Am. Entertainers, L.L.C. v. City of Rocky Mount

• Decision Date: 08 September 2016
• Docket Number: No. 5:14-CV-438-D,5:14-CV-438-D
• Parties: AMERICAN ENTERTAINERS, L.L.C., Plaintiff, v. CITY OF ROCKY MOUNT, NORTH CAROLINA, Defendant.
• Court: U.S. District Court — Eastern District of North Carolina

AMERICAN ENTERTAINERS, L.L.C., Plaintiff, v. CITY OF ROCKY MOUNT, NORTH CAROLINA, Defendant.

No. 5:14-CV-438-D

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION

September 8, 2016

ORDER

On July 31, 2014, American Entertainers, L.L.C., ("plaintiff" or "American") filed a complaint against the City of Rocky Mount, North Carolina ("defendant" or "the City") [D.E. 1]. American operates an adult club named Gentlemen's Playground ("GP") in Rocky Mount, and American's claims concern the City's ordinances regulating "Sexually Oriented Businesses." See generally Compl. [D.E. 1]. Specifically, American contends that: (1) GP does not fall within the definition of a Sexually Oriented Business as defined by the City's ordinances; (2) the City agreed to allow American to operate GP using its current format; (3) the City's licensing requirements for Sexually Oriented Businesses create an unconstitutional prior restraint on free speech; (4) the City's licensing requirements unreasonably burden free speech and infringe on the right of anonymity; (5) the City's ordinances regulating Sexually Oriented Businesses are unconstitutionally overbroad; (6) the City's prohibition of persons under the age of 21 from owning or operating a Sexually Oriented Business unconstitutionally restricts free speech; (7) the ordinance prohibiting performances for only one customer imposes an unconstitutional burden on free speech; and, (8) the prohibition against an adult entertainer touching a patron imposes an unconstitutional burden on free speech. See Compl. ¶¶ 57-178.¹

On November 30, 2015, the City and American filed cross-motions for summary judgment [D.E. 34, 37]. As explained below, the court grants in part and denies in part the City's motion for summary judgment and grants in part and denies in part American's motion for summary judgment.

I.

In 2002, American began operating GP as a "gentleman's club" with scantily-clad dancers. Khera Aff. [D.E. 38-1] ¶¶ 6-7. In 2003, the City threatened to bring action against American for operating a Sexually Oriented Business without a Sexually Oriented Business License in violation of the City's Sexually Oriented Business Ordinance ("SOBO"). Id. ¶ 8. On September 9, 2003, American sued the City in this court, arguing that the SOBO was unconstitutional ("the 2003 lawsuit"). Compl. ¶¶ 16-17; see also Compl., Am. Entertainers, L.L.C. v. City of Rocky Mount, No. 5:03-CV-683-BO (E.D.N.C. Sept. 9, 2003), [D.E. 1]. The City granted GP a temporary license to operate until the resolution of the 2003 lawsuit. See Chief Moore Dep. [D.E. 33-5] 21 (Deposition exhibit 42). On October 29, 2003, American's attorney Richard Wilson ("Wilson") sent an email to J. Nicholas Ellis ("Ellis"), one of City's attorneys in the 2003 lawsuit. Khera Aff. ¶ 11; Khera Aff. 9 (Affidavit exhibit A, email from Wilson to Ellis). In that email, Wilson asked Ellis to advise the City that American had changed its operating format: the dancers would use makeup latex and makeup powder to cover their areolae, where previously they had used surgical tape. Khera Aff. 9(Affidavit exhibit A, email from Wilson to Ellis). On June 25, 2004, American voluntarily dismissed the 2003 lawsuit. [D.E. 1-4].

American asserts that it dismissed the 2003 lawsuit "pursuant to an express agreement between the parties," an agreement that was "partly in parol and partly reduced to writing." Pl.'s Mot. Summ. J. [D.E. 37] 3. As evidence of this agreement, American offers the email sent to Ellis, and the testimony of Gurnam Khera ("Khera"), who owns and operates American. See Pl.'s Mot. Summ. J. 3; Khera Aff. ¶¶ 10-12; Khera Aff. 9 (Affidavit Exhibit A, email from Wilson to Ellis). According to Khera, the 2003 lawsuit "was settled through an exchange of letters." Khera Aff. ¶¶ 10-12. No such letters, however, are in evidence. Nonetheless, according to Khera's description of the settlement,

Plaintiff would be permitted to operate a 'bikini bar' in which performers provided live exotic dance performances while clothed in 'pasties and boy shorts.' Pasties consist of fabric or other opaque material sufficient to cover the nipples and areola. Boy shorts cover the pubic area, anal cleft, and a portion of the buttocks. The parties agreed that the quantity of clothing would be the dividing line between a sexually oriented business regulated under [the SOBO] and a bikini bar which would be unregulated by those ordinances.

