Attorney Roger Jon Diamond reports:
I am very pleased to report that I just won the Grand Avenue case in the State Court of Appeal. Although the case dealt with a proposed adult cabaret the Opinion really applies to all adult businesses including adult bookstores and arcades and adult mini theaters. Indeed, to the extent that the case deals with an interpretation of a Municipal Code provision it would also apply to any adult use in Los Angeles even if the adult use is not protected by the First Amendment. This would include sexual encounter establishments and massage parlors. It is an extremely important decision as far as adult zoning is concerned.
The case is entitled Grand Avenue Enterprises v. City of Los Angeles, 2007 Cal. App. LEXIS 701 (January 29, 2007).
My clients, then represented by a different attorney, applied to the City of Los Angeles for a building permit to convert a warehouse to an adult cabaret. Apparently my clients made some sort of an effort to determine whether the proposed location complied with the provision of the Los Angeles Municipal Code that is fairly standard in cities and counties throughout the United States. Specifically, the Los Angeles Municipal Code requires adult businesses to be located in certain zones and, within the zones, the property still must be at least 500 feet away from churches, schools, playgrounds, residentially zoned properties, and must be at least 1,000 feet away from other adult businesses. My clients, with their initial attorney, apparently did some checking to determine that the site was appropriate.
Unfortunately, they were not aware that the State Division of Architect had approved the construction of a middle school across the street from the proposed adult cabaret. The approval by the State Division of Architect preceded the application for the required permit for the adult cabaret. My clients' architect apparently did not know that proposed schools were planned by the State Division of Architect, not by the City of Los Angeles.
The Department of Building of Safety issued the appropriate building permit to my clients without apparently knowing of the proposed school because the Department of Building & Safety did not check with the State Division of Architect.
My clients then proceeded pursuant to the building permit to renovate the warehouse. When the renovation was about 95% complete the politicians learned of the proposed adult cabaret, something they claim they were not aware of originally. The politicians (Los Angeles City Council members) tried to figure out a way to stop the project even though it was virtually complete. The City Council member in whose district the proposed adult cabaret would be located became aware of the proposed middle school to be located across the street from the adult cabaret
Without notifying my clients or their previous attorney, the City Council conducted a public hearing and directed the Department of Building & Safety to revoke the building permit previously issued. The Department of Building and Safety then, in response to the directive from the Los Angeles City Council, revoked the building permit and rescinded the Certificate of Occupancy, thereby making the building unusable.
It was at this point that I was contacted by the clients. They were faced with having spent substantial sums of money renovating the warehouse, only to be told by the City that a proposed school disqualified their adult cabaret. Los Angeles Municipal Code Section 12.70 (c) prohibits the operation of an adult cabaret within 500 feet of a school.
Once retained, I immediately filed an appeal to the Board of Building & Safety Commissioners from the order rescinding the Certificate of Occupancy and revoking the building permit. That was an administrative hearing that is allowed under Los Angeles Municipal Code. In addition to exhausting the available administrative remedy, I also filed a lawsuit in the Los Angeles County Superior Court seeking injunctive relief to allow the cabaret to be completed and reopen.
The case was heard by a judge who is hostile to adult businesses. He refers to adult cabarets as lap dancing facilities. He denied preliminary injunctive relief and also the Court of Appeal denied an emergency writ petition to allow the cabaret to be completed and reopen. It had opened for business just prior to the completion of the renovation.
In addition to arguing First Amendment violations, I also argued that the City Department of Building & Safety and Los Angeles City Council misconstrued Los Angeles Municipal Code Section 12.70(c) by applying the code provision improperly to the situation. Specifically, I argued that it must be a current sensitive use that is in existence in order to disqualify the adult cabaret.
I had previously won a similar case in the federal court entitled Young v. City of Simi Valley, where the United States District Court agreed with me that once an application for an adult cabaret permit is filed a city may not allow a late arriving sensitive use such as a church to disqualify the pending application. See Young v. City of Simi Valley, 977 F.Supp. 1017 (C.D. Cal. 1997). In that case the District Court ruled that the city ordinance in question was unconstitutional to the extent that it allowed a veto of a proposed adult cabaret permit application by a so called late arriving sensitive use. The United States Court of Appeals for the Ninth Circuit affirmed the District Court ruling in my favor, 216 F.3d 807 (9th Cir.2000), and the United States Supreme Court denied certiorari requested by the City of Simi Valley.
There is one difference between the Young v. City of Simi Valley case and the case involving Grand Avenue. In the Young v. City of Simi Valley case the "veto" was carried out by a sham church. There was no real church. It claimed to be a Bible study class. With respect to the Grand Avenue case, I could make no argument that the school was a sham and a pretext for shutting down the cabaret. The evidence was undisputed that the Los Angeles Unified School District did propose a school for the area. The evidence was uncontroverted that the State Division of Architect did issue the required permit to the school district and that that permit had been issued before my clients applied for the building permit to renovate the warehouse.
