Alcohol ban in cabarets unconstitutional (69030)

Listen to this article

An ordinance that limits the sale of alcohol to existing cabarets violates the First Amendment, the Seventh Circuit held on Nov. 19.

The Village of Washington Park, Illinois, has a rather unusual economy. The village derives nearly all of its tax revenues from the adult entertainment industry. As of June 2006, the 2.5 square mile village had eight licensed adult cabarets, including two under new construction.

The Village is also particular about who gets issued those licenses.

In 2003, Eric Joelner applied for a license to operate an adult cabaret. The Village then passed an ordinance, increasing the number of available licenses from four to six. However, it then immediately granted the two newly available licenses, but did not grant either to Joelner.

Selective Treatment

Instead, one went to the son of the former police chief, who did not have a pending application, and the second went to another who applied for a license after Joelner. The Village Board then denied Joelner’s application.

Joelner sought a preliminary judgment to force the Village to grant him the licenses, but the district court denied the injunction. The Seventh Circuit affirmed, but remanded the case to consider whether the ordinance was necessary to serve a compelling state interest and was narrowly drawn to accomplish it. Joelner v. Village of Washington Park, 378 F.3d 613 (7th Cir. 2004)(Joelner I).

The court suggested that the numerical restriction on licenses was likely unconstitutional, because it seemed to be predominantly motivated by concerns about revenue and political patronage.

After the opinion was issued, the Village repealed the ordinance, and passed a new one, lifting the numerical limit on licenses, but prohibiting the sale or consumption of alcohol in cabarets, except for those previously licensed under prior ordinances. The new ordinance also expanded hours of operation, and forbade complete nudity and masturbation.

The preamble to the new ordinance cited 19 federal court opinions referring to the harmful effects of combining alcohol and adult entertainment.

Clubs Grandfathered

Back in the district court, Joelner presented uncontradicted evidence that, despite the new ordinance, the existing cabarets operate 24 hours and feature complete nudity. The village’s mayor testified that the reason for exempting existing businesses from the new ordinance was concern about infringing on their property rights.

The district court struck down the ordinance as an unconstitutional attempt to stifle competition, and held the denial of licenses to Joelner was unconstitutional. The Village appealed, but the Seventh Circuit affirmed in an opinion by Judge Michael S. Kanne, applying the standard set forth in 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996).

Under the standard, a court must ask if an ordinance that bans alcohol at adult entertainment establishments: (1) is passed pursuant to a legitimate governmental power; (2) does not completely prohibit adult entertainment; and (3) is aimed at combating the negative secondary effects caused by adult entertainment establishments.

If so, the regulation is subjected to intermediate scrutiny, and is constitutional if it serves a substantial governmental interest, is narrowly tailored, and reasonable alternative avenues of communication remain available.

If not, strict scrutiny applies, and the regulation must be necessary to achieve a compelling state interest and be narrowly drawn to achieve that end.

Although the court acknowledged the standard was “lax,” it found the Village failed to meet its burden.

Unequal Treatment

The uncontradicted evidence was that Joelner has been the sole applicant for a license under the new ordinance, and that it is impossible to sustain an adult cabaret in the Village without selling alcohol, when other cabarets can.

The court found it reasonable for the district court to infer that Joelner’s potential customers would simply migrate to the other establishments, taking with them any negative secondary effects that the Village claimed the ordinance would protect against.

The Village argued that it was merely experimenting with gradual solutions to its problems, but the court found there was no evidence that this was the Village’s reason for banning alcohol only in new cabarets. Given that all of the Village’s revenue comes from adult cabarets, the court found that it had little incentive to cure its problems.

The court also noted that the Village backdated the two new licenses so that clubs not yet in operation could serve alcohol. In addition, the Village expanded permissible hours of operation, failed to even enforce those, and neglected to enforce the prohibition on complete nudity against current license holders.

The court concluded, “The backdated licenses, the expanded hours of operation, and the unenforced prohibition on complete nudity permitted the district court to conclude without clear error that the Village was not experimenting with a gradual solution to the secondary effects of erotic speech.”

Agreeing that the purpose of the ordinance was to prevent competition with existing businesses, the court applied strict scrutiny, and held the ordinance unconstitutional. However, the court added that, even if it applied intermediate scrutiny, it would still hold the alcohol ban unconstitutional, because it is underinclusive.

By permanently insulating eight concentrated establishments from the alcohol ban and leaving alcohol use at those establishments otherwise entirely unrestricted, the court concluded the ordinance could not actually advance the Village’s purported purpose of mitigating the harmful effects of alcohol combined with nude dancing.

Accordingly, the court affirmed.

Analysis

The evidence of anti-competitive motive on the Village’s part in this case is so overwhelming, that it would seem easy to distinguish it in future cases where a municipality passes an identical ordinance, but does so without any anti-competitive intent.

However, the court’s analysis suggests this is not the case; any ordinance that allows alcohol to be sold in existing businesses, but not future ones, would still probably fail to pass constitutional muster under the court’s analysis.

The court wrote that the ordinance would fail, even if it were applying intermediate scrutiny, because “the ordinance PERMANENTLY insulates eight concentrated establishments from the alcohol ban and leaves alcohol use at those establishments otherwise ENTIRELY unrestricted (emphasis in original).”

This rule produces a strange anomaly, however.

A municipality may pass an ordinance that limits the number of adult cabarets within its borders, if its predominant concern is to reduce the negative secondary effects of such clubs. Also, a municipality may prohibit alcohol altogether in all such establishments.

Thus, it would seem that a municipality should be able to take a middle ground, and create a two-tiered system: allowing a certain number of such esta
blishments to sell alcohol, while not allowing alcohol sales at the second class of clubs.

However, as the court found in this case, the effect of such a rule is that only clubs that can sell alcohol will be able to thrive.

This effect is identical to the effect if the municipality allows all clubs to sell alcohol, but limits their number, without allowing the second tier of clubs at all — something a municipality may do. Thus, the court’s holding seems to arbitrarily limit a municipality’s options.

Were the court to rule otherwise, however, it would effectively allow municipalities to limit the speech of one group of citizens, in the name of minimizing the harmful secondary effects caused by others, while exempting from responsibility those causing the harm.

So, the court’s rule makes sense, even if, at first blush, it prohibits what would appear to be a reasonable balancing of First Amendment rights and a city’s quality of life.