EXPO 2020 | Oct 25-28 - Planet Hollywood Las Vegas

The EXPO 2012 Legal Panel


12EXPO legalNothing’s certain but death ...and the pole tax?
— The EXPO 2012 Legal Panel —

The 2012 Expo legal panel focused on the two main threats that have recently plagued adult nightclubs in several states and are expected to be on the horizon in several more very soon: Customer head taxes, commonly referred to as “pole taxes,” and comprehensive, all encompassing, industry-killing “community defense acts” (CDAs), usually spearheaded by Religious Right moral bully organizations, such as Citizens For Community Defense, which has a primary goal of eliminating adult entertainment from the landscape of America.

This year’s legal panelists have all been tireless fighters on the front lines of the ongoing battle to keep our industry alive. Each has recently worked to repel CDAs, pole taxes or both. The panelists included noted First Amendment attorneys Brad Shafer of Lansing, Michigan, John Weston of Los Angeles and panel moderator, Luke Lirot of Clearwater, Florida. Joining the attorneys was Jeff Levy, executive director of three statewide ACE associations in New York, New Jersey and Pennsylvania, representing about 500 adult clubs.

Jeff Levy

12EXPO jeffl1Jeff Levy explained that in the five years he has led the three state associations, they have been able to stop all 23 pieces of state and local legislation that had been introduced against the adult nightclub industry in those states. The types of bills included distance requirements; entertainer licensing; mandatory police security at club expense; 10 p.m. closure; and pole taxes. These were all very serious bills that could have killed the clubs or rendered them non-profit, at the very least.
“We’ve never lost and we intend we intend to keep it that way,” explained Levy. “I came up with a mantra, ‘negotiate, don’t litigate.’”
Levy hastened to add that, without the court victories of top industry attorneys, there would be no opportunity for negotiation. He estimates that his negotiation posture has saved his member clubs over $5 million over the cost of litigation. He said first and foremost, you must start an ACE state association and have member clubs willing to work together, proactively, for their mutual benefit.
Levy explained that a successful ACE chapter needs a strong, knowledgeable executive director, “who is the mortar that makes all the bricks stick.” An executive director must understand how to lobby effectively in a particular state, as lobbying style and methodology is highly specific to each state and in some cases, to each municipality. The laws governing lobbying differ drastically, so that what is permissible in one state might actually be illegal in another.
Levy underlined the importance of subscribing to an online legislative bill tracking system. The bill tracking should provide immediate notification when legislation affecting the industry is introduced in your state and when movement on the legislation occurs. This timely notification is critical as you have a limited time to mount an offense, once legislation is introduced.
When detrimental legislation is introduced, Levy suggests going to chairperson of the committee from which the bill has sprung. He recommends doing your homework on the issue. Explain the good points of our industry and its economic impact. Tell them why the legislation would harm our clubs.
Levy also suggested finding other potential allies in the legislature and the community, as well as developing relationships with reporters, who can often share valuable information with you. Finally, Levy recommended keeping up to date on the activities of Religious Right in your area, as they are often the driving forces in anti-adult legislation.

Brad Shafer

12EXPO brad1Attorney and founding ACE National and ACE of Michigan attorney/advisor Brad Shafer discussed what to do when negotiation fails and you must resort to litigation. Shafer explained that, while generally agreeing with Levy that negotiation is preferable to litigation, “When you lobby, you need to anticipate that you might have to be engaged in litigation at some point in the future.”

Shafer cited a Nevada case he has been involved with since 2005. In 2003, Nevada’s state legislature decided to introduce a pole tax against adult nightclubs as a revenue source. An industry attorney convinced the lawmakers that there were very likely constitutional issues with such a content-based tax against protected expression. So they decided to introduce a tax against all entertainment businesses—and exempt out every type of business except adult entertainment clubs. The bill passed and went into effect in 2004. The only exemption for adult clubs was that it excused those with a capacity of under 300.
In 2005, the legislature amended the law to reduce the exempted seating capacity to 200, to capture all of the clubs in Las Vegas. They also “fixed” the bill to exempt a few types of non-adult businesses they had inadvertently omitted from the original bill.
Shafer explained the three constitutional principles that generally make pole taxes unconstitutional. “If a tax is specifically imposed upon expression, such as live exotic dancing, that has First Amendment protection,” said Shafer. “If a tax only affects a small group of taxpayers, it should be unconstitutional. Why? Because if you have a generally applicable sales tax, everyone politically will get involved and if that tax shouldn’t be passed, the politics will make sure it fails. But if you’re only taxing a small sliver of taxpayers, particularly an unpopular group such as adult businesses, it becomes very easy to legislatively enact morality.
“Third, if a law is content specific, in other words, directed at a certain content of expression, it is unconstitutional,” he added. “Since the Nevada law exempts out all other types of entertainment, based on their content, it is clearly content-specific.”