The trial court dismissed my lawsuit challenging what the City had done with respect to revoking the Certificate of Occupancy and the building permit.
I appealed the judgment of the Los Angeles County Superior Court to the State Court of Appeal. I was slightly discouraged with respect to the appeal since the same Court of Appeal had denied my emergency request for a stay to allow the cabaret to operate pending the appeal.
My clients did sell the building during the pendency of the appeal.
However, I am very happy to report that the Court of Appeal did reverse the judgment of the Superior Court and did rule that the City had misconstrued its own ordinance. Specifically, the Court of Appeal ruled that the ordinance only applied to existing schools, not to future, proposed schools, even if those schools have received permits and even though, as in this case, construction began on the school. Notwithstanding the partial construction of the school, the Court of Appeal ruled that the adult cabaret had priority because the school was not in existence.
Since the building has been sold, there will obviously be no adult cabaret operating and the school did go in. However, the good news is the appellate court has remanded the case for a trial on the issue of damages. In a perfect world the clients would have held onto the building to be able to benefit from the ruling of the Court of Appeal. Nevertheless, the prospect of recovering damages is most encouraging. More important, this case will help future proposed adult cabarets battling to open in the face of claims that future sensitive uses will be located in the area to disqualify the proposed adult cabaret. The government's argument regarding future uses will not be available in the future. This will also apply to proposals to build adult bookstores and arcades and similar businesses.
I would like to mention one thing in closing. It is clear to me that there is a growing hostility on the part of the judiciary to adult cabarets. The court did not deal with this case as a First Amendment case. I argued the First Amendment for a number of reasons, one of which was that under the Civil Rights Act, attorney's fees are recoverable. A number of times the Court of Appeal referred to the proposed adult cabaret as a "lap dancing" facility. Lap dancing itself is not a form of activity protected by the First Amendment according to the appellate courts that have dealt with the issue.
I did win a lap dancing case in the face of bad precedent but only because I was able to persuade the Court of Appeal that lap dancing cannot be regulated by municipal ordinances in California because the subject has been preempted by the State of California with respect to statewide legislation dealing with prostitution, lewd conduct, and live obscene conduct.
I do have pending before the California Supreme Court another case involving the recovery of damages for lost profits during the time that a club was temporarily closed. This is the Manta Management case. Manta Management v. City of San Bernardino, 44 Cal.Rptr.3d 35 (2006). In this case the City of San Bernardino obtained a preliminary injunction temporarily shutting down a strip club because it allegedly operated in the wrong zone. It was true that the club was not in the right zone but we contended that the zoning ordinance was unconstitutional. The trial court agreed with me and dissolved the preliminary injunction. I cross-complained for damages for lost profits during the time the club was closed by the preliminary injunction. The trial jury awarded $1,400,000 in damages and the State Appellate Court in a published decision affirmed the trial court judgment of the award of $1,400,000 in damages. The damages would have been higher except that the City produced evidence of prostitution at the location and the jury agreed, thereby reducing the recovery. The State Supreme Court has agreed to hear the case at the request of the City of San Bernardino.
The issue is whether or not the Federal Civil Rights Act authorizes an award of damages when the damages are allegedly caused by the issuance of a preliminary injunction. The City of San Bernardino claims no responsibility for the temporary shut down of the club on the theory that it was the trial court that issued the preliminary injunction. The City is arguing that when a city goes to court and gets a preliminary injunction it should not have to pay damages if it later turns out that the preliminary injunction should not have been issued. Ordinarily when a private party obtains a preliminary injunction against another private party, it has to post a bond to protect the defendant if the trial court eventually rules for the defendant and against the plaintiff who obtained the preliminary injunction. In these circumstances the recovery by the defendant is limited to the amount of the bond. Unfortunately in California, as with most states, cities do not have to post bonds in order to get preliminary injunctions. In this case I requested the posting of a bond by the City but state law exempted cities from the bonding requirements.
In any event, the Manta Management case will be an interesting case to follow. The point of all this is for cities to know that if they do take initial action to revoke permits or to obtain preliminary injunctions that they are on the hook for damages should a trial court and/or an appellate court later on determine that their actions were improper.
In conclusion, I am very pleased with the result. I am glad the Court of Appeal saw it my way with respect to the interpretation of the Municipal Code. It is true that in general a court will avoid deciding a constitutional issue if there is a non-constitutional basis upon which to make the ruling. Here the Court of Appeal stated that the Municipal Code was clear on its face and could not be construed so as to prohibit an adult cabaret in the face of a future school. Unfortunately, the trial court judge, who has already shown his hostility to adult businesses, misconstrued the Municipal Code.
