40 Retail Corp. v. City of Clarksville

• Decision Date: 06 December 2012
• Docket Number: No. 12–276.,12–276.
• Citation: 2012 Ark. 422,424 S.W.3d 823
• Parties: 40 RETAIL CORPORATION, Appellant v. CITY OF CLARKSVILLE, Appellee.
• Court: Arkansas Supreme Court

2012 Ark. 422
424 S.W.3d 823

40 RETAIL CORPORATION, Appellant
v.
CITY OF CLARKSVILLE, Appellee.

No. 12–276.

Supreme Court of Arkansas.

Nov. 8, 2012.
Rehearing Denied Dec. 6, 2012.

[424 S.W.3d 824]

Gary S. Edinger; and John Wesley Hall, Jr., Little Rock, for appellant.

Michael Mosley, North Little Rock, for appellee.

COURTNEY HUDSON GOODSON, Justice.

Appellant 40 Retail Corporation (40 Retail) appeals the order entered by the Johnson County Circuit Court granting appellee City of Clarksville's (Clarksville) amended motion for summary judgment. For reversal, 40 Retail contends that the circuit court erred in ruling that principles of waiver and estoppel preclude its challenges to the validity and constitutionality of Clarksville's ordinance regulating sexually oriented businesses. We agree and reverse and remand.

The material facts of this case are not in dispute. 40 Retail is an Arkansas corporation that operates a business known as the “X–Mart Adult Superstore” (X–Mart) located on South Rogers Street in Clarksville. On January 25, 2006, three weeks after X–Mart opened its doors, the Clarksville City Council enacted Ordinance 06–534 establishing licensing requirements and regulations for sexually oriented businesses. Under 06–534, X–Mart is classified as an “Adult Bookstore or Adult Videostore,” defined as a “commercial establishment that, as one of its principal purposes, offers for sale or rental books, magazines, periodicals or other printed matter, or photographs, films, motion pictures, video cassettes, compact discs, digital video discs, slides, or other visual representations that are characterized by their emphasis upon the display of

[424 S.W.3d 825]

‘specified sexual activities' or ‘specified anatomical areas.’ ” The ordinance requires licensure and the payment of fees, and it provides penalties of up to one year in jail and a $1,000 fine for each violation. Ordinance 06–534 also restricts the location of sexually oriented businesses to Clarksville's industrial districts and provides that such establishments must be 750 feet from other sexually oriented businesses, businesses licensed to sell alcohol, houses of worship, day-care centers, public or private elementary or secondary schools, public bars, and residences. It also contains signage restrictions.

Ordinance 06–534 made provision for nonconforming businesses already in existence at the time of its passage. In this regard, the ordinance provides,

Notwithstanding anything to the contrary in the City of Clarksville's Code, a nonconforming sexually oriented business, lawfully existing in all respects under law prior to the effective date of this ordinance, may continue to operate for three (3) years following that date in order to make a reasonable recoupment of its investment in its current location. At the conclusion of said three (3) years, the use will no longer be recognized as a lawful nonconforming use, provided that a nonconforming sexually oriented business may apply for one or more six-month extensions of the original three-year period upon a showing of financial hardship. An application for an initial extension based upon financial hardship (“hardship exception”) shall be made at least sixty (60) days before the conclusion of the aforementioned three-year (3–yr.) period. If a hardship extension is granted, subsequent applications or hardship extensions shall be made at least sixty (60) days before the conclusion of the nonconforming sexually oriented business's current extension period.

The ordinance required applications for hardship extensions to include evidence of purchase and improvement costs, income earned and lost, depreciation, and costs of relocation.

X–Mart operated for three years as a nonconforming sexually oriented business, and once the three-year grace period ended, it applied for and received a single six-month hardship extension. This hardship extension expired on July 17, 2009, and 40 Retail did not apply for another extension. Thereafter, on September 14, 2009, Clarksville filed this action to enjoin the continuing operation of the store. It alleged that 40 Retail's operation of X–Mart should be restrained because the hardship extension had expired and because the store did not comply with the provisions of the ordinance. In response, 40 Retail filed an answer and a counterclaim, in which it sought both declaratory and injunctive relief.¹ In the counterclaim, 40 Retail alleged that the ordinance was invalid because it was not enacted in accordance with various statutory notice procedures. It also claimed that the ordinance violated the Arkansas Civil Rights Act and asserted that the ordinance was unconstitutional, both on its face and as applied, under the Arkansas Constitution. Specifically, 40 Retail urged that Clarksville had not and could not produce any evidence concerning the existence of adverse secondary effects

[424 S.W.3d 826]

arising from the store's operation and could not demonstrate a nexus between its constitutionally protected freedom of expression and any alleged negative secondary effects. In this same vein, it also asserted that the data and studies utilized by Clarksville when considering passage of the ordinance were “shoddy.” Further, 40 Retail argued that the ordinance was unconstitutional as applied to a “take-out” only retail business. It also contended that the ordinance was unconstitutional because it did not provide a sufficient number of sites within city limits where an adult business would have a reasonable opportunity to operate. On additional constitutional grounds, 40 Retail contested the ordinance's provision requiring applicants to appear in person when applying for a license. 40 Retail also challenged as unconstitutional the signage provisions prohibiting the use of “photographs, silhouettes, drawings, or pictorial representations.”

Clarksville followed its answer to the counterclaim with an amended motion for summary judgment. It argued that the undisputed facts showed that X–Mart was currently operating in violation of the ordinance; that the enactment of the ordinance was not defective; and that the ordinance did not infringe upon 40 Retail's rights of free expression. In addition, Clarksville asserted that 40 Retail was estopped from challenging the ordinance because it had acquiesced to its provisions for three years and because it had applied for and accepted a hardship license. The circuit court held a hearing on the amended motion for summary judgment on December 7, 2011, at which the parties argued their respective positions. After receiving a supplemental brief from Clarksville, the circuit court granted the amended motion for summary judgment by an order dated January 5, 2012. In its decision, the court did not address the merits of 40 Retail's challenges to the validity and constitutionality of the ordinance. Instead, citing Arkansas State Highway Commission v. Hightower, 238 Ark. 569, 383 S.W.2d 279 (1964), the court found that the doctrines of waiver and estoppel prohibited 40 Retail from challenging the ordinance because it sought and was granted a hardship license and because it had received the benefit of the ordinance's amortization period.

For reversal of the circuit court's decision, 40 Retail argues that the court erred by ruling that principles of waiver and estoppel preclude its challenges to the validity and constitutionality of the ordinance. It contends that these principles do not apply when the law imposes a burden rather than confers a benefit and that a waiver does not occur by submitting to a mandatory law that includes...