Id. ¶ 10. Khera also stated that, in a conversation with Ellis and another lawyer, "it was said" that American did not require a license "if they put latex or pastie on [their areolae] . . . [t]his was the paper we had." Khera Dep. [D.E. 33-2] 65-66. The parties agree that GP continued to operate with dancers wearing as little as "pasties and boy shorts" from the lawsuit's dismissal on June 25, 2004, until July 18, 2014. Pl.'s Mot. Summ. J. 4; see Mem. Supp. Def.'s Mot. Summ. J. [D.E. 35] 4.

On April 4, 2014, a confidential informant working for the Rocky Mount Police Department entered GP and recorded video. See [D.E. 33-4] 217, 219 (Affidavit exhibit 35, Sexually Oriented Business Incident Report). The video shows performers dancing with exposed breasts, including exposed nipples, and exposed buttocks. Id. 219-20 (Affidavit exhibit 35, Sexually OrientedBusiness Incident Report); Video at 2:30-11:10.² The video also shows a performer dancing for only one patron at a time in an area secluded from the view of other patrons and accepting tips. [D.E. 33-4] 220 (Affidavit exhibit 35, Sexually Oriented Business Incident Report); Video at 00:50-11:10. A man whom Corporal Jarrod Edmonds of the Rocky Mount Police Department ("Edmonds") identifies as Khera appears at the beginning and the end of the video. [D.E. 33-4] 220 (Affidavit exhibit 35, Sexually Oriented Business Incident Report); see Video at 1:30-1:40, 11:20-11:40.

On May 3, 2014, Edmonds performed a routine compliance check of GP. [D.E. 33-4] 221. During this visit, Edmonds observed performers dancing with "nipples exposed, touching patrons, conducting hand to hand tipping, . . . [and] providing a private one on one dance in a VIP area outside of eye shot from other patrons." Id. Edmonds noted that Khera was present "and did not prohibit" the dancers' behavior. Id.

On July 9, 2014, Edmonds prepared a Sexually Oriented Business report ("SOBIR") describing the results of the two police investigations. [D.E. 33-4] 217-22. Testimony from Khera as well as two of GP's dancers confirm many of the SOBIR's findings. Dancers at GP perform with their tops off and only "the areola and a little bit above the areola" covered. Khera Dep. 57-69; see also Casey Moore Dep. [D.E. 33-1] 14-15, 42-45 (stating that dancers "had to" cover "[o]nly the areola and nipple"); Brown Dep. [D.E. 33-3] 13-14, 22-27 (stating that dancers were told to cover their areolae and nipples and that dancers would not cover any other part of the breast). Dancers would perform in shorts that covered only "half of [a dancer's] buttocks . . . at all times." Casey Moore Dep. 42. According to Khera, dancers at GP also "place their hands on their breasts andsqueeze them," but do so only when their breasts are "covered." Khera Dep. 93.

On July 18, 2014, American received a letter from Chief James C. Moore of the Rocky Mount Police Department ("Chief Moore"). Compl. Ex. E [D.E. 1-5]. This letter notified American that Chief Moore believed GP was operating as a Sexually Oriented Business without a license in violation of the City's SOBO and denied expressly that American had an agreement that allowed it to continue operating GP in its present format without a license. Id. The letter also stated that the Police Department would "take criminal action against" GP if it did not comply with the SOBO by August 1, 2014. Id.

On July 31, 2014, American filed this lawsuit seeking declaratory and injunctive relief [D.E. 1]. On November 30, 2015, after discovery closed, the City and American filed cross-motions for summary judgment. See [D.E. 34, 37].

II.

In considering a motion for summary judgment, the court views the evidence in the light most favorable to the non-movant and applies well-established principles under Rule 56 of the Federal Rules of Civil Procedure. See, e.g., Fed. R. Civ. P. 56; Scott v. Harris, 550 U.S. 372, 378 (2007); Celotex Corp. v. Catrett, 477 U.S. 317, 325-26 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-55 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986). Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see Anderson, 477 U.S. at 247-48.

The party seeking summary judgment must initially demonstrate an absence of a genuine issue of material fact. Celotex, 477 U.S. at 325. Once the movant meets its burden, the nonmoving party then must affirmatively demonstrate that there exists a genuine issue of material fact for trial.See Matsushita, 475 U.S. at 587. "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson, 477 U.S. at 249. Nor will a "mere . . . scintilla of evidence in support of the [nonmoving party's] position" suffice; "there must be evidence on which the [fact finder] could reasonably find for the [nonmoving party]." Anderson, 477 U.S. at 252. When video evidence is in the record and "opposing parties tell two different stories, one of which is blatantly contradicted by the record [including the video], so that no reasonable jury could believe it, a court should not adopt that version." Scott, 550 U.S. at 380. "When cross-motions for summary judgment are before a court, the court examines each motion separately, employing the familiar standard under Rule 56 of the Federal Rules of Civil Procedure." Desmond v....