The latest round in the legal saga of an adult bookstore in Las Vegas has been won by the city. The U.S. Ninth Circuit Court of Appeals upheld the city's regulatory system for adult businesses after the city adopted measures to ensure prompt reviews of adult business license applications by city officials and state courts.
The decision follows two earlier Ninth Circuit victories by the adult bookstore, when the court struck down the city's ordinances for regulating adult businesses. Baby Tam & Co., Inc. v. City of Las Vegas, 154 F.3d 1097 (1998) (Baby Tam I) and Baby Tam & Co., Inc., v. City of Las Vegas, 199 F.3d 111 (2000) (Baby Tam II). See CP&DR Legal Digest, March 2000.
In Baby Tam I, the Ninth Circuit threw out the city's ordinance because it failed to provide for prompt judicial review of a denial of a license for an adult bookstore. The lack of prompt legal recourse made the regulation a restraint of speech that violated the First and Fourteenth amendments, the court held. After that decision, Las Vegas amended its ordinance and secured changes to state law to ensure that such legal challenges would be decided within 30 days of the filing of a writ. But the court was still not satisfied and ruled 2-1 in Baby Tam II that the licensing scheme was illegal because it set no time limit for the city's director of the Department of Finance and Business Services to rule on an application.
In March 2000, Las Vegas officials revised their ordinance again. The amended law gave the director 30 days to decide on a license upon receipt of an application and "applicable fees." If the director did not decide within 30 days, the application would be deemed approved. And if the application was denied, and the state court did not rule on a lawsuit over the denial within 30 days, the city had to issue a temporary bookstore license.
After adopting those changes, the city asked U.S. District Court Judge Philip Pro to lift an injunction that prohibited the city from denying a business and zoning license to Baby Tam. Baby Tam, which operates an adult bookstore on West Charleston Boulevard, filed a counter motion asking Judge Pro to compel the city to issue a license.
In May 2000, the judge ruled for the city and vacated the injunction. The city then issued citations to Baby Tam, which closed its bookstore. The city also obtained a state court injunction prohibiting Baby Tam from operating in an improper zone and without a business license.
Baby Tam then appealed to the same three-judge panel that has struck down past city ordinance. This time, however, the bookstore lost, despite presenting an array of arguments.
First, the bookstore argued that because the court found the city's licensing scheme invalid in Baby Tam I, the business was entitled to a license because it was a lawful business at the time and is entitled to legal nonconforming use status. But the unanimous three-judge panel pointed to a city ordinance that grandfathers businesses in existence on September 16, 1992. Baby Tam did not register as a business corporation until 1997.
"[I]t is established that city zoning may eliminate features of the landscape that pre-existed the zoning code and have been found objectionable under it," Judge John Noonan wrote. He continued, "We note that at no time did this court or the district court order the City to license Baby Tam. Litigation in this case has proceeded on the assumption that the City could amend its licensing scheme to meet Baby Tam's challenges."
The bookstore owners also argued that the new regulatory scheme was flawed because it did not ensure prompt judicial relief if a denied applicant brought suit in a federal court, rather than state court. But the Ninth Circuit ruled that there is "no constitutional requirement of prompt review by both court systems. State courts are entirely capable of adjudicating federal constitutional claims."
The court also rejected Baby Tam's contentions that the "applicable fees" portion of the revised ordinance could stall the process by giving the director too much discretion, and that the fees are a tax on the exercise of free speech. The court found the definition of fees to be straightforward — $30 for processing and the advance payment of a semiannual license fee based on projected gross sales.
"The gross sales tax of the City falls on all businesses in the City. The tax is not imposed on the exercise of free speech. Furthermore, it is minimal. It ranges from $25 on semiannual gross sales of $12,000, to $670 on $1.2 million of such sales. It is not a burden on speech," Judge Noonan wrote.
The court also rejected arguments that the city's definition of an "adult" business was unconstitutionally vague and conferred too much discretion on the city. "The ordinance is specific in spelling out what sexual acts and what parts of the human body and what sexual toys qualify as sexual," Noonan wrote. "No set of regulations can be applied without a modicum of judgment being exercised by the regulators. This ordinance cabins their discretion and directs their judgment and therefore passes constitutional muster."
Finally, the court rejected the argument that the regulatory scheme improperly places the burden for seeking legal recourse on the applicant.
Baby Tam & Co., Inc. v. City of Las Vegas, No. 00-16123, 01 C.D.O.S. 3295, 2001 Daily Journal D.A.R. 4083, filed April 26, 2001.
For Baby Tam: Michael Stein, Michael Stein & Associates, (702) 380-1000.
For the city: William Henry, senior litigation counsel, (702) 229-6201.