Millennium Restaurants Group v. City of Dallas

• Decision Date: 18 October 2001
• Docket Number: No. Civ.A.3:01-CV-0857-G.,Civ.A.3:01-CV-0857-G.
• Parties: MILLENNIUM RESTAURANTS GROUP, INC., d/b/a Cabaret Royale, et al., Plaintiffs, Clubco Mgmt., Inc., d/b/a Dallas Gentlemen's Club, et al., Intervenors, v. CITY OF DALLAS, TEXAS, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

181 F.Supp.2d 659

MILLENNIUM RESTAURANTS GROUP, INC., d/b/a Cabaret Royale, et al., Plaintiffs Clubco Mgmt., Inc., d/b/a Dallas Gentlemen's Club, et al., Intervenors, v. CITY OF DALLAS, TEXAS, et al., Defendants.

No. Civ.A.3:01-CV-0857-G.

United States District Court, N.D. Texas, Dallas Division.

October 18, 2001.

COPYRIGHT MATERIAL OMITTED

John A. Koepke, A. David Gross, Jackson Walker, Dallas, TX, Steven Hershey Swander, Law Office of Steven H. Swander, Fort Worth, TX, Roger Earl Albright, Law Office of Roger Albright, Dallas, TX, for Plaintiffs.

Doreen E. McGookey, Dallas City Attorney's Office, Dallas, TX, Arthur F. Selander, Quilling, Selander, Cumminskey & Lownds, Dallas, TX, for Defendants.

MEMORANDUM ORDER

FISH, District Judge.

Before the court is the motion of the plaintiffs Millennium Restaurants Group, Inc. d/b/a Cabaret Royale ("Millenium") and Steven W. Craft ("Craft")¹ and the intervenors Clubco Mgmt., Inc. d/b/a Dallas Gentlemen's Club ("Clubco") and Brandon P. Gale ("Gale") for a preliminary injunction. For the reasons stated below,² the motion is granted.³

I. BACKGROUND

Millennium is an existing licensed adult cabaret operating in a conforming location under Chapter 41A of the Dallas City Code, the provision which governs "Sexually Oriented Businesses" ("Chapter 41A"). Brief of Plaintiffs in Support of a Preliminary Injunction ("Motion") at 2. Millennium or its predecessors have operated a licensed adult cabaret since 1988. Id. Millennium does business as Cabaret Royale, located at 10723 Composite Drive, Dallas Texas. Id.

On or about April 17, 2001, the City of Dallas (the "City") issued a letter to Cabaret Royale revoking its license under Chapter 41A to operate as a sexually oriented business. Id.; Brief in Support of Defendants' Response to Plaintiffs' Motion for Preliminary Injunction ("Response") at 2. The revocation would have become effective on May 17, 2001 if this court had not issued an agreed temporary restraining order prohibiting it. Motion at 2. The revocation letter cited Chapter 41A, § 41A-10 ("the ordinance") as the basis for revocation of the license, specifically referring to the convictions of four entertainers at Cabaret Royale for public lewdness on the premises. Motion at 2; Response at 2; Appendix to Defendants' Findings of Fact and Conclusions of Law and Brief in Support of Defendants' Response ("Defendants' Appendix") at 78-79.

Chapter 41A, § 41A-2(4) of the Dallas City Code defines an "adult cabaret" as:

a commercial establishment that regularly features the offering to customers of live entertainment that:

(A) is intended to provide sexual stimulation or sexual gratification to such customers; and

(B) is distinguished by or characterized by an emphasis on matter depicting, simulating, or relating to "specified anatomical areas" or "specified sexual activities."⁴

Id., located in Plaintiffs' and Intervenors' Appendix in Support of Findings of Fact and Conclusions of Law and Brief in Support of Preliminary Injunction ("Plaintiffs' Appendix") at 2 (footnote added).

Clubco is an existing adult cabaret operating in a conforming location. Motion at 3. Clubco has operated a licensed adult cabaret since 1992. Id. Clubco does business as Dallas Gentlemen's Club, located at 2117 W. Northwest Hwy., Dallas, Texas. Id. Intervenor Gale, an officer of Clubco, holds the city license under which Clubco operates as an adult cabaret. Id.

On or about May 9, 2001, the City issued a notice letter to Clubco revoking its license under Chapter 41A to operate as a sexually oriented business. Id.; Response at 3. The revocation would have become effective on June 8, 2001, if an agreed temporary restraining order had not been entered the same day. Motion at 3. This revocation letter also cited Chapter 41A, § 41A-10(b)(6) as the basis for revocation of the license, specifically referring to the convictions of three entertainers at Dallas Gentlemen's Club for public lewdness on the premises. Id.; Response at 3; Defendant's Appendix at 80-81.

The adult cabarets at issue in this case offer performances of erotic dancing to their customers. Motion at 3. The female performers dance topless and wear G-strings. Id.

