On the one hand, they pass ordinances restricting how you operate your adult nightclub. But on the other hand, according to First Amendment attorney Eric Bernstein, your local government needs the tax revenues generated by your business more than ever before. Here, Bernstein explains how and why club operators should confront local government when restrictive ordinances are proposed against them.
Here we go again—another “preaching” article from a lawyer in the business suggesting to all of you that you spend some of your hard-earned money on lawyers. Well, I can’t deny that lawyers are beneficiaries of actions by gentlemen’s club owners, but that comes with the nature of the business. That is, the need to provide legal guidance/defense against those who would prevent your business from continuing. The problem is heightened by a member of the bar, Scott Bergthold, Esq., whose major stated purpose in life is to conduct a national law practice that focuses on the drafting and defense of adult business ordinances to limit/destroy your business on behalf of governmental entities in Federal and state courts.
It is now time for the gentlemen’s club businesses across the country to rise up and fight in the two most recognizable places this industry can affect: (1) legislative/council chambers and (2) courtrooms. The author of this article has a unique perspective on this; my law firm represents both governmental entities and gentlemen’s clubs throughout the nation, and the politicians are aware where the revenue comes from for my contributions to them.
This industry has never, strangely enough, been in a better position that it is now. In this era of decreasing revenue streams for local, county and state governments, the payment of income taxes, property taxes, licensing fees and related revenues from adult nightclubs are necessary to keep them afloat. Just as government has started to vehemently embrace gambling (online and sports) for revenue after years of rejection, it is time to recommit ourselves to strong government officials how important our revenues are to their revenue stream.
Government officials like when things are quiet and hate when things are controversial. For years, I have taught governing body officials that the feelings of the people who go to council meetings, freeholder meetings and legislative meetings represent the people who go to the meetings, and not the feelings of an exceptionally vast majority of those who support the industry. Government officials need to understand that the revenues/taxes/fees you provide and the services you give to the public and the measures you employ to make their (and your lives) easier is a necessary component to governments themselves to function. They also understand that the expenditures of legal fees by government come at a high price; not only the amount, but that they cut into available monies for other services.
Additionally, we need to be able to provide our own version of what Mr. Bergthold is up to; that is, legislation which benefits this industry and government together. We can no longer accept the ostrich principle, that if I put my head in the sand, everyone will leave me alone and not notice my business. Compromise is not a sin; it is part of the system, and until we fight back against the Bergtholds of the world, we will always be addressing this from behind.
In order to understand how to address taking the offense, the industry needs to understand the various levels/thresholds that must be addressed in the regulation of a sexually oriented business. There can be no prohibition of a sexually oriented business; the existence of a total ban has been found by the U.S. Supreme Court to be unconstitutional. So government is then left with the difficult task of crafting legislation which can not be a total ban, but merely be a regulation on time, place or manner of operations.
If it is a time, place or manner regulation, it must then be content neutral. The City of Renton v. Playtime Theatres, Inc. decision and other court decisions have defined content neutral as being enacted for a content neutral purpose, such as controlling deleterious negative secondary effects. What makes this even more problematic for governmental entities is that they need a significant amount of deleterious secondary effects evidence as their basis. Furthermore, there is no requirement that said deleterious secondary effects evidence need to be focused on whether the adult business, such as a gentlemen’s club, are the most abhorrent businesses in the municipality, or that the deleterious secondary effects exceed that of other “problem” businesses within the governmental boundaries in question.
What the municipality must initially show is some basis that the regulation “may reduce the costs of the secondary effects without substantially reducing speech.” It is a difficult road to handle, considering that deleterious secondary effects have been identified as: (1) an increase in crime, including those of a sexual nature; (2) an increase in the transmission of sexually transmitted diseases; (3) a decrease in both the property values of commercial and residential properties (but must have some nexus to the existence of an adult business, not just the general real estate market); and, (4) urban blight. If a governmental entity can meet this initial burden through its legislation, it requires the adult business to attack the underlying rationales proposed by the governmental entity to support the legislation through facts, charts, graphs, reports, testimony, etc., rather than an alternative rationale.