12EXPO brad2(Brad) Shafer explained that, while most club operators oppose pole taxes, there is a countervailing opinion among some owners and attorneys who believe that if clubs agree to a “more manageable” pole tax, it could make governments reliant on the clubs for revenue and they would be less likely to further regulate the clubs with time, place and manner laws.

In 2005, all of the big adult clubs in Las Vegas got together and hired Shafer to challenge the tax. In a mass meeting with his clients, he explained that, despite the fact that his preferred legislative arena is generally federal court, this case must be heard in Nevada state court. Shafer’s reasoning was based on the federal Tax Injunction Act, passed in the 1800s, which says that the federal courts do not have jurisdiction to decide the legality or constitutionality of a state tax as long as there is a “plain, efficient, speedy remedy available in state court.”
Shafer filed a case in federal court and, as expected, the case was thrown out, based on the Tax Injunction Act. He immediately filed the case in state court and—after seven years of litigation—two separate appeals have gone before the Nevada Supreme Court and the case is still active. The facial challenge (challenging the ordinance on its face or as written) is pending (the factual, or as applied challenge, has recently been remanded to an administrative law judge for the taking of evidence). So as far as the constitutional challenge, Shafer and company are, for all practical purposes starting all over, seven years later.
After the administrative law judge renders an opinion, the case will go back to the state tax commission. Then to the state district court, then back to the Nevada Supreme Court.
“So maybe in another five years,” speculated Shafer, “I’ll finally have an end to my ‘plain, efficient, speedy remedy available in state court.”
The Nevada law Shafer is challenging contains a provision that says that no court can issue an injunction, putting collection of a tax on hold for the pendency of the case, even if the court believes it is unconstitutional. Accordingly, Shafer has been forced to jump through multiple hurtles to litigate a refund action. So far, since the suit was filed in 2005, his Las Vegas clients have paid over $20 million in pole taxes.
Shafer noted that pole taxes have also been enacted in other jurisdictions, such as Utah, Texas and Illinois. The Utah and Texas pole taxes have both been upheld by their states’ Supreme Courts. And these courts have not put any constraints on how large a pole tax can be levied.
“It’s $10 in Utah,” said Shafer. “Maybe in Montana it will be $20. And maybe in another state it’s $50. There’s no limitation on these taxes.”
Shafer explained that, while most club operators oppose pole taxes, there is a countervailing opinion among some owners and attorneys who believe that if clubs agree to a “more manageable” pole tax, it could make governments reliant on the clubs for revenue and they would be less likely to further regulate the clubs with time, place and manner laws. In Illinois, the state ACE chapter worked with the legislature to come up with a compromise pole tax, after the legislative body introduced a steep pole tax bill.
“This is an issue that IS coming to your doorstep,” said Shafer. “It’s not going to stop at these states. And no matter who gets elected, there will be huge federal budget cuts and the Bush tax cuts will expire. The top economic analysts are saying this is going to have a catastrophic impact on the country. And the states don’t have any money, either. So where are they going to look? They’re going to look at targets such as adult nightclubs.”
Shafer said clubs and state ACE associations are going to have to decide how they want to handle and lobby tax challenges. He cautioned that clubs be careful what they say in their lobbying efforts, as they may have to litigate these issues later. He suggested considering the option of a pole tax in hopes of avoiding a CDA later.

