By Andrew Keshner, From New York Law Journal

Zoning amendments that were meant to toughen and clarify rules on adult establishments in New York City were found to be unconstitutional Tuesday by a divided Manhattan appeals court.

In the long-running litigation on regulations for businesses devoting a certain amount of floor space or stock to adult entertainment, the 3-2 Appellate Division, First Department, affirmed a lower court ruling, which said the 2001 amendments for so-called “60/40” establishments breached the First Amendment, and it upheld a permanent injunction on enforcement.

In For The People Theaters of N.Y. Inc. v. City of New York, 12157-12158—the case’s third trip to the First Department—the majority said the city failed to show the adult eating and drinking businesses, and adult video and book stores, retained a “predominant sexual focus.”

Justice Barbara Kapnick wrote for the majority, joined by Justices Angela Mazzarelli and Paul Feinman.

“The city assumes that because the 60/40 clubs regularly feature topless dancing, this automatically means that they retain a predominant sexual focus. However, there is nothing in the prior related decisions that mandates that conclusion,” Kapnick said, affirming a 2012 decision by late Manhattan Supreme Court Justice Louis York.

In dissent, Justice Richard Andrias, joined by Justice Leland DeGrasse, said the majority used an insufficient “mechanical and mathematical approach, under which the predominant sexual focus in the 60/40 businesses’ activities is quantitatively outweighed by signage, policies towards minors, and layouts.”

The case has its roots in a 1994 Department of City Planning study regarding the impact of adult establishments on the quality of city life.

The study said establishments concentrated in a particular area tend to produce negative secondary effects such as increased crime, decreased property values and reduced commercial activities.

In 1995, the city passed a zoning resolution that distinguished adult establishments from other commercial ones and barred adult businesses from designated areas. The resolution defined adult establishments as a “commercial establishment” where a “substantial portion” of the business included “an adult bookstore, adult eating or drinking establishment, adult theater, or other adult commercial establishment, or any combination thereof.”

In response to a 1998 vagueness challenge in the Southern District, the city said a “substantial portion” meant a business qualified as “adult” if at least 40 percent of the accessible floor space or stock was meant for adult purposes.

It then began bringing nuisance proceedings against businesses it claimed were following the 60/40 formula as a “sham.” Those proceedings were challenged, and the state Court of Appeals decided sham compliance was not a relevant factor and the law had to be applied as written.

Then the city planning department endorsed amendments it said were meant to “clarify certain definitions … in order to effectuate the [department’s] original intent.” They were meant to address attempts by adult businesses to operate in their current locations through fake conversions that technically complied with the 60/40 formula but did not change the business’ character.

After the City Council passed the amendments, For the People Theatres, an adult movie theater, and JGJ Merchandise, an adult video store, sued the city in September 2002, arguing the amendments were unconstitutional. In October 2002, Ten’s Cabaret and Pussycat Lounge filed suit and the actions were consolidated.

The plaintiffs argued the city was improperly relying on the 1994 study and its conclusions about adverse effects in the 2001 amendments. They contended the city was impermissibly changing the rules for businesses engaging in constitutionally protected activities despite the fact that 60/40 establishments were different from their predecessors solely offering adult entertainment.

The First Department granted summary judgment to the city in 2005, but a 4-3 Court of Appeals reversed and remanded the case for trial, saying “a triable question of fact has been presented as to whether 60/40 businesses are so transformed in character” that they no longer resembled the business thought to bring negative secondary effects.

The Court of Appeals majority added that if the fact-finder decided the city “fairly supported its position on sham compliance … the city will have satisfied its burden to justify strengthening the 1995 ordinance by enacting the 2001 amendments.”

After a trial where the city presented evidence on 10 cabarets and about 15 video and bookstores, York ruled in 2010 that the 2001 amendments were valid.

The stores appealed and the First Department remitted the case to York, asking for elaboration on his reasoning. It directed him to consider evidence presented by the businesses and weigh four factors when determining predominant sexual focus: signage, exclusion of minors, sale of materials emphasizing “specified sexual activities” or “specified anatomical areas,” and layouts making it difficult to access non-adult materials.

In light of the appellate decision, York reversed himself, and in 2012 released a decision saying the amendments were unconstitutional (NYLJ, Aug. 31, 2012).

The city appealed, saying the establishments still had a predominant sexual focus, resembling the earlier businesses devoting 100 percent of their space and stock to adult entertainment.

Kapnick noted, for example, that 12 of 13 book and video stores had peep booths which supported city arguments about their predominant sexual focus.

“However, promotion of sexually explicit materials is only one of the four relevant factors,” she added.

Meanwhile, she said, evidence about signage did not indicate the predominant sexual focus and said there was “nothing in the record to suggest that such a difficulty exists at any of the stores. In fact, there is ample evidence that most of the stores keep the non-adult materials in the front of the stores, making them easy to access.”

Andrias said he believed the city sustained its burden of showing sham compliance. “This court did not call for a mechanical application by which each factor is to be weighted equally and tallied to arrive at a quantitative conclusion,” he said.

In a footnote, Kapnick responded to Andrias’ critique saying, “what we have attempted to do, is separately and fully analyze each of the characteristics that this court suggested should be considered in making this determination.”

Erica Dubno of Fahringer & Dubno represented the coalition of theaters, video and book stores. She said the First Department “recognized Justice York’s careful and considered judgment, which was made after having personally inspected the establishments, having presided over a trial and having carefully reviewed the evidence.”

Dubno worked on the case and related cases for the past 20 years with her former partner, Herald Price Fahringer, who died in February (NYLJ, Feb. 18).

Dubno said Fahringer “would’ve have been very happy. … This was his darling, something he cared very deeply about.”

Edward Rudofsky of Zane and Rudofsky and Martin Mehler of Mehler & Buscemi represented the clubs. Rudofsky said he was pleased with the ruling.

Nicholas Paolucci, a Law Department spokesman, said the decision is under review.

Assistant Corporation Counsels Elizabeth Natrella, Leonard Koerner, Robin Binder and Sheryl Neufeld appeared for the city.

IMAGE: Show World Center at 671 Eighth Ave. NYLJ/Rick Kopstein

For more on this story go to: http://www.newyorklawjournal.com/id=1202732739125/Adult-Businesses-Prevail-in-Protracted-Zoning-Litigation#ixzz3grk5VbrH