The plaintiffs and intervenors are before the court now because the City is proposing to revoke their licenses to operate adult cabarets. Id. at 4. The defendant City bases its revocation on § 41A-10(b)(6) of Chapter 41A, a provision of the Sexually Oriented Business Ordinance which states that:

(b) The chief of police shall revoke a license if the chief of police determines that one or more of the following is true:

* * * * * *

(6) On two or more occasions within a 12-month period, a person or persons committed an offense occurring in or on the licensed premises of a crime listed in Section 41A-5(a)(8)(A)⁵ for which a conviction has been obtained, and the person or persons were employees of the sexually oriented business at the time the offenses were committed.

Id., located in Plaintiff's Appendix at 13 (footnote added).

This section, under which the City has acted, does not require that the license holder had knowledge of an employee's violation of the law. See Chapter 41A, § 41A-21(b) ("Except where otherwise specified, a culpable mental state is not required for the commission of an offense under this chapter."). Plaintiffs' Appendix at 24; Motion at 5. Nor does it require the licensee to have been negligent in failing to adequately instruct or supervise employees in avoiding lewd conduct as part of their erotic dance. Motion at 5. Rather, the ordinance calls for the automatic revocation of the license without any inquiry into the culpability of the licensee for the unlawful conduct. Chapter 41A, § 41A-10(b)(6), located in Plaintiffs' Appendix at 13.

The plaintiffs and intervenors further allege that the manner in which convictions are obtained against the performers offers no notice to the licensees of the facilities. Motion at 5. A dancer believed by a police officer to have crossed the line in her performance — from the lawfully erotic to the unlawfully lewd — is sent a notice of a misdemeanor violation of the law in the mail. Id. Both the plaintiffs and the defendants agree that the ordinance imposes no duty or requirement upon the City to contact the employers with respect to offenses committed by their employees. Id.; Response at 5. However, the defendant City points out that uniformed officers enter the establishments the evening offenses occur to identify offending employees. Response at 5; Affidavit of Michael T. Igo, located in Defendants' Appendix at 82-83. The dancers are then allowed to plead no contest to the offense and serve little or no jail time. Motion at 5. Thus, the plaintiffs and intervenors contend, the dancers have little or no incentive to contest the charge and two convictions can be obtained before the licensee is even aware of the problem. Id.

II. ANALYSIS

To obtain a preliminary injunction, it is well established that the movants must show: (1) a substantial likelihood that the movants will ultimately prevail on the merits; (2) a substantial threat that the movants will suffer irreparable injury if the injunction is not granted; (3) that the threatened injury to the movants outweighs whatever damage the proposed injunction may cause the opposing parties; and (4) that granting the injunction is not adverse to the public interest. Vision Center v. Opticks, Inc., 596 F.2d 111, 114 (5th Cir.1979) (citation omitted), cert. denied, 444 U.S. 1016, 100 S.Ct. 668, 62 L.Ed.2d 646 (1980); Mississippi Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 621 (5th Cir.1985) (citing Canal Authority of State of Florida v. Callaway, 489 F.2d 567, 572 (5th Cir.1974)).

The decision to grant or deny a preliminary injunction is left to the sound discretion of the district court. Mississippi Power & Light, 760 F.2d at 621. A preliminary injunction is an extraordinary remedy which should only be granted if the movants have clearly carried their burden of persuasion on all of the four factors. Id.; Allied Marketing Group, Inc. v. CDL Marketing, Inc., 878 F.2d 806, 809 (5th Cir.1989) (citations omitted). Each of these factors will be discussed separately.

A. Substantial Likelihood of Success

The plaintiffs and intervenors have shown a substantial likelihood of success on their claim that the ordinance violated applicable federal law in at least the following ways. First, they have shown a substantial likelihood of success on their claim that the City's attempt to revoke the plaintiffs' licenses based on past performances by entertainers is an unconstitutional prior restraint on the freedom of expression. Motion at 8. In Universal Amusement Company, Inc. v. Vance, 587 F.2d 159 (5th Cir.1978) (en banc), aff'd, 445 U.S. 308, 100 S.Ct. 1156, 63 L.Ed.2d 413 (1980), the Fifth Circuit noted that "[a] prior restraint of expression comes before [the] court with `a heavy presumption against its constitutional validity.'" Id. at 165, citing Bantam Books, Inc. v. Sullivan, 372 U.S. 58, 70, 83 S.Ct. 631, 9 L.Ed.2d 584 (1963). In Vance, the Fifth Circuit considered an effort by Texas authorities to close an adult theater for one year as a public nuisance on the basis of its showing of legally obscene, and therefore unprotected, material. The court, in language directly applicable to the present situation, found that the use of the nuisance statutes to accomplish this end would be unconstitutional, holding that:

Read together, Articles 4666 and 4667 clearly create a prior restraint. The statutes allow the state to close, for one year, a theatre that has exhibited obscene films. Unless a bond from $1,000 to $5,000 is posted, the showing of any motion picture is punishable by contempt of court. Thus, future conduct that may fall within the purview of the first amendment is absolutely prohibited after a finding of unprotected present conduct. It was precisely...