4447 Corp. v. Goldsmith

• Decision Date: 12 June 1985
• Docket Number: Nos. 4-1283A415,3-484A106,s. 4-1283A415
• Citation: 479 N.E.2d 578
• Parties: 4447 CORPORATION, World Video Systems, Issi Theatre Corporation, Plaza Entertainment Center and Burton Gorelick, Appellants-Defendants, v. Stephen GOLDSMITH, Prosecuting Attorney for the Nineteenth Judicial Circuit, Appellee-Plaintiff. FORT WAYNE BOOKS, INC., Cinema Blue of Fort Wayne, Inc., and Erotic House Bookstore, Inc., Appellants-Defendants, v. STATE of Indiana and Stephen M. Sims, Prosecuting Attorney for the Thirty-Eighth Judicial Circuit, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

Page 578

479 N.E.2d 578

4447 CORPORATION, World Video Systems, Issi Theatre

Corporation, Plaza Entertainment Center and Burton

Gorelick, Appellants-Defendants, v. Stephen GOLDSMITH, Prosecuting Attorney for the Nineteenth

Judicial Circuit, Appellee-Plaintiff.

FORT WAYNE BOOKS, INC., Cinema Blue of Fort Wayne, Inc., and Erotic House Bookstore, Inc., Appellants-Defendants, v. STATE of Indiana and Stephen M. Sims, Prosecuting Attorney

for the Thirty-Eighth Judicial Circuit,

Appellees-Plaintiffs.

Nos. 4-1283A415, 3-484A106.

Court of Appeals of Indiana Fourth District.

June 12, 1985.

John H. Weston, David M. Brown, Brown, Weston & Sarno, Beverly Hills, Cal., Kenneth R. Scheibenberger, Lebamoff Law Offices, Fort Wayne, Stephen M. Taylor, Taylor & Rubin, P.C., South Field, Mich., for Ft. Wayne Books, Inc., et al.

Franklin I. Miroff, Ancel, Miroff & Frank, P.C., Indianapolis, for 4447 Corp., et al.

Linley E. Pearson, Atty. Gen., Richard E. Hendrickson, Arthur Thaddeus Perry, Deputy Attys. Gen., Indianapolis, for appellee-plaintiff.

YOUNG, Judge.

In each of these cases, the state has instituted proceedings against adult bookstores under the Racketeer Influenced and Corrupt Organizations Act (RICO), IND.CODE 35-45-6-1 et seq., seeking remedies available under the Civil Remedies for Racketeering Activity (CRRA) statute, IND.CODE 34-4-30.5-1 et seq. The defendants bring interlocutory appeals from the trial courts' denials of their motions to vacate injunctive orders providing for, inter alia, the padlocking of bookstores and seizure of the contents thereof. We have consolidated these appeals in order to consider defendants' common challenge to the constitutionality of the RICO and CRRA statutes under the First Amendment to the United States Constitution.

Marion County Prosecutor Stephen Goldsmith initiated the first of these actions on August 1, 1983, when he filed a complaint in the Marion Circuit Court against the individual and corporate defendants, owners and operators of three adult bookstores. The complaint alleged that the bookstores constituted "an illegal enterprise" ¹ and that the defendants had engaged in "a pattern of racketeering activity" ² in violation of IC 35-45-6-1 et seq. These RICO provisions create an offense of "corrupt business influence," a Class C felony, committed by a person:

(1) who has knowingly or intentionally received any proceeds directly or indirectly derived from a pattern of racketeering activity, and who uses or invests those proceeds or the proceeds derived from them to acquire an interest in real property or to establish or to operate an enterprise;

(2) who through a pattern of racketeering activity, knowingly or intentionally acquires or maintains, either directly or indirectly, an interest in or control of real property or an enterprise; or

(3) who is employed by or associated with an enterprise, and who knowingly or intentionally conducts or otherwise participates in the activities of that enterprise through a pattern of racketeering activity; ....

IC 35-45-6-2. The statute enumerates various predicate offenses which constitute "racketeering activity," including obscenity violations under IND.CODE 35-30-10.1-2 (repealed 1983 Acts, P.L. 311; see now IND.CODE 35-49-3-1).

