A $1.4-million damages award that a jury granted to the owner of a San Bernardino adult cabaret has been upheld by the Fourth District Court of Appeal. The damages were based on expenses and lost income from a 53-month period when the City of San Bernardino’s zoning ordinance - which was eventually ruled unconstitutional - prevented Flesh Night Club from operating.
The court upheld the award of damages even though both the Superior Court and the Fourth District approved an injunction blocking the night club from operating, the night club’s owner did not insist that the city post an injunction bond to cover potential damages, and a substantial portion of the club’s profits apparently came from prostitution.
The court ruled that the forced closure violated the club owner’s First Amendment rights and the owner was due damages under the federal civil rights statute (42 U.S.C. § 1983).
“[W]e conclude that a city is liable for damages under § 1983 if it chooses to enforce an unconstitutional ordinance by means of a preliminary injunction,” Justice Art McKinster wrote for the unanimous three-judge panel of the Fourth District, Division Two. “It is no defense that the injunction was sought in good faith, nor does the city’s reliance on a preliminary injunction duly issued by a trial court insulate it from liability.”
Roger Jon Diamond, attorney for Flesh Night Club, told the Los Angeles Daily Journal that the court made a “courageous decision.” “It will tell cities they need to be very careful before trying to shut down an existing business if it’s protected by the First Amendment,” he told the newspaper.
A San Bernardino deputy city attorney called the matter “pending litigation” and said city attorneys would have no comment.
San Bernardino has been trying to shutter the adult night club since it converted from a comedy club to topless entertainment in 1994. The night club’s owner, Waldon Randall Welty, who does business as Manta Management Corporation, started the court proceedings in November 1994, when he sued the city in federal court. He contended that the city’s zoning ordinance was unconstitutionally restrictive.
At the time, the city’s ordinance limited locations for adult businesses to “commercial heavy” and “industrial light” zones, and required a buffer of 2,000 feet from any other adult business, and 1,000 feet from a school, church, public park, residence or residentially zoned land. Flesh Night Club’s location complied with the buffer requirements, but the Hospitality Lane site was in the wrong zoning district.
In January 1995, the city attorney bought an action in the name of the People alleging the business constituted a public nuisance and seeking to close the night club through a preliminary and permanent injunction. The following month, San Bernardino County Superior Court Judge Duane Lloyd granted a preliminary injunction and ordered Manta to cease operating as an adult cabaret. Manta appealed the injunction and filed a cross-complaint against the city, seeking relief under § 1983.
After a lengthy bench trial in 1996, Superior Court Judge Carl Davis declared the city’s ordinance unconstitutional because it did not serve a substantial governmental interest and did not allow for reasonable alternative avenues of communication. The city appealed that decision, and the Fourth District in an unpublished ruling affirmed the trial court ruling and dissolved the injunction in early 1999 (People v. Manta Management Corp., No E019635).
The litigation then returned to the trial court for a two-step trial, first to determine liability and second to determine damages. Superior Court Judge Donald Alvarez ruled that the act of requesting and obtaining the preliminary injunction and stay pending appeal constituted a basis for liability under § 1983. A jury later awarded Manta $1.4 million in damages.
On appeal, the city argued that seeking redress in court is not a First Amendment violation and, for that reason, the city cannot be held liable.
However, in this case, the city’s ordinance had been ruled to violate the First Amendment, and, the court noted, a city may be sued for “monetary, declaratory or injunctive relief” if it implements an unconstitutional policy. Although city officials and employees have immunity, “municipalities themselves have no immunity from damages liability ‘flowing from their constitutional violations,’” McKinster wrote, citing Owen v. City of Independence, Mo., (1980) 445 U.S. 622. The fact that the city received a court-ordered injunction and relied on that injunction in good faith provides no immunity, he court ruled.
The city noted that Manta did not obtain an injunction bond, which under state and federal law provides a means for recovering damages. But the court, again citing Owen, said an exception exists for § 1983 claims.
“The trial court recognized this, holding that the injunction was the vehicle by which the city sought to enforce an unconstitutional ordinance, and that Manta’s cross-complaint was thus based not on the mere wrongful issuance of an injunction but on ‘a separate and distinct action for violation of Manta’s constitutional rights,” McKinster wrote. “[T]he absence of a bond is irrelevant.”
The court then turned to the evidence behind the damages award. Manta sought $2.6 million based on $1.66 million in net profits during the 53 months after Flesh Night Club reopened and $943,000 in expenses while the club was shuttered. During the trial, the city presented evidence that Flesh dancers, with Welty’s encouragement, engaged in prostitution. The jury determined that some profits earned from 1999 to 2004 were from illegal activity but the jury carved out what it considered lawful profits.
On appeal, the city argued that because some of the night club’s income was from prostitution, Manta should be barred from recovering any lost profits. But the court said it is possible for a jury to separate legal profits from illegal income. Assuming the jury awarded Manta all $943,000 for expenses, the jury awarded Manta only $456,000 for lost profits, or about 25% of what Manta claimed. Evidence exists, the court continued, that Manta derived income from legal means, such as lap dance fees, admission charges and the sale of soft drinks “at greatly inflated prices.”
Flesh Night Club attorney Diamond told the Daily Journal he would now seek about $500,000 in attorney fees from the city. Meanwhile, a city lawsuit that seeks to shut down the club because of prostitution is pending.
Manta Management Corporation v. City of San Bernardino, No. E036942, 06 C.D.O.S. 3913, 2006 DJDAR 5715. Filed May 11, 2006.
For Manta: Roger Jon Diamond, (310) 399-3259.
For the city: Christopher Lockwood, Arias, Lockwood & Gray, (909) 885-1229.