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HH-Indianapolis LLC v. Consolidated City of Indianapolis

United States District Court, S.D. Indiana, Indianapolis Division

September 22, 2017

HH-INDIANAPOLIS LLC, Plaintiff,
v.
CONSOLIDATED CITY OF INDIANAPOLIS / MARION COUNTY, INDIANA, METROPOLITAN BOARD OF ZONING APPEALS OF MARION COUNTY, DIVISION I, DEPARTMENT OF BUSINESS AND NEIGHBORHOOD SERVICES, Defendants.

          MEMORANDUM ORDER

          SARAH EVANS BARKER, JUDGE.

         HH-Indianapolis (“HH”) has plans to open a retail store (“the Store”) at a location on the north side of Indianapolis it has leased for a ten-year period (“the Premises”). Under the local zoning ordinance (“the Ordinance”), the Premises is not zoned for an “adult entertainment business” as defined by the Ordinance. The Indianapolis Department of Business and Neighborhood Services (DBNS) determined that, based on its inventory as well as its intentions, the Store would qualify as an adult entertainment business. HH appealed that determination to the Marion County Board of Zoning Appeals (BZA), which affirmed the DBNS. No appeal of that decision was taken in Marion Superior Court.

         HH brought this Section 1983 action against Indianapolis, the BZA, and the DBNS (collectively, “the City”) for violations of the First Amendment, the Equal Protection Clause of the Fourteenth Amendment, and state administrative law. HH seeks inter alia a preliminary injunction enjoining enforcement of the Ordinance against HH. HH's motion for a preliminary injunction is now before the Court. For the below reasons, the motion is denied.

         Background

         HH “is a retailer that intends to operate a retail establishment at the Premises to sell lingerie, gag-gifts, tiaras, sashes, marital aids, [1] souvenirs, cards, and a minimal amount of ‘adult' [i.e., relating to sex] instruments and written materials.” Pl.'s Br. Supp., p. 4; see also Pl.'s Am. Compl. ¶ 56 (“instructional DVDs and literature, as well as clothing, greeting cards, Halloween costumes, games, sashes, tiaras, key chains, buttons, gag gifts, joke books, and bumper stickers.”). HH's parent company (“HH-Entertainment”) oversees several such retail locations across the country. In part, their business model is to avoid classification as adult businesses under local law by appropriately structuring their inventory, store layout, and other facets of their business plan so as to fall outside or beneath whatever thresholds trigger such classification.

         The Ordinance establishes a category of “adult entertainment businesses.” Rev. Code of the Consol. City and Cnty. of Indianapolis and Marion [hereinafter “Code”], ch. 807. The Ordinance defines several types of adult entertainment businesses, Code § 807- 106, including, as relevant here, “adult bookstore[s], ” id. § 807-103, and “adult service establishment[s].” Id. § 807-112. An “adult bookstore” is an establishment having at least 25 percent of its retail floor space used for the display of, at least 25 percent of its inventory consisting of, or at least 25 percent of its weekly revenue derived from, “adult products.” Id. § 807-103. An “adult service establishment” is an establishment “which provides a preponderance of services involving specified sexual activities or display of specified anatomical areas.” Id. § 807-112. “Adult products, ” id. § 807-103, “specified sexual activities, ” id. § 807-116, “specified anatomical areas, ” id. § 807-115, and “services involving specified sexual activity or display of specified anatomical areas, ” id. § 740-202, are all further defined in the Ordinance; “preponderance” is not.

         The Ordinance also establishes different types of zoning districts, including C-3, C-4, C-5, and C-7 districts. “The C-3 District is for the development of an extensive range of retail sales and personal, professional and business services required to meet the demands of a fully developed residential neighborhood, regardless of its size.” Id. § 742-104(C). Adult entertainment businesses may not operate as of right in a C-3 district. Id. § 743-1. An adult entertainment business may operate in a C-3 district after obtaining a use variance from the BZA, see R. at 244, and may operate as of right in a C-4, C-5, or C-7 district. Code § 743-1.

         The Premises is located in a C-3 district.[2] See Defs.' Br. Opp., p. 2 (area district map). It is just across the street from a large C-4 district and two smaller C-5 and C-7 districts. Id.

         In summer 2016, HH selected the Premises as the site for the Store. HH communicated with a city planner for the City, who confirmed to HH the definition of “adult bookstore” under the Ordinance. In July 2016, HH entered into a ten-year lease for the Premises. HH then applied to DBNS for structural and sign permits in connection with the Premises. DBNS noted that the proposed signage advertised inter alia “erotica.” See R. at 254. DBNS suspected that HH intended to operate an adult entertainment business and requested information from HH about the Store. In response, HH submitted information including a floor plan and inventory and revenue projections (“the Initial Submission”). DBNS found the information in the Initial Submission to be “imprecise and contradictory[.]” R. at 247. DBNS denied the requested permits after determining that HH intended to use the Premises as an adult service establishment without holding a use variance.

