Nightclubs v. City of Paducah

• Decision Date: 22 September 1999
• Docket Number: No. 98-6581,98-6581
• Parties: (6th Cir. 2000) Nightclubs, Inc.,Plaintiff-Appellant, v. City of Paducah, et al., Defendants-Appellees. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 884

202 F.3d 884 (6th Cir. 2000)

Nightclubs, Inc.,Plaintiff-Appellant, v. City of Paducah, et al.,

Defendants-Appellees.

No. 98-6581

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: September 22, 1999

Decided and Filed: February 2, 2000

Appeal from the United States District Court for the Western District of Kentucky at Paducah; No. 98-00241--Thomas B. Russell, District Judge. [Copyrighted Material Omitted] Mark P. Bryant, Charlotte B. Scott, William E. Scent, BRADLEY, BRYANT & KAUTZ, Paducah, Kentucky, for Appellant.

David L. Kelly, DENTON & KEULER, Paducah, Kentucky, for Appellees.

Before: MERRITT and CLAY, Circuit Judges; ALDRICH,^* District Judge.

ALDRICH, D. J., delivered the opinion of the court, in which CLAY, J., joined. MERRITT, J. (pp. 894-97), delivered a separate dissenting opinion.

OPINION

ALDRICH, District Judge.

Plaintiff-Appellant Nightclubs, Inc. ("Nightclubs") brought this action against the City of Paducah, Kentucky; the City Commission of the City of Paducah, Kentucky; Albert Jones, in his official capacity as the Mayor of Paducah, Kentucky; and James Zumwalt, in his official capacity as the City Manager of Paducah, Kentucky (collectively "the City" or "Paducah"). Pursuant to 42 U.S.C. § 1983, Nightclubs challenges the constitutionality of a Paducah ordinance that provides for the licensing and regulation of sexually oriented businesses and their employees. The District Court denied Nightclubs' motion for a preliminary injunction in substantial part. Nightclubs appeals that denial, arguing that the ordinance's licensing scheme amounts to an unlawful prior restraint in violation of the First and Fourteenth Amendments to the United States Constitution. This Court has jurisdiction pursuant to 28 U.S.C. § 1291 and § 1292(a)(1). Because the District Court erred in not enjoining the licensing scheme, we REVERSE, VACATE, and REMAND.

I.

Nightclubs, Inc., doing business as "Regina's House of Dolls," is a Kentucky corporation that owns and operates an adult entertainment business featuring performances by female dancers. The business has been operating continuously in Paducah, Kentucky since 1987. On August 11, 1998, the City of Paducah enacted Ordinance No. 98-8-5925 ("the ordinance"), which is designed to regulate sexually oriented businesses. Regina's House of Dolls qualifies as an "adult cabaret" under § 11-2(3) of the ordinance.¹

In addition to regulating the substantive operation of sexually oriented businesses, the ordinance requires such businesses to obtain licenses from the City prior to operation. See Ord. § 11-6(a). The ordinance also requires individuals who work as managers and entertainers in sexually oriented businesses to obtain employee licenses from the City. See id. Section 11-6 delineates the licensing application procedures. See Ord. §§ 11-6(b)-(g). An applicant for a sexually oriented business license must submit various pieces of information to the City, including a complete set of fingerprints "on forms as prescribed by the Chief of Police," his or her social security number and/or tax identification number, and a description of "the nature of the activity or activities to be engaged in at the establishment." Ord. § 11-6(e). The applicant must also disclose certain details regarding any crime(s) that he or she has been convicted of "relating to prostitution, solicitation, or sexual offenses" within the three years prior to the date of the application. Ord. § 11-6(e)(3). Section 11-6(e)(11) states that the applicant must already possess a current "City business license," and that "the premises must be inspected and found to be in compliance with health, fire, zoning, plumbing and building codes of the City." Ord. § 11-6(e)(11).

Section 11-7(a) provides as follows:

Upon receipt of an application properly filed with the Director and upon payment of the non-refundable application fee, the Director or his/her designee shall immediately stamp the application as received and shall immediately thereafter initiate an investigation of the application and the proposed sexually oriented business by all appropriate City departments and agencies. The City shall approve or deny the issuance of a license to an applicant within ten (10) business days after receipt of a completed sexually oriented business application.

