ZJ Gifts D-2, LLC v. City of Aurora, 03CA0425.

• Decision Date: 20 May 2004
• Docket Number: No. 03CA0425.,03CA0425.
• Citation: 93 P.3d 633
• Parties: Z.J. GIFTS D-2, L.L.C., an Oklahoma limited partnership d/b/a Christal's, Plaintiff-Appellant, v. CITY OF AURORA, an incorporated home rule municipal corporation, Defendant-Appellee.
• Court: Colorado Court of Appeals

93 P.3d 633

Z.J. GIFTS D-2, L.L.C., an Oklahoma limited partnership d/b/a Christal's, Plaintiff-Appellant, v. CITY OF AURORA, an incorporated home rule municipal corporation, Defendant-Appellee.

No. 03CA0425.

Colorado Court of Appeals, Div. IV.

May 20, 2004.

Schwartz & Goldberg, P.C., Arthur M. Schwartz, Michael W. Gross, Denver, Colorado, for Plaintiff-Appellant.

Charles H. Richardson, City Attorney, Robert Werking, Assistant City Attorney, Aurora, Colorado; Arrington & Associates, P.C., Barry K. Arrington, Golden, Colorado, for Defendant-Appellee.

Opinion by Judge GRAHAM.

Plaintiff, Z.J. Gifts D-2, L.L.C., doing business as Christal's, appeals the trial court's judgment permanently enjoining it from operating a sexually oriented business in its present location and without a sexually oriented business license. We affirm.

In November 1993, plaintiff began operating a retail video and gift store in the City of Aurora known as Christal's that sold and rented adult sexually oriented materials, among other items, for viewing off premises. Plaintiff provided no onsite viewing of material or adult entertainment.

In December 1993, the City enacted an ordinance that restricted the location of sexually oriented businesses to industrial zones. Christal's was not located in an industrial zone.

Under Aurora City Code § 26-441 (1994), a sexually oriented business includes, inter alia, an adult bookstore, "adult novelty store, or adult video store." Section 26-441 further defines an "adult bookstore, adult novelty store, or adult video store" as:

A commercial establishment which devotes a significant or substantial portion of its stock in trade or interior floor space to the sale, rental or viewing, for any form of consideration, of books, magazines, periodicals, or other printed matter or photographs, films, motion pictures, video cassettes, slides, or other visual representations which are characterized by the depiction or description of specified sexual activities or specified anatomical areas.

(Emphasis added.)

In 1993, plaintiff filed an action in federal district court challenging the constitutionality of the ordinance under the First and Fourteenth Amendments to the United States Constitution. The district court concluded that the ordinance violated the First Amendment, but that ruling was reversed on appeal. Z.J. Gifts D-2, L.L.C. v. City of Aurora, 136 F.3d 683 (10th Cir.1998)(Z.J. Gifts I). On remand, the federal district court entered judgment dismissing plaintiff's federal constitutional claims. The judgment then became final.

Approximately forty-five days later, in October 1998, plaintiff filed this action in state court for injunctive and declaratory relief, seeking to prevent the City from enforcing the ordinance against Christal's. Plaintiff challenged the ordinance as unconstitutionally vague under the United States and Colorado Constitutions and asserted that it wished to comply with the ordinance, but was unable to do so because the City had enacted no ascertainable guidelines defining "significant" or "substantial." The City filed a motion to dismiss plaintiff's complaint under the principles of res judicata and collateral estoppel based upon the Tenth Circuit's decision in Z.J. Gifts I, which resolved the federal constitutional issues against plaintiff. The City also filed a counterclaim and motion seeking to enjoin plaintiff from operating a sexually oriented business without a sexually oriented business license in any zone other than an industrial zone.

Following three separate hearings, the trial court rejected plaintiff's claims and granted the City's motion for preliminary injunction. Plaintiff appealed and secured a stay of the order pending appeal. A division of this court affirmed the trial court's decision. Z.J. Gifts D-2, L.L.C. v. City of Aurora, (Colo.App. No. 99CA1853, Apr. 26, 2001)(not published pursuant to C.A.R. 35(f))(Z.J. Gifts II). The matter was then remanded for trial.

After trial, the court dismissed plaintiff's federal constitutional claims as barred by res judicata based upon Z.J. Gifts I. The court declined to evaluate the ordinance under Colo. Const. art. II, § 10 because it determined that this article did not extend broader protection in the context of sexually oriented business regulations than the First Amendment and therefore that the state constitutional claims were not different from the federal constitutional claims previously decided against plaintiff in Z.J. Gifts I. The court further concluded that the terms "significant" and "substantial" were not unconstitutionally vague under the Colorado Constitution. The court permanently enjoined plaintiff from operating a sexually oriented business in its present location and in violation of the licensing requirements of the ordinance.