Goldsmith in his complaint sought civil remedies created by the Civil Remedies for Racketeering Activity Act. Under IC 34-4-30.5-2, which provides for injunctive relief in response to RICO violations, the trial court, upon a finding by a preponderance of the evidence that a RICO violation has occurred may:

(1) order a defendant to divest himself of any interest in any enterprise or real property;

(2) impose reasonable restrictions upon the future activities or investments of a defendant, including prohibiting a defendant from engaging in the same type of endeavor as the enterprise in which he was engaged in violation of IC 35-45-6-2;

(3) order the dissolution or reorganization of any enterprise;

(4) order the suspension or revocation of a license, permit, or prior approval granted to any enterprise by any agency of the state;

(5) order the forfeiture of the charter of a corporation organized under the laws of Indiana, or the revocation of a certificate authorizing a foreign corporation to conduct business within the state, upon finding that the board of directors or a managerial agent acting on behalf of the corporation, in conducting the affairs of the corporation, has authorized or engaged in conduct in violation of IC 35-45-6-2 and that, for the prevention of future criminal activity, the public interest requires the charter of the corporation forfeited and the corporation dissolved or the certificate revoked; and

(6) make any other order or judgment that the court considers appropriate.

The CRRA statute further authorizes the prosecuting attorney to seek forfeiture of property incident to corrupt business influence, and to obtain a court order seizing property subject to forfeiture, under IC 34-4-30.5-3:

(a) The prosecuting attorney in a county in which any of the property is located, may bring an action for the forfeiture of any property used in the course of, intended for use in the course of, derived from, or realized through, conduct in violation of IC 35-45-6-2. An action for forfeiture may be brought in any circuit or superior court in a county in which any of the property is located. Upon a showing by a preponderance of the evidence that the property in question was used in the course of, intended for use in the course of, derived from, or realized through, conduct in violation of IC 35-45-6-2, the court shall order the property forfeited to the state, and shall specify the manner of disposition of the property including the manner of disposition if the property is not transferable for value. The court shall order forfeitures and dispositions under this section with due provision for the rights of innocent persons.

(b) When an action is filed under subsection (a), the prosecutor may move for an order to have property subject to forfeiture seized by a law enforcement agency. The judge shall issue such an order upon a showing of probable cause to believe that a violation of IC 35-45-6-2 involving the property in question has occurred.

Pursuant to this authority, Goldsmith filed along with his complaint a Petition for Seizure of Property Subject to Forfeiture, incorporating by reference the allegations of the complaint and of the probable cause affidavit. This petition alleged that the defendants intended soon to open an additional adult bookstore in furtherance of their "racketeering activity", i.e. "dissemination of obscene material." The petition also asserted that the new bookstore contained numerous obscene items, none of which were specified, and cited possession of these allegedly obscene materials as probable cause to establish RICO violations.

The probable cause affidavit upon which this petition for seizure relied stated that police had visited the two operating adult bookstores, where they observed sexually-oriented books, magazines, films and videotapes. They purchased four sexually-explicit movies, which they submitted to the court. Visiting the construction site of the soon-to-open bookstore, they were informed that sexually-oriented materials would be available there as well. The police further alleged that the three bookstores constituted a single enterprise under common ownership and control.

On the basis of these allegations, the trial court at the ex parte proceedings of August 1, 1983, issued an order that police seize, i.e. padlock, the third bookstore in advance of its opening, as authorized by IC 34-4-30.5-4. ³ While this order permitted the continued distribution of literature and films at the two existing bookstores, it required the defendants to list and preserve all other property pending trial. On August 4, 1983, the defendants appeared and filed motions to dismiss the complaint and to vacate the trial court's order.

Goldsmith on September 8, 1983, filed an amended complaint in the Hamilton Circuit Court, to which venue of the case had been transferred. Reciting allegations materially the same as those of the original complaint, ⁴ plaintiff prayed for a panoply of CRRA remedies, including license suspension, corporate charter revocation, and forfeiture of all property related to the operation of these bookstores.

On December 21, 1983, the Hamilton Circuit Court denied defendants' Motion to Dismiss the complaint and to vacate the order of the Marion Circuit Court. This court has granted a stay of that order pending appeal of the denial of defendants' motion to vacate.

In Fort Wayne Books, et al., Allen County Prosecutor Stephen Sims has initiated a similar civil action against the owners and operators of three adult bookstores. As in the 4447 case, the complaint alleges an illegal enterprise, the purpose of which is to operate adult bookstores. In this case, the complaint also cites a pattern of racketeering activity consisting of thirty-nine prior obscenity convictions of the three bookstores and their agents between June 1981 and March 19, 1984, the date of the complaint.

Sims in his complaint sought CRRA remedies including license forfeiture and confiscation of defendants' property. The prosecutor accordingly filed a petition for seizure of property, seeking forfeiture of the three bookstores with their entire contents and all corporate assets under IC 34-4-30.5-3.

The forfeiture petition incorporated by reference the allegations of the complaint and the probable cause affidavit. The latter stated that police had been monitoring the activities of the three bookstores and that the defendant corporations and their employees had incurred thirty-nine obscenity convictions. The affiant related that he and other police had recently visited the bookstores, where they observed materials he believed to be obscene.

At an ex parte hearing held the same day...