Renton structure is the burden-shifting framework articulated in Alameda Books. The City bears the ultimate burden of showing that the ordinance it enacted passes intermediate scrutiny. To show that the ordinance advances a substantial government interest, the City 'may rely on any evidence that is "reasonably believed to be relevant" for demonstrating a connection between speech and substantial, independent government interest.'"

"If the Court, after reviewing the evidence presented by the authors of the regulation, finds that the evidence is sufficient to support the rationale for the law, the burden shifts to Plaintiffs '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.'  Finally, '[i]f the 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 ordinance.' A municipality's failure to supplement the record in a satisfactory fashion means that it cannot, as a matter of law, demonstrate that the ordinance survives intermediate scrutiny, thereby entitling the plaintiff to summary judgment."

This last was certainly one of the main victories accomplished by DeWitt's then-partner, First Amendment attorney John Weston, in arguing the Alameda Books case before the Supreme Court. Before Alameda, those challenging adult zoning ordinances had no legal avenue through which to attack the assumptions and "evidence" which municipalities claimed to rely upon in passing their ordinances; such "evidence," however shoddy it may have been, was considered sacrosanct by courts, and First Amendment attorneys were caught between the proverbial rock and a hard place: City councils were under no duty to consider or even hear evidence of the lack of effectiveness of their proposed ordinances in curbing alleged secondary effects, but once those ordinances were passed, trial courts uniformly told attorneys that it was too late to introduce evidence of the ordinances' ineffectiveness; that that should have been done at the city council stage.

Indeed, both parties to this lawsuit submitted evidence beyond what was adduced in the original case. The City introduced two declarations from Vanita Spaulding, a woman with "substantial expertise regarding financial, market, business and industry research and analysis" who has served as a consultant to "business management, investment advisors, auditors, shareholders, financial investors and potential investors for use in business and litigation." The defense offered testimony from Rick Hinckley, owner of an adult arcade installation business; William Andrus, a 20-year veteran of the adult industry and Vice-President of Beverly Books, the combination adult bookstore/arcade involved in the present case; renown sociologist Dr. Daniel Linz; and Jeffrey Cancino, whose expertise was not identified in the opinion.

Since the issue here involved a Los Angeles city ordinance which prohibited two adult businesses - in this case, an adult video store and its attached adult arcade - from occupying the same business space, Ms. Spaulding's testimony was introduced to bolster the City's claim that each portion of the combined adult business could operate profitably on its own, while both Hinckley and Andrus, based on their extensive experience in adult businesses, told the court that neither was aware of any stand-alone adult arcade existing anywhere in the country, and that customers typically would use the arcade booths to preview a potential adult DVD sale or rental from the video portion of the business.

The Court found Hinckley's and Andrus' evidence both relevant and credible, but dismissed Spaulding's second declaration, in which she evaluated the businesses from an economic standpoint, as irrelevant.

"The following analogy from a more familiar industry, offered by Plaintiffs, is useful in explaining why Ms. Spaulding's conclusion does not follow from her testimony," Judge Pregerson wrote. "Consider a multi-screen (non-adult) motion picture theater, the typical multi-cinema in a building containing a half-dozen screens, with a central area containing concessions. Nobody would dispute that the concession stands at these theaters sell extremely expensive popcorn, candy, soda, hot dogs, and other goods..."

"Following the logic from her declaration, the concession stand would be a viable stand-alone business," the judge continued. "However, customers generally buy concessions immediately before entering a film. The cinema and concession elements have, in effect, a symbiotic relationship. People are willing to pay exorbitant prices for popcorn because, at least in part, the convenience of being able to buy an item within feet of the theater entrance outweighs the increased cost of that item. It does not logically follow that customers would continue to purchase a $7 bag of popcorn if they had to go to an inconvenient location down the block to do so. It may be possible that a stand-alone concession stand would be an economically viable business, but Ms. Spaulding's analysis of the financials of the combined business simply does not provide a foundation upon which to so opine."

