8100 North Freeway, Ltd. v. City of Houston

• Decision Date: 08 March 2012
• Docket Number: No. 14–11–00301–CV.,14–11–00301–CV.
• Parties: 8100 NORTH FREEWAY, LTD., Appellant, v. The CITY OF HOUSTON, Appellee.
• Court: Texas Court of Appeals

363 S.W.3d 849

8100 NORTH FREEWAY, LTD., Appellant,

v.The CITY OF HOUSTON, Appellee.

No. 14–11–00301–CV.

Court of Appeals of Texas, Houston (14th Dist.).

March 8, 2012.

Bradley J. Reich, Denver, CO, Richard B. Kuniansky, Houston, for appellant.

Nirja S. Aiyer, Patrick Zummo, Houston, for appellee.

Panel consists of Chief Justice HEDGES and Justices CHRISTOPHER and McCALLY.

OPINION

TRACY CHRISTOPHER, Justice.

Appellant, 8100 North Freeway, Ltd. (“8100”), appeals from the trial court's granting of a permanent injunction enjoining 8100 from operating an adult arcade without a permit. Finding no error, we affirm.

I. The Adult Arcade Regulations

Chapter 243 of the Texas Local Government Code authorizes municipalities such as the City of Houston (“Houston”) to regulate sexually-oriented businesses (“SOB”). See Tex. Loc. Gov't Code Ann.. § 243.003 (West 2005). The Local Government Code defines an SOB as:

[A] sex parlor, nude studio, modeling studio, love parlor, adult bookstore, adult movie theater, adult video arcade, adult movie arcade, adult video store, adult motel, or other commercial enterprise the primary business of which is the offering of a service or the selling, renting, or exhibiting of devices or any other items intended to provide sexual stimulation or sexual gratification to the customer.

Id. at § 243.002 (West 2005). Pursuant to that authority, Houston enacted Chapter 28 of its Code of Ordinances to regulate SOBs.

In 1997, Houston enacted Ordinance 97–75, which amended Chapter 28 of the Houston Code of Ordinances. The specific part of the amended Chapter 28 at issue in this appeal is Article II, containing sections 28–81 through 28–116. Article II regulates “adult arcades.” Article II defines an “adult arcade” as a business where members of the public “are admitted to use one or more arcade devices.” Houston, Tex., Rev. Ordinances ch. 28, art. II, § 28–81. An “arcade device” is defined as a coin or slug operated device that dispenses entertainment intended for viewing by five or fewer persons. Id. Article II defines “entertainment” as:

(1) Any live exhibition, display or performance; or

(2) Any still picture(s) or movie picture(s), whether mechanically, electrically or electronically displayed; or

(3) Any combination of the foregoing, in which the specified anatomical areas or specified sexual activities are depicted.

Id. “Specified anatomical areas” means:

Less than completely and opaquely covered:

a. Human genitals, pubic region or pubic hair; or

b. Buttock; or

c. Female breast or breasts or any portion thereof that is situated below a point immediately above the top of the areola; or

d. Any combination of the foregoing; or

Human male genitals in a discernibly erect state, even if completely and opaquely covered.

Id. “Specified sexual activities” means:

Human genitals in a state of sexual stimulation or arousal;

Acts of human masturbation, sexual intercourse or sodomy;

Fondling or other erotic touching of human genitals, pubic regions, buttock or female breast; or

Any combination thereof.

Id.

Article II requires that an owner or operator of an adult arcade as defined in the ordinance obtain a permit in order to operate. Id. at § 28–91. An adult arcade must meet certain configuration requirements in order to obtain that permit. In particular, section 28–101 requires an unobstructed line of sight from the manager's station into every area where an adult arcade customer has access. Id. at § 28–101(a). This unobstructed view “must be by direct line of sight from the manager's station.” Id.

Under Chapter 28, Houston's police chief “shall grant the permit” unless (1) the adult arcade does not comply with the configuration requirements; (2) the police chief is unable to contact the applicant at the telephone number provided by the applicant to schedule and conduct the required inspection; or (3) the adult arcade had a permit revoked within the 180 days preceding the date the application was filed. Id. at § 28–93(b).