Ord. § 11-7(a). Thus, once an applicant submits a "completed" business license application in accordance with § 11-6, the City Manager must immediately instruct various City departments to conduct the appropriate investigations.² Section 11-7(a) further declares that the City "shall approve" the issuance of a sexually oriented business license "unless" the City determines that the application is deficient in one of eight specified ways. Id. That is, Paducah will deny a business license if the applicant is overdue on any payments to the City, has failed to provide requisite information on the application, has failed to pay the license fee, or otherwise "has failed to comply with any provision or requirement of this ordinance." Id. A business license will also be denied if the premises to be used for the sexually oriented business is not in compliance with zoning requirements or with applicable health, fire, building, and plumbing codes. Id. Licenses are to be renewed annually under these same procedures. See Ord. §§ 11-10(a)-(b).

Sections 11-15 and 11-17 govern appeals from the denial, suspension, or revocation of licenses. Section 11-15 provides that an aggrieved applicant may appeal the denial of a license to the Board of Commissioners ("the Board") within ten days of receiving notice that his or her application was denied. See Ord. § 11-15(b). The Board must hold a hearing on the appeal within ten days of the filing of the notice of appeal. Id. The applicant may be represented by counsel, present evidence, and cross-examine witnesses at the hearing; the City Manager has the burden to prove that denial of the license was appropriate. See Ord. § 11-15(c). The Board must render a decision in writing within five days of hearing the appeal. See Ord. § 11-15(d). If the Board chooses to remand the matter to the City Manager "for further review and action," the City Manager must complete further review within ten days of the remand. Id. Section 11-15(e) states, "The applicant shall have the right to seek prompt judicial review of the Board of Commissioners' decision in any court of competent jurisdiction as provided by law. The action shall be promptly reviewed by the court." Ord. § 11-15(e). Section 11-17 prescribes almost identical appeal rights for a license holder seeking an appeal of the suspension or revocation of a license. See Ord. § 11-17(a)-(f).

Soon after the Paducah ordinance went into effect, Nightclubs filed this action, challenging the constitutionality of the ordinance both on its face and as applied³. After conducting a hearing on the plaintiff's motion for a preliminary injunction, the District Court enjoined only those sections of the ordinance pertaining to the high cost of licensing fees and the requirement that landowners submit notarized acknowledgments along with license applications. See Ord. §§ 11-6(e)(13), 11-9(a)-(d).⁴ The District Court declined to enjoin the remaining operational and licensing provisions of the ordinance. Nightclubs appeals that denial with respect to the licensing scheme, arguing that on its face, the scheme is an unconstitutional prior restraint upon one's freedom of expression.

II.

In deciding whether to grant a preliminary injunction, a district court must consider and balance four factors: (1) whether the plaintiff has established a substantial likelihood or probability of success on the merits; (2) whether there is a threat of irreparable harm to the plaintiff; (3) whether issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served by granting injunctive relief. See Connection Distrib. Co. v. Reno, 154 F.3d 281, 288 (6th Cir. 1998), cert. denied, 119 S.Ct. 1496 (1999). This Court reviews the grant or denial of a preliminary injunction for an abuse of discretion. Id. "'The district court's determination will be disturbed only if the district court relied upon clearly erroneous findings of fact, improperly applied the governing law, or used an erroneous legal standard.'" Id. (quoting Blue Cross & Blue Shield Mutual of Ohio v. Blue Cross and Blue Shield Ass'n, 110 F.3d 318, 322 (6th Cir. 1997)). In cases involving the First Amendment, the crucial inquiry is usually whether the plaintiff has demonstrated a likelihood of success on the merits. Id. This is so because, as in this case, the issues of the public interest and harm to the respective parties largely depend on the constitutionality of the statute. Id.

III.

The sole issue raised on appeal is whether Paducah's licensing scheme, on its face, contains adequate procedural safeguards as required by the First Amendment. We conclude that it does not.

As an initial matter, we note that Nightclubs has standing to bring a facial attack against the City's licensing scheme. "In the area of freedom of expression it is well established that one has standing to challenge a statute on the ground that it delegates overly broad licensing discretion to an administrative office, whether or not his conduct could be proscribed by a properly drawn statute, and whether or not he applied for a license." Freedman v. Maryland, 380 U.S. 51, 56 (1965). A form of unbridled discretion is the failure to place brief, specific time limits on the decision-making process. See id. at 57; East Brooks Books, Inc. v. City of Memphis, 48 F.3d 220, 224, reh'g denied (6th Cir.), cert. denied, 516 U.S. 909 (1995). The rationale for permitting a facial challenge is that when a licensing scheme allegedly contains a risk of delay, "'every application of the statute create[s] an impermissible risk of suppression of ideas.'"...