With the movie theater/concession analogy obviously right on point, and with the defense testimony that in fact no stand-alone adult arcades exist anywhere in the U.S., together with additional testimony that the arcades' counterparts, adult movie theaters, had become nearly extinct, in part because they were universally considered to be "seedy," the judge's decision was logical and expected.

"Plaintiffs' evidence casts the requisite doubt here," the judge concluded. "The City's rationale in passing the ordinance 'must be that this ordinance will cause two businesses to split rather than one to close.' Although the City satisfied its initial burden, Plaintiffs have come forth with compelling evidence that stand-alone arcades are not economically viable; indeed they do not and have never existed. Because stand-alone arcades do not exist and are not a viable model, it is implausible that the City reasonably believed that the arcades could move rather than close, that, in other words, the City had 'some basis to think that its ordinance will suppress secondary effects, but not also the speech associated with those effects.' Therefore, Plaintiffs' evidence suggests that the City's intent in passing the ordinances was to reduce secondary effects by closing arcades - impermissibly 'reducing speech in the same proportion.' ... The burden now shifts back to the City 'to supplement the record with evidence renewing support for a theory that justifies its ordinance.' The Court finds that the City has failed in this regard... There is therefore no question of material fact but that Los Angeles Municipal Code section 12.70(C) cannot withstand intermediate scrutiny, and that it violates the First Amendment."

Within 10 days of Judge Pregerson's opinion striking down the ordinance, the City had filed for reconsideration of his decision, and on Nov. 21, the judge denied that Motion.

"I started to worry about the City's reconsideration motion because the judge had it under consideration for almost two months, which is unusual where it is denied," DeWitt said. "However, it appears that the delay was attributable to the fact that Judge Pregerson is a remarkably thorough judge, which is evidenced by the 11-page opinion he wrote; most reconsideration denials are not accompanied by an opinion. Also, I know that Judge Pregerson, like all federal judges in California, is swamped with criminal cases that must be given priority."

Indeed, the judge dealt with several of the City's objections to his original decision, including the City's contention that the finding that stand-alone arcades had never existed was erroneous; that the decision contradicted the original Alameda Books case and the Supreme Court's decision in Alameda that the Plaintiffs had provided insufficient evidence that stand-alone arcades cannot exist; that "to the extent the Court's ruling was based on the conclusion that the City's regulation entirely bans adult arcades, it contradicts the law of this case"; that the Court's order did not address the "substantial negative secondary effects" of arcades, and that it had improperly rejected Vanita Spaulding's evidence as to arcades' profitability.

Judge Pregerson dealt with each objection in short order, noting that stand-alone arcades have not been seen or heard of for more than 60 years, and would not be viable today; that the City had misconstrued the evidentiary concerns of both Judge Pregerson's original opinion in 1998 as well as the Supreme Court's 2002 fractured opinion; that Judge Pregerson had never said that the ordinance had completely banned arcades; and that the fact that the City had presented evidence that another bookstore/arcade combination had seen a "precipitous drop" in incidents of crime and police calls after the business changed to a stand-alone bookstore was not relevant to the instant case. Rather, what was relevant was that, since the arcade could not be a viable stand-alone business, the ordinance violated the high court's Alameda dictum by reducing the availability of speech in order to reduce secondary effects, a practice which is not allowed.

"As I sit here, I feel pretty good about the case," DeWitt told AVN. "My real worry was that McCain would get elected and topple the balance in the Supreme Court. Given that it now appears that the balance of the  Court will not change, Justice O'Connor's plurality opinion, which generated Judge Pregerson's good opinions on remand, will remain good law, at least as long as this case is alive."

"The status now," DeWitt continued. "is that once there is a 'final judgment' - a relatively ministerial act - the City has 30 days to give notice of appeal to the Ninth Circuit, which the deputy city attorney who is lead counsel in the case has said is its intent. I assume the City intends to try to take this all the way up to the Supreme Court again if it loses its appeal, but in the end, I don't expect that they'll prevail. In the meantime, we need to file the 'attorneys' fees motion from hell,' because the case is over 13 years old now, and so many attorneys have been involved in it over the years. The amount claimed will be in the seven-figure range because of the protracted nature of the litigation."