         Without first seeking a use variance, HH appealed the determination of the DBNS to the BZA. At a December 6, 2016, hearing on that appeal, DBNS staff presented a report to the BZA summarizing its grounds for determining the Store to be an adult service establishment or, in the alternative, an adult bookstore. DBNS again emphasized the vagueness and imprecision of the Initial Submission. Tr. 23. DBNS staff noted that, while HH reported an “adult [products] subtotal” of ca. 16 percent of inventory and 24 percent of sales, R. at 256, the “toys” category[3] constituted ca. 13 percent of inventory and 29 percent of sales-itself putting HH past the 25 percent threshold for adult bookstores. Id. DBNS staff noted further that, while the area set aside for “adult” products in HH's proposed floor plan included “sensual care” products, R. at 257, “sensual care” products were not included under HH's “adult [products] subtotal[, ]” R. at 256, and it “seem[ed] likely that a significant portion, if not all, of the products within the ‘sensual care' department would be classified as an adult product[, ]” R. at 248, comprising ca. 12 percent of inventory and 14 percent of sales. R. at 256. Finally, DBNS staff noted that “marital aids” were not included in the “adult” product area by HH, but that “[m]arital aids, by definition, are sex toys.” R. at 248.

         DBNS staff concluded that, even if the Premises would not be used as an adult bookstore on the basis of the figures in the Initial Submission, when viewed critically, it would be used as an adult service establishment. This was so because HH proposed both “[t]he sale or display” of media “characterized by an emphasis” on specified sexual activities or specified anatomical areas in the form of adult literature and movies, and “[t]he presentation of” media “characterized by an emphasis” on specified sexual activities or specified anatomical areas in the form of workshops, courses, and product demonstrations as conducted at other HH-Entertainment stores. R. at 248-49. This combination would render the Store an adult service establishment under the Ordinance.[4]Alternatively, DBNS staff concluded that, “by partitioning off a specialty sales area” from the main retail area, see R. at 258-59, the partitioned area would constitute its own adult entertainment business. R. at 249.

         Remonstrators-community members, nearby property owners and tenants, and a city-county councillor-appeared by counsel and submitted evidence. Counsel for remonstrators urged the same theory as the DBNS: that HH intended to use the premises for an adult service establishment by offering adult media for sale and by offering courses, workshops, and product demonstrations. Remonstrators submitted photographs showing the high, and highly visible, volume of adult products at other HH-Entertainment stores, R. at 313-16, and the nature of the courses, workshops, and “live demo[nstration]s of our steamiest couples' products . . . hosted at all [HH-Entertainment] retail locations[.]” R. at 324; see, e.g., R. at 325-27. Remonstrators concluded that by “sell[ing] and display[ing]” adult media, “offer[ing] classes to the public . . . utiliz[ing]” adult media, and “offer[ing] classes to the public . . . includ[ing] live demonstrations and performances . . ., ” HH would operate an adult service establishment. R. at 330.

         The city-county councillor present at the hearing accused HH-Entertainment of having “a track record of deception in trying to hide [its] true intentions when it seeks to establish” its retail stores, and asked the BZA to “use a healthy, you know, attitude of skepticism” in evaluating HH's presentation. Tr. 19. The councillor reported that, when HH-Entertainment attempted to open a store in Lexington, Kentucky, “the permits . . . applied for indicated they were building a coffee shop.” Tr. 20. The councillor further agreed with the DBNS's suggestion that the Initial Submission was “decept[ive] in the ways [HH] describe[d] its products.” Id.

         HH presented additional evidence on the Store at the BZA hearing, including revised inventory and revenue projections (“the Later Submission”). HH claimed that the Initial Submission inaccurately relied on figures from HH-Entertainment stores nationwide and from HH-Entertainment's on-line store. The Later Submission projected figures specific to the Store, R. at 23, but DBNS opined that the Later Submission was vitiated by a similar vagueness of categorization as beset the Initial Submission and appeared to contradict it. HH repeatedly disclaimed any intent to operate the Store as an adult service establishment or an adult bookstore. Specifically, HH insisted that, when it proposed to sell “marital aids, ” it meant condoms, not sex toys, Tr. 5, and that it had no intention of offering courses, workshops, or product demonstrations at the Premises, as other HH-Entertainment stores do. Finally, HH invited the BZA to tour the Store once it was stocked and set up so that BZA members could see for themselves what sort of business HH proposed to operate.

         At the conclusion of the December 6, 2016, hearing, the BZA voted unanimously (5-0) to affirm the DBNS's determination that HH proposed to operate an adult entertainment business, which violated the zoning code for that location. Tr. 35. HH filed this lawsuit less than a month later on January 5, 2017, Dkt. 1, and an amended complaint on January 12, 2017. Dkt. 9. Its motion for a preliminary injunction was filed on June 2, 2017, Dkt. 33, on which this Court held a hearing on September 13, 2017. Dkt. 46.

