News Analysis: Fifth Circuit Ignores Spirit of <i>Alameda</i> In Adult Bookstore Decision

In a decision handed down Thursday, the Fifth Circuit U.S. Court of Appeals delivered a blow to adult businesses in Kennedale, Tex. – and by extension, to all adult businesses in Texas, Louisiana and Mississippi – in ruling that Kennedale had fulfilled its duty to consider reliable evidence in formulating its adult zoning ordinance.

According to the history set forth in the Fifth Circuit's ruling in H and L Land Corp, et al v. City of Kennedale, in 1999, Kennedale annexed several tracts of unincorporated land surrounding the city that included several sexually oriented businesses, thereby subjecting those businesses to the city's ordinances. Those ordinances prohibited the adult businesses from operating within 800 feet of churches, schools, residences, day care centers, parks, and other sexually oriented businesses, as well as within other specified overlay districts.

To justify its ordinances, Kennedale relied on (1) adverse secondary effects studies from nine other cities; (2) an opinion survey of local land use appraisers conducted by the city's attorney; and (3) commentary from citizens at public meetings, all regarding alleged harmful secondary effects of adult businesses on surrounding land uses.

Kennedale's ordinances allowed a three-year amortization period for the adult businesses, and after a threatened lawsuit, allocated specific parcels of land onto which the soon-to-be-displaced adult businesses could relocate.

One of those businesses, Dreamers, an "off-site" adult book/video store with no on-site viewing booths, challenged Kennedale's ordinances in U.S. District Court, and in a summary judgment, the court granted Dreamers an injunction against enforcement. The Fifth Circuit reversed that decision and remanded the case for further consideration.

According to the appeals court's opinion, the district court judge relied on the Fifth Circuit's own previous decision in Encore Videos, Inc. v. City of San Antonio – a 2003 decision about there was much controversy since the originally-issued opinion was withdrawn and rewritten – in finding that the secondary effects studies on which Kennedale relied in adopting its ordinances "failed to show that the ordinances were narrowly tailored to further a substantial government interest." Moreover, the district court rebuffed Kennedale's attempts to introduce new evidence during the summary judgment phase which the city claimed would bolster its rationale for the ordinances.

"This appeal," wrote Judge Fortunato P. Benavides for the Fifth Circuit panel, "raises a single question: Does the evidence offered by the city of Kennedale sufficiently support its ordinance regulating sexually oriented businesses?"

The appeals court reviewed the district court's summary judgment ruling de novo, and the court's factual findings for clear error – and by a failure to do sufficient investigation of the district court's findings, it found some.

"The Supreme Court's admonition that cities not justify ordinances by relying on 'shoddy data or reasoning'," wrote the appeals court, quoting City of Los Angeles v. Alameda Books, the U.S. Supreme Court's landmark 2002 adult bookstore decision, "requires factual findings, but turns on the legal interpretation of what the Supreme Court meant by 'shoddy.' Therefore, we review a district court's findings as to the existence of a city's evidence for clear error, but we review de novo whether that evidence falls within the Supreme Court's admonition."

"To show that an ordinance advances its goals, a city 'may rely on any evidence that is "reasonably believed to be relevant",'" the court continued, still quoting Alameda. "However, '[t]his is not to say that a municipality can get away with shoddy data or reasoning. The municipality's evidence must fairly support the municipality's rationale for its ordinance'."

While the Fifth Circuit opinion discusses whether the definition of an "adult bookstore" refers only to stores which have no in-store viewing facilities or whether the term could encompass businesses with arcades, it eventually comes to the conclusion that at least two of the nine secondary effects studies on which Kennedale claimed to have relied – Indianapolis (1984) and Oklahoma City (1986) – dealt exclusively with "on-site" stores, and thus were relevant to the Dreamers case.

What is unclear from the opinion, however, is whether counsel for Dreamers challenged the validity of any of the studies Kennedale used to support its ordinance, because the two which the Fifth Circuit did accept as relevant have been shown to contain exactly the type of "shoddy data and reasoning" which the Supreme Court warned against in Alameda.

Referring to the Indianapolis study, sociologist Dr. Daniel Linz, in an analysis done in 2000 for respondents in the Supreme Court case of City of Erie v. Pap's A.M., found that "the overall study fails to adhere to rudimentary professional standards, and an error rate cannot be calculated due to a failure to meet basic statistical assumptions."

Dr. Linz went on to cite some of the specific flaws in the Indianapolis study, including a failure to properly match the characteristics of the adult business sites with those of the control sites within the city; failure to consider pre-existing crime statistics for the areas prior to the opening of the adult businesses; and failure to separate the effects of alcohol consumption in the adult businesses from the effects of the adult content of the businesses.

Moreover, the Fifth Circuit opinion gives credence to a survey of land use appraisers performed by the city of Indianapolis in conjunction with Indiana University School of Business – a survey which Dr. Linz found to be highly flawed.

"[T]he researchers did not adhere to minimum professional standards by failing to conduct a survey study of real estate professionals in accordance with proper survey techniques," Dr. Linz said of the Indianapolis survey. "Beyond being purely subjective, the most striking limitations of this survey study is that it asks a national sample of real estate appraisers who are not from Indianapolis to consider only a hypothetical scenario concerning adult businesses in a community. Thus, the survey results are not applicable to the question of whether an adult business would have a negative effect upon property values in the Indianapolis area."

Indeed; "Eighty percent of the [survey] respondents predicted that an adult bookstore would negatively impact residential property values," reported Judge Benavides of the Indianapolis study, "and seventy-two percent believed commercial property value would also be negatively effected [sic]. The Oklahoma City study, which surveyed one hundred Oklahoma City real estate appraisers, produced similar results: Seventy-four percent predicted a negative impact on real estate value in the surrounding area." [Emphasis added.]

Perhaps even more important than the fact that neither the Indianapolis nor the Oklahoma City surveys had any relation to conditions in Kennedale, more than 20 years have passed since the most recent of those surveys, and American society – as well as, likely, society in Kennedale itself – has become much more sophisticated regarding adult material during that time period. Moreover, no mention is made in the Fifth Circuit's opinion as to whether Kennedale's tax authorities were consulted regarding whether appraisals of the adult locations for tax purposes had led to a tax increase or decrease, which surely would be an important factor in determining whether the adult businesses had had an effect on property values in the area.

"The Indianapolis survey, in particular, was drafted by experts, pretested, and administered to a large, national pool of respondents. It is not 'shoddy'," claimed Judge Benavides, concluding that because of that assessment, the Fifth Circuit need not (and did not) consider "an opinion survey of land use appraisers conducted by the city's attorney, and citizen commentary from public meetings" – neither of which likely would have been probative in this case anyway.

However, the Linz study makes it clear that Kennedale's zoning commissioners – and the Fifth Circuit panel – were relying on "shoddy data and reasoning," in violation of the Supreme Court's Alameda ruling, and that the appeals court should have upheld the district court's injunction against the Kennedale ordinances. Instead, it remanded the case to the district court for that court to determine whether the ordinances "unreasonably limit alternative avenues of communication."