Lee v. City of Newport

• Citation: 947 F.2d 945
• Decision Date: 05 November 1991
• Docket Number: No. 91-5158,91-5158
• Parties: NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. Armina LEE, d/b/a Brass Bull, Plaintiff-Appellant, v. The CITY OF NEWPORT, et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 945

947 F.2d 945

NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

Armina LEE, d/b/a Brass Bull, Plaintiff-Appellant, v. The CITY OF NEWPORT, et al., Defendants-Appellees.

No. 91-5158.

United States Court of Appeals, Sixth Circuit.

Nov. 5, 1991.

Before MILBURN and SUHRHEINRICH, Circuit Judges, and JORDAN, District Judge. ^*

LEON JORDAN, District Judge.

This is an appeal from the judgment of the United States District Court for the Eastern District of Kentucky. The determinative issue in this civil rights action pursuant to 42 U.S.C. § 1983 is the constitutionality of certain provisions of an ordinance enacted by the City of Newport, Kentucky, Ordinance No. 26-39. This ordinance purports to be an occupational licensing provision under which the plaintiff's license to operate an entertainment establishment known as the Brass Bull in Newport was suspended and conditionally revoked. The plaintiff sought injunctive relief in the District Court for the Eastern District of Kentucky, which denied the application for injunctive relief following a hearing. The plaintiff has appealed and for the reasons stated below this Court reverses the judgment of the District Court.

I. FACTS

A hearing on the plaintiff's application for injunctive relief was held in the Eastern District of Kentucky on January 31, 1991. Most of the facts surrounding the suspension of the plaintiff's occupational license are not disputed. ¹ The ordinance at issue, section 26-39, provides in relevant part:

"(a) Any license issued under this division may, with notice to the holder thereof and a hearing as hereinafter provided for, be revoked or suspended by the Board of Commissioners.

(1) If, within twelve months prior to the date on which charges are filed, there has been a conviction of any licensee or his agent, servants or employees, for any action or activity occurring in, on, or at the premises covered by the license, in violation of any provision of this division or any other division of the City of Newport, or of any criminal or penal statute of the Commonwealth of Kentucky against gambling, disorderly conduct, or any other criminal or penal offense, and a judgment of conviction in any court of competent jurisdiction shall be conclusive evidence of such violation....

"(b) ... Upon a decision by the Board of Commissioners to revoke or suspend a license issued under this division, all business activity at that location shall cease immediately for the period of suspension or revocation." (Emphasis added.) ²

The plaintiff is the owner and operator of the Brass Bull, an adult oriented nightclub. She has operated the nightclub since September, 1984, and has been issued an occupational license for every year of operation; the last such license was issued in July, 1990. Ms. Lee testified that at the time of the last license renewal, she was aware that two of her employees had been convicted of acts of prostitution, one of whom was convicted twice, that occurred on the premises of the Brass Bull. Prior to the renewal of her license, one of these employees had been terminated by the plaintiff and the other had left her job voluntarily. As of July 1, 1990, the plaintiff was not offering nude dancing at her club, since she had her liquor license at that time, but was offering seminude dancing. J.A. 57-59.

On October 25, 1990, the City of Newport (the City) issued the plaintiff a notice to revoke her license. This notice was received by her in early November. Prior to the issuance of the notice, the plaintiff decided to offer nude dancing as entertainment and thus surrendered her liquor license to the City and the State of Kentucky. J.A. 16, 59-61.

The City's notice of revocation was based on the three convictions of two employees for prostitution in May, 1990. The plaintiff's uncontradicted testimony was that she was not aware of prostitution or solicitation occurring on the premises of the Brass Bull prior to these convictions. She has all her employees sign a contract in which they are notified that prostitution will not be permitted on the premises. She stated that she neither condones nor encourages such conduct and that any employee who is found engaging in this conduct is fired immediately. She holds weekly meetings with her employees as part of her efforts to oversee their activities. She assigns other employees to supervise the employees and has instructed them as to how such conduct is to be handled. These precautions had been used by her since at least April, 1990. The plaintiff stated in her testimony at the hearing on her application for injunctive relief that by offering nude dancing she was better able to prevent prostitution since she removed the booths from the club, turned up the lighting, eliminated the sale of alcohol, and prohibited all contact between the dancers and customers. J.A. 61-62, 68.