         Standard of Decision

         “An equitable, interlocutory form of relief, a preliminary injunction is an exercise of a very far-reaching power, never to be indulged in except in a case clearly demanding it.” Girl Scouts of Manitou Council, Inc. v. Girls Scouts of the U.S.A., Inc., 549 F.3d 1079, 1085 (7th Cir. 2008) (quotations and citation omitted). A movant seeking a preliminary injunction must show that (1) it is reasonably likely to succeed on the merits, (2) it is suffering irreparable harm without adequate remedy at law, (3) the balance of harms weighs in its favor, and (4) the injunction is in the public interest. Christ. Legal Soc'y v. Walker, 453 F.3d 853, 859 (7th Cir. 2006). The movant's burden is by a preponderance of the evidence. Baskin v. Bogan, 983 F.Supp.2d 1021, 1024 (S.D. Ind. 2014).

         The analysis proceeds in two steps. Girl Scouts, 549 F.3d at 1086. At the threshold, a court must determine whether there is a “better than negligible” chance of success on the merits, id. at 1096, and whether the alleged harm is irreparable without adequate legal remedy. Id. at 1086. If the movant cannot pass the threshold, its motion must be denied. Id.

         But if the movant passes the threshold, then a court must proceed to balance the harm to the movant unless the injunction issues against the harm to the nonmovant if it does. Id. The balance is struck on a sliding scale: the greater the movant's likelihood of success, the less favorable the balance of harms need be; the lesser the movant's likelihood of success, the more favorable the balance need be. Id. “Where appropriate, ” the court must also weigh any burden or benefit to any third party, or the “public interest, ” if or unless the injunction issues. Id.

         Analysis

         HH presses its challenge to the City's determination under the Ordinance from a number of angles. Under the First Amendment, HH raises (I.A) an “as applied” challenge to the Ordinance as applied through the City's determination that HH is an adult entertainment business, (I.B) a facial challenge to the definition of “adult service establishment” for vagueness, and (I.C) a facial challenge to the definition of “adult service establishment” for overbreadth. Under the Fourteenth Amendment, HH raises (II) an equal protection claim. Finally, under Indiana administrative law, HH raises (III) a challenge to the City's decision as arbitrary, capricious, and unsupported by substantial evidence.

         After careful review, we conclude that none of the constitutional claims have a better than negligible chance of success on the merits, and the state-law claim does not allege irreparable injury. HH's petition therefore fails to make it across the threshold of the preliminary injunction standard.

         I. First Amendment Claims

         The threshold question in any free-speech case is the existence of some protected speech or expression. See Green Valley Invests. v. Winnebago County, 794 F.3d 864, 867 (7th Cir. 2015); Ind. Vol. Firemen's Ass'n, Inc. v. Pearson, 700 F.Supp. 421, 437 (S.D. Ind. 1988). At the Premises, HH proposes to sell “instructional DVDs and literature, ” “greeting cards, ” “joke books, ” “bumper stickers, ” and material relating to “the emerging bondage-domination-sadomasochism (‘BDSM') political and cultural movement[.]” Pl.'s Am. Compl. ¶ 56. Such nonobscene material, even if indecent or pornographic, is expression protected by the First Amendment. See, e.g., New Albany DVD, LLC v. City of New Albany, 581 F.3d 556, 558 (7th Cir. 2009).

         “The loss of First Amendment freedoms is presumed to constitute an irreparable injury for which money damages are not adequate, and injunctions protecting First Amendment freedoms are always in the public interest.” Christ. Legal Soc'y, 453 F.3d at 859 (citing Elrod v. Burns, 427 U.S. 347, 373 (1976)). Thus, on a motion for a preliminary injunction under the First Amendment, “the likelihood of success on the merits will often be the determinative factor.” Joelner v. Village of Washington Park, 378 F.3d 613, 620 (7th Cir. 2004). We therefore proceed to consider the merits of each of HH's First Amendment claims.

         A. “As Applied” Challenge

         In brief, HH's “as applied” claim comes down to this: HH told the City it did not propose to operate an adult entertainment business; the City did not believe HH; the City determined that HH did propose to operate an adult entertainment business; the City therefore required HH to operate as of right in a C-4, C-5, or C-7 zoning district, rather than a C-3 district; HH claims the City's determination was erroneous according to the state-law definition of “adult entertainment business.” These facts are unlikely to make out a constitutional violation. Accepting HH's contrary position would constitutionalize every mine-run state-law commercial zoning dispute so long as the applicant proposed to sell books. This we decline to do.

         The constitutionality of municipal land-use regulation of sexually indecent expression is controlled by the Supreme Court's decisions in Young v. American MiniTheaters, Inc., 427 U.S. 50 (1976), City of Renton v. Playtime Theatres, Inc., 475 U.S. 41 (1986), and City of Los Angeles v. Alameda Book, Inc., 535 U.S. 425 (2002). Under those cases, ‚Äústate and local governments may regulate adult establishments by using time, place, and manner restrictions to reduce the secondary effects of those businesses on third parties, but may not regulate them to restrict the dissemination ...


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