II. Prior Decisions Upholding Ordinance 97–75

Houston contends that 8100 is barred by res judicata from making its current points on appeal. Houston also argues that it does not have to prove, in every case, the negative effects of an adult video arcade. 8100 and its predecessor in interest, AVW, Inc., operated a business, originally called Adult Video Megaplexxx (“Megaplexxx”), which consisted of an adult bookstore and an adult arcade that featured small booths with doors where adult customers could privately view sexually explicit videos. Megaplexxx was one of many parties that challenged the City's sexually-oriented business ordinance in 1997. The Fifth Circuit upheld the constitutionality of the amendments in N.W. Enterprises Inc. v. City of Houston, 352 F.3d 162 (5th Cir.2003). The Fifth Circuit held that Ordinance 97–75 was a content neutral regulation. Id. at 176–77. The Fifth Circuit also determined that Ordinance 97–75 was intended to reduce negative secondary effects of SOBs including crime, disease, psychological harm to children, and reduced property values to surrounding landowners. Id. at 175–76. Finally, the Fifth Circuit stated that Houston “need not relitigate [the issue of secondary effects] every time its SOB ordinances are challenged.” Id. at 176; see also Laredo Rd. Co. v. Maverick Cnty., Tex., 389 F.Supp.2d 729, 743 (W.D.Tex.2005) (holding that county could rely on secondary effects research conducted by other localities as well as findings of secondary effects by the state legislature).

In an attempt to comply with the direct line of sight requirement, 8100 installed video cameras in each arcade booth. 8100 then applied for an Article II arcade permit, which the City denied. The denial was upheld in the trial court and on appeal, concluding that the video monitoring system did not meet the direct line of sight requirement. Rosenblatt v. City of Houston, 31 S.W.3d 399, 402 (Tex.App.-Corpus Christi 2000, pet. denied).¹ The court also rejected AVW's claim that the video arcade regulations were unconstitutional under the First Amendment, concluding they were barred by res judicata.

In July 2008, Houston filed suit against 8100 seeking to temporarily and then permanently enjoin 8100 from operating an adult arcade without an Article II permit. The trial court granted a temporary injunction which we upheld on appeal. 8100 N. Freeway, Ltd. v. City of Houston, 329 S.W.3d 858 (Tex.App.-Houston [14th Dist.] 2010, no pet.). 8100 argued that the injunction constituted an unlawful prior restraint on protected First Amendment activities. We rejected that argument, but did not address the other constitutional arguments raised by 8100. Id. at 864–865.

III. Factual Background

The parties stipulated that the record from the temporary injunction hearing would be incorporated into the record of the permanent injunction. In late 2008, 8100 opted to change its business model in an effort to avoid being subject to Houston's SOB ordinance. William Becker, one of 8100's owners, testified during the temporary injunction hearing. According to Becker, the changes envisioned by 8100's owners were accomplished gradually. First, 8100 changed its name to “Tryst, A Love Boutique.” ² In addition, 8100 began offering new types of inventory, including condoms, oils, lingerie, costumes, bachelorette gag gifts, adult novelties, incense, herbal supplements, and smoke accessories. 8100 also expanded the video arcade area from 9 to 28 viewing rooms. 8100 also increased the number of viewing channels to 128. Becker was asked during his testimony about the types of videos shown in 8100's arcade. Becker prefaced his testimony with the caveat: “I don't know the specifics, because I haven't been to the store for some time.” Becker then went on to testify that, according to 8100's management report, out of the 128 channels, 65 to 70 offered non-adult videos while half of the remaining channels offered hard-core adult videos and the other half offered soft-core videos along the lines of “Girls Gone Wild.” By making these changes, 8100 was following a strategy where it sought to recast itself as a commercial enterprise in which the primary business was not the “offering of a service or the selling, renting, or exhibiting of devices or any other items intended to provide sexual stimulation or sexual gratification to the customer.” By doing this, 8100 adopted the position that it would not be required to get an Article II permit to operate. See Tex. Loc. Gov't Code Ann.. § 243.002. Despite these changes, Becker testified that he would not permit his minor children to work inside the business.

Matthew Dexter, a member of the Houston Police Department Vice Division, inspected the premises of 8100's business on January 16, 2009.³ As Dexter approached the entrance into the business, he observed the following on the door: “Adult Video Megaplexxx; Open 24 hours, 7 days a week; Minors, Alcohol, Cameras, Firearms.” Upon entering the business, Dexter saw the manager/cashier station to his left, a retail area selling adult novelties, sex toys, and similar items to his right, and then the DVD area in the center of the business. According to Dexter, the arcade area was on the opposite end of the building from the entrance. As he approached the arcade area, Dexter observed and photographed a dry erase board stating: “Look, Arcade Rooms. The Nastiest and Raw Hardcore Steaming Channels!!!” Dexter also observed a flat screen television hanging on the wall above the arcade entrance displaying a sexually explicit video. Once in the arcade area, Dexter discovered three hallways with twenty-eight individual viewing booths. Each booth had an opaque door and on the door of the booth he inspected, Dexter observed this notice: “Notice. Only one person per room. All rooms are monitored by camera pursuant to City Ordinance 97–75.” Inside the booth Dexter physically entered, he found an arcade device. After inserting a dollar...