In a letter from the City's law department, dated November 30, 1991, the City offered to settle the revocation proceeding if the plaintiff would cease offering nude dancing and reactivate her liquor license. Another settlement offer had been made on November 19, 1990. The plaintiff declined the settlement offers. J.A. 23-24, 63-64.

On January 21, 1991, a revocation hearing was held before the City commissioners. The plaintiff was present and testified. She explained the efforts she made to control her employees and offered other evidence of the precautions she had taken to prevent prostitution on the premises. This evidence was uncontroverted by the City. J.A. 64-67.

At the hearing in the District Court ten days later, the plaintiff stated on cross-examination that she was working in the club the night on which two of her employees were cited for prostitution. She testified, however, that she saw no indication that these employees were engaged in illegal conduct. These two employees were not arrested by the undercover officer on the same night as their violations and the plaintiff stated that she had no knowledge of the violations until the latter part of April, 1990. J.A. 77-78.

James Parsons testified on behalf of the City. Mr. Parsons is the city manager and has held this position since October 1, 1989. His responsibilities include filing charges against occupational licensees whose licenses may be subject to revocation or suspension. He filed the charges against the plaintiff. While the City has established regulations governing the conduct of businesses engaged in selling alcohol, every business in the City is required to obtain and maintain an occupational license. J.A. 80-82, 114.

The charges against the plaintiff were based on these three prostitution convictions obtained in May, 1990. The charges were lodged on October 25, 1990, against the plaintiff. He stated that the City was aware at the time that these charges were brought that the Brass Bull was offering nude dancing but stated that this fact had no effect on the City's decision. Mr. Parsons was present at the hearing held by the City in January, 1991, on the revocation of the plaintiff's license. As a result of this hearing, the plaintiff's license was suspended for six months and she was placed on probation, during which period of probation another violation would have resulted in the revocation of her occupational license. J.A. 82-85.

Unsupported by the record of the hearing before the City commissioners, Mr. Parsons offered his opinion that the City imposed suspension rather than revocation because the plaintiff attempted to exercise more control over the activities of her employees in her business than did another licensee whose charges had been heard by the City commissioners on the same day. Mr. Parsons testified that prostitution affects the viability of downtown businesses because customers tend to avoid the downtown shopping district due to these kinds of illegal activities. He further stated that since many acts of prostitution are performed by the employees of establishments like the plaintiff's, the City was attempting to make these establishments assume responsibility for the conduct of their employees to prevent prostitution from occurring. J.A. 86-87.

At the January hearings, the City offered no evidence that the plaintiff had not in fact taken steps to control the behavior of the Brass Bull's employees. No notice was given to the plaintiff that the City was concerned about the degree or extent of control she exercised over her employees. No criminal charge was brought against the plaintiff for permitting prostitution to occur on the premises of the Brass Bull. ³ J.A. 93-94.

He denied that the City was motivated by a desire to eliminate nude dancing in Newport in taking its actions against the plaintiff. The City is investigating occupational license violations in other businesses and not all nude dancing establishments have been charged with license violations. No charges have, however, been processed against or are pending against any other kind of business than adult oriented establishments. Nothing in the occupational license ordinance expressly permits the decision maker to consider any mitigating factors in the determination of whether to revoke or suspend a license and no standard governs the decision maker's discretion as to the nature of the penalty for a violation. J.A. 96-98, 103-106.

Mr. Parsons admitted that he and the City commissioners have publicly expressed their opposition to adult entertainment establishments. These same commissioners had the authority to make the revocation decision concerning the plaintiff's club. He testified that studies have been conducted that indicate a correlation between prostitution, both in the clubs and in the neighborhood of the clubs, and the operation of adult oriented establishments....