Plaintiff filed a motion for reconsideration based on several legal decisions issued after Z.J. Gifts I. The trial court denied the motion, and this appeal followed.

I. Res Judicata

Plaintiff contends that the trial court erred by failing to consider its federal constitutional claims in the context of the recent Supreme Court decision, City of Los Angeles v. Alameda Books, Inc., 535 U.S. 425, 122 S.Ct. 1728, 152 L.Ed.2d 670 (2002), which plaintiff asserts implicitly overruled Z.J. Gifts I. Plaintiff contends that Alameda Books placed a stricter evidentiary burden on the City to prove by a designated quantum of evidence that the ordinance is a constitutional regulation. Plaintiff argues that the trial court should have considered its federal constitutional claims under the new, heightened evidentiary burden set forth in Alameda Books. In effect, plaintiff asserts that the trial court erred in ruling that its First and Fourteenth Amendment claims were barred by the doctrine of res judicata. We disagree.

Res judicata operates as a bar to a second action on the same claim litigated in a prior proceeding where there was a final judgment and identity of subject matter, claims for relief, and parties to the action. City & County of Denver v. Block 173 Assocs., 814 P.2d 824 (Colo.1991).

In barring the relitigation of tried matters, res judicata serves distinct and important public and private values. As the United States Supreme Court has stated, res judicata serves "the dual purpose of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 649, 58 L.Ed.2d 552 (1979).

Although plaintiff concedes that Z.J. Gifts I became final and resolved its federal constitutional claims, it nevertheless asserts that the Supreme Court's decision in Alameda Books imposes a new, heightened evidentiary burden on the City to show specifically the secondary adverse effects of sexually oriented businesses providing no onsite adult entertainment. Plaintiff argues that, because the City did not furnish such evidence, but relied only upon studies from other states that examined the effects of sexually oriented businesses generally and the effects of adult bookstores on surrounding communities, the trial court should not have relied on the Tenth Circuit's holding in Z.J. Gifts I and should have reconsidered the constitutional issues in light of the new evidentiary standard announced in Alameda Books.

A. The Alameda Books standard

We conclude that Z.J. Gifts I in fact comports with the principles announced in Alameda Books.

In holding that the City's ordinance satisfied City of Renton v. Playtime Theatres, Inc., 475 U.S. 41, 106 S.Ct. 925, 89 L.Ed.2d 29 (1986), and United States v. O'Brien, 391 U.S. 367, 88 S.Ct. 1673, 20 L.Ed.2d 672 (1968), the Tenth Circuit stated that the City need only rely upon "evidence... reasonably believed to be relevant to the problem that the city addresses." Z.J. Gifts I, supra, 136 F.3d at 687 (quoting Renton, supra, 475 U.S. at 51-52, 106 S.Ct. at 931). "If the city can show that the ordinance affects `that category of [businesses] shown to produce the unwanted secondary effects,' the ordinance will stand." Z.J. Gifts I, supra, 136 F.3d at 687 (quoting Renton, supra, 475 U.S. at 54, 106 S.Ct. at 932). The court reasoned that the City's reliance on studies utilizing slightly dissimilar businesses did not affect the ordinance's content-neutrality, Z.J. Gifts I, supra (citing ILQ Invs., Inc. v. City of Rochester, 25 F.3d 1413 (8th Cir.1994)), and whether sexually oriented materials are viewed onsite or offsite is "constitutionally insignificant for purposes of determining an ordinance's content-neutrality," "particularly in light of the [Supreme] Court's strong statements regarding the government's interest in regulating such businesses in Young [v. America Mini Theatres, Inc., 427 U.S. 50, 96 S.Ct. 2440, 49 L.Ed.2d 310 (1976)] and Renton." Z.J. Gifts I, supra, 136 F.3d at 687-88.

In Alameda Books, the Supreme Court also adopted the evidentiary standard announced in Renton that a municipality may rely on evidence that is "reasonably believed to be relevant" for demonstrating a connection between speech and a substantial, independent governmental interest. Alameda Books, supra, 535 U.S. at 438, 122 S.Ct. at 1736. The Court explained that the "city certainly bears the burden of providing evidence that supports a link between concentrations of adult operations and asserted secondary effects," but the city did not "bear the burden of providing evidence that rules out every theory for the link between concentrations of adult establishments that is inconsistent with its own." Alameda Books, supra, 535 U.S. at 437, 122 S.Ct. at 1735. The Court refused to "set such a high bar for municipalities that want to address merely the secondary effects of protected speech." Alameda Books, supra, 535 U.S. at 438, 122 S.Ct. at 1736. It stated that cities are entitled to rely, in part, on "appeal to common...