Mall Real Estate, L.L.C. v. City of Hamburg

• Decision Date: 27 July 2012
• Docket Number: No. 10–0898.,10–0898.
• Citation: 818 N.W.2d 190
• Parties: MALL REAL ESTATE, L.L.C., an Iowa Limited Liability Company, Appellant, v. CITY OF HAMBURG, an Iowa Municipal Corporation, Appellee.
• Court: Iowa Supreme Court

818 N.W.2d 190

MALL REAL ESTATE, L.L.C., an Iowa Limited Liability Company, Appellant,

v.CITY OF HAMBURG, an Iowa Municipal Corporation, Appellee.

No. 10–0898.

Supreme Court of Iowa.

July 27, 2012.

W. Andrew McCullough, Midvale, Utah, and Brian B. Vakulskas and Daniel P. Vakulskas of Vakulskas Law Firm, Sioux City, for appellant.

Raymond R. Aranza of Scheldrup Blades Schrock Smith Aranza, P.C., Cedar Rapids, for appellee.

WIGGINS, Justice.

The operator of an establishment offering nude and seminude dance performances sought an injunction restraining a city from enforcing its ordinance regulating nude and seminude dancing. The district court found that state law did not preempt the ordinance and that the ordinance was constitutional. On appeal, we find that state law preempts enforcement of the ordinance and that it is unenforceable against the establishment. Accordingly, we reverse the judgment of the district court and remand the case with instructions to the court to enter an order enjoining the city from enforcing its ordinance against the establishment.

I. Background Facts and Proceedings.

On December 8, 2008, the Hamburg city council passed chapter 48 of its city code. The ordinance, known as the “Sexually Oriented Business Ordinance,” contains provisions relating to licensing and zoning and imposes a range of regulations upon sexually oriented businesses. The stated purpose of the ordinance is to “regulate sexually oriented businesses in order to promote the health, safety, morals, and general welfare of the citizens of the City, and to establish reasonable and uniform regulations to prevent the deleterious secondary effects of sexually oriented businesses.” Hamburg, Iowa, Code § 48.010.01 (Dec. 8, 2008). The ordinance also states, “[I]t is neither the intent nor effect of this ordinance to restrict or deny access by adults to sexually oriented materials protected by the First Amendment to the Constitution of the United States of America....” Id.

Businesses subject to the terms of the ordinance include adult cabarets, which the ordinance defines, among other things, as any “business or entity that is with the emphasis on observation or viewing of nude or semi-nude performances whether the performers receive compensation or not, that regularly features persons who appear nude or semi-nude.” ¹Id.§§ 48.020.02, .030. The ordinance requires a sexually oriented business to have a valid sexually oriented business license and an employee of a sexually oriented business to have a valid sexually oriented business employee license. Id. § 48.040.01–.02. Further, the ordinance regulates many aspects and activities of sexually oriented businesses, including the consumption of alcohol on the premises, exterior portions of the businesses, signage, hours of operation, the exhibition of sexually explicit films, live nudity, and siting. See id. §§ 48.085–.087, .130–.150, .180, .200.

For example, the ordinance prohibits the possession or consumption of alcoholic beverages by any person on the premises of a sexually oriented business. Id. § 48.085. The ordinance also prohibits any person from intentionally or knowingly appearing in a state of nudity or from intentionally or knowingly violating Iowa Code section 728.5.²Id. § 48.180.01. Similarly, the ordinance contains requirements that seminude employees remain more than six feet away from customers and on a stage at least two-feet high. ³Id. § 48.180.02. It also prohibits the exchange of gratuities between customers and seminude employees and prohibits intentional contact between customers and seminude employees. Id. § 48.180.03, .04. Moreover, it restricts the size, number, and shape of a sexually oriented business's signage, places restrictions on the content of such signs, and regulates the font and color scheme of such signs. Id. § 48.087.

The City imputes violations of the ordinance to the sexually oriented business licensee. Id. § 48.190. If a sexually oriented business licensee violates the ordinance or knowingly allows an employee to violate the ordinance, then the City may suspend the license of the business and the employee. Id. § 48.090. The ordinance also provides for the revocation of a sexually oriented business license. For example, the City may revoke a sexually oriented business license for activity on the premises related to controlled substances, alcohol, prostitution, acts of specified sexual activity, conduct negatively affecting the health, safety, or welfare of the citizens of Hamburg, or conduct otherwise in violation of the ordinance. Id. § 48.100.