The types of legislation that this industry now faces comes down to variations of two different legal theories: (1) “time, place and/or manner”; and, (2) “no touch”/”you are too close to the performer.” The “time, place and/or manner” theory is in order to reduce the deleterious secondary effects an adult establishment creates by closing it an hour and/or on certain days different from other businesses/or limiting the location to certain areas of the governmental boundaries. The problem with “time, place and/or manner” is that, in many cases, they can produce the opposite effect from which they are intended. They must serve a significant governmental interest; they must be narrowly tailored to accomplish that limited purpose; and, they must leave open, ample alternative channels for communication of the information sought to be restricted.
While legislation based on such a theory has been successful, it becomes incumbent on the adult nightclub community to press the concept that this type of restriction impacts revenues and taxes generated by the establishment itself. Property values are based on highest and best use of the property as it exists, with one of the key underlying fundamentals of such being the income approach (which basically uses the businesses income/expense stream to prove value). As income decreases, value of the property decreases with it—which means tax revenues generated from such decreases as well. A reduction in business revenues also impacts sales tax/local non-property tax receipts, and may call into question licensing fees, which, in some cases, are also revenue based.
Additionally, there is a preemption on time, manner and/or place restrictions when the adult establishment holds a liquor or other ABC permit/license. State liquor laws trump local/county tailored legislation, and there cannot be two classes of business both holding the same type/level of liquor license. An adult establishment’s hours of operation cannot be restricted differently than a non-adult establishment’s hours if they both hold, for example, a broad alcohol consumption/distribution license. It becomes incumbent upon adult businesses, such as gentlemen’s clubs, to fashion their business hours and their suggestions to government to not only maximize their own revenue, but drive home the point that governmental revenues generated by sales, customers, property values, etc. will be decreased, causing an adverse impact to governmental revenues and services, which impact a broader array of people.
The “no touch”/”you are too close to the performers” regulation is both a perception and a reality issue which club owners must be prepared to address in a positive and forward manner. The argument for this type of restriction is that it prevents/limits the exchange of money for sexual favors or for drug transactions or for health reasons. It is difficult to initially argue against that, but many customers want to get as close to the action as possible and this type of action is regularly portrayed in movies and television (and on the Internet) as commonplace in the business. Additionally, the governmental entity must prove that these types of regulations are content neutral and do not restrict the actions of the performer or the business of the performer, whose ability to perform is protected under the First Amendment.
It is extremely important to use your standing in the community as a reputable business owner/taxpayer/government revenue generator to get your point across to government officials. In many cases, being a local business person, belonging to the same types of organizations that the governmental officials at issue belong to, and knowing the area can be helpful not only in terms of tailoring responses to a Bergthold-type assault, but to getting out in front and mobilizing those who support local business generation and success. An existing adult business may not always be the most favored business in a community, but with so many failing, the ability to survive is looked upon in a different light.
The author of this article is not delusional, but instead pragmatic. Representing public entities for almost three decades and adult businesses for over a decade has taught me that they can coexist, so long as both parties’ interests are satisfied. Government interests are satisfied by a revenue stream and peace and quiet; a well-run, well-serviced business operation that is an asset to the neighborhood where it is located. Adult business owners’ interests are satisfied when they run their business in an efficient manner and as free from undue restrictions as possible.
Don’t be afraid to work with the government and understand what they seek; but, more importantly, don’t be afraid to fight for your rights and make government understand the price they will have to pay is steep, including legal fees available under a number of Federal and State laws. It is time to stand up for and protect your rights as a business owner; the more you do, the more you may be surprised at how the government backs down.
Eric M. Bernstein, Esq. is owner/partner in the law firm of Eric M. Bernstein & Associates, LLC, located in New Jersey with clients all across North America. Mr. Bernstein and his firm represent employers/management in the fields of labor and employment law, government law, land use law, entertainment law and internet law. Bernstein serves as a member of the Legal Advisory Board of ACE National and as a member of the First Amendment Lawyers Association. He can be reached at firstname.lastname@example.org, his website is www.embalaw.com, and his office phone number is (732) 805-3360. Please visit him at his EXPO 2012 booth (#124) for consultation and related matters.