Clarence Judy and Terry Rutledge own Mall Real Estate. Mall Real Estate leases space located at 701 Main Street in Hamburg to the Hamburg Theatre for the Performing Arts, which has been open for nine years and is also known as Shotgun Geniez. Mall Real Estate operates the parking lots surrounding the Hamburg Theatre. Persons who wish to enter the Hamburg Theatre must pay an individual parking fee to Mall Real Estate. Performers at the Hamburg Theatre perform nude, seminude, and fully clothed. At times during performances, performers physically contact customers, often by sitting in their laps. The performers also spend time talking to customers. The Hamburg Theatre does not have a liquor license or sell alcohol, but it does allow customers to supply their own alcohol. Judy believes the customers at the Hamburg Theatre come to see nude dancing, get lap dances, and converse with the performers.

Judy testified the Hamburg Theatre does its best to ensure the customers and performers comply with the law. He further testified the Hamburg Theatre does its best to ensure minors do not enter. Hamburg Theatre employees have caught minors attempting to enter the club and turned them away. The Hamburg Theatre gives customers younger than twenty-one years old but older than eighteen years old a glow-in-the-dark wristband to signify they are not permitted to consume alcohol. Further, club employees keep watch to make sure no one with a wristband consumes alcohol. Performers must provide identification proving their age, but are otherwise free to perform in whatever manner they wish provided they comply with any applicable laws while in the Hamburg Theatre.

Judy estimates in excess of 112,000 customers have been to the Hamburg Theatre during the past nine years. The Hamburg Theatre has never been cited by police for unsightly litter, and no one in the club has been cited for engaging in sex acts on the premises or for purchasing or selling drugs. However, on one occasion the police cited a minor as a minor in possession of alcohol at the club. In addition, a seventeen-year-old once danced on stage, but the Hamburg Theatre was acquitted of any wrongdoing. There was also one case of alleged prostitution, which was dismissed. Seven or eight incidents involving the club have resulted in police reports. In defense of the Hamburg Theatre, Judy constructed a list of all calls to police that had been made within 1000 feet of the business since 2002, noting that only a few actually pertained to the Hamburg Theatre.

Shortly after the City adopted the ordinance, Mall Real Estate filed a petition seeking a declaratory judgment declaring that the City's ordinance does not affect or apply to the Hamburg Theatre and that the ordinance is unconstitutional. Mall Real Estate further requested a temporary injunction restraining Hamburg from enforcing the ordinance against the Hamburg Theatre.

The district court denied Mall Real Estate's request for declaratory and injunctive relief, holding the ordinance affected and applied to the Hamburg Theatre and was constitutional. Mall Real Estate filed a notice of appeal. The district court stayed enforcement of the ordinance pending the outcome of this appeal. On appeal, Mall Real Estate argues the ordinance does not apply to the Hamburg Theatre, conflicts with state law, and violates the Iowa Constitution. Mall Real Estate bases its preemption argument on its assertion that the Hamburg Theatre is a theater for the purposes of Iowa Code section 728.5 (2009).⁴ The City asserts it may pass valid zoning and licensing regulations. At trial, the parties agreed the sections of the ordinance relating to zoning would not affect Mall Real Estate because the Hamburg Theatre preexisted the ordinance. Therefore, we have no reason to consider any part of the ordinance related to zoning.

II. Issues.

Because the issue of whether state law preempts the City's ordinance is dispositive of this appeal, we need not reach the constitutional issues raised.

III. Scope of Review.

We review whether state law preempts a municipal ordinance for correction of errors of law because it is a question of statutory construction. Hensler v. City of Davenport, 790 N.W.2d 569, 578 (Iowa 2010).

IV. Whether the Iowa Code Preempts the Hamburg Ordinance.

Mall Real Estate asserts the Hamburg ordinance conflicts with state law because section 728.5 contains a theater exception and the Hamburg ordinance does not. Mall Real Estate bases this argument on two other district court decisions that the district court distinguished as dealing with different statutes under different facts and circumstances. The City responds by arguing section 728.11 allows local governments to pass ordinances related to zoning and licensing of such businesses.

Section 728.5 exempts theaters from the statewide ban of public nudity. SeeIowa Code § 728.5. Section 728.11 contains a uniform application provision. It provides:

In order to provide for the uniform application of the provisions of this chapter relating to obscene material applicable to minors within this state, it is intended that the sole and only regulation of obscene material shall be under the provisions of this chapter, and no municipality, county or other governmental unit within this state shall make any law, ordinance or regulation relating to the availability of obscene...