Luke Lirot

12EXPO lukeLuke Lirot discussed comprehensive Community Defense Acts. He explained that in 2008, Ohio was the first state to adopt an incredibly oppressive CDA. Missouri followed in 2010 with an even stricter CDA.
“Most of the provisions in a CDA will put every gentlemen’s club out of business, without question, without fail,” cautioned Lirot.
Lirot explained that a CDA generally makes any kind of nudity illegal; restricts or prohibits alcohol sales; requires a six-foot or similar distance between dancers and customers, generally at all times the club is open, even if the dancers are fully dressed; and limits the clubs’ hours of operation, forcing closure at midnight or even earlier.
Lirot explained how the industry got to this sad state. In 1976, the first major U.S. Supreme Court case involving the adult entertainment industry was Young v. American Mini Theatres. The city of Detroit adopted an anti-skid row ordinance. It tried to eliminate a number of businesses from the near downtown corridor, including pool halls, pawnshops, day labor agencies, blood donor clinics and adult bookstores. Since adult bookstores are a constitutionally protected form of free expression under the First Amendment, prohibiting them is not allowed and it should have been a no-brainer for the High Court to rule such an action unconstitutional.
To get around the First Amendment, the Court said that if the local government can document evidence to show it really wasn’t the sexual themes of the material they were trying to restrict, but rather the so-called “adverse secondary effects” of the businesses, such as causing crime; having an adverse effect on property values or having a detrimental effect on the tone of commerce, they could restrict the adult businesses.
The next major case affecting adult businesses, City of Renton (Washington) v. Playtime Theatre came nine years later, in 1985. A man wanted to open an adult entertainment theater in Renton, a suburb of Seattle. Since there had never been any adult businesses in Renton, the city had no way to document the supposed “secondary effects” of such establishments in Renton, as required under the Young decision. So the city attorneys collected magazine articles and other anecdotal evidence that suggested, in broad strokes, that adult businesses are bad. Renton used that pretense of evidence to adopt an adult business ordinance. The operator sued the city and the case eventually went to the U.S. Supreme Court. The Court decided that adult businesses are inherently bad and ruled that Renton didn’t have to wait for problems with the business there to occur. In lieu of the specific local evidence they had required of Detroit in Young, they said Renton could “borrow” evidence from similar municipalities which they could “reasonably rely on” to demonstrate that adverse secondary effects would accompany an adult business in their town.
Based on Young and Renton, nearly every decent-sized municipality in the nation adopted an anti-adult business ordinance of their own. And these early ordinances related to zoning. Adult business regulation has now largely morphed from zoning to wildly restrictive time, place and manner laws such as CDAs, without any real limitation from the courts and often without any right for the adult businesses to challenge the assertions of “secondary effects.”

12EXPO luke2As Lirot pointed out, there is very little if any credible evidence anywhere to show higher secondary effects around adult businesses than other types of businesses. And yet the courts are actually saying in some cases that the truth doesn’t matter.

In the 1991 Barnes v Glen Theatre case, the U.S. Supreme Court for the first time regulated the form of expression at adult businesses, requiring Indiana entertainers to wear pasties and G-strings. The Court’s bizarre reasoning was that it was no big deal to make the dancers cover up and that it would have no effect on limiting the erotic message of the performance. As adult operators know, nudity clearly intensifies the erotic message.
Since the Barnes decision, there have been further decisions not just telling us where we can have adult entertainment, but also putting limitations on the form of the entertainment. Many comprehensive adult ordinances lump all types of adult businesses, including adult bookstores, adult nightclubs, one-hour motels, massage parlors—many of which have no First Amendment protection—together.
Most of the so-called “studies” governments have relied on since Young and Renton to document “secondary effects” are laughable and without an ounce of credibility. For example, in Cincinnati, while there were 60 adult clubs in the city, the author of a study only chose the six worst clubs to look at, which clearly did not provide an accurate indicator of the city’s clubs. In other studies, the fact that police patrols were escalated around adult clubs was ignored. Clearly with more eyes on the street, you will find more crime. And yet this variable has been regularly ignored when claims of higher crime around adult businesses is reported in numerous studies.
There is very little if any credible evidence anywhere to show higher secondary effects around adult businesses than other types of businesses. And yet the courts are actually saying in some cases that the truth doesn’t matter! Governments can rely on any implausible, gerrymandered “evidence” they want. The fact that it’s clearly not true has been ruled to not matter.
There have been some Supreme Court decisions, such as Alameda Books v City of Los Angeles and City of Erie (PA) v Paps A.M. that require some criteria from the municipalities to justify secondary effects. The Court ruled that municipalities cannot rely on shoddy evidence or reasoning. The danger of these court decisions goes far beyond threats to the survival of adult businesses. “If they can do this to the adult industry, no form of speech is safe,” cautioned Lirot.
Where do we go from here?
“We need to do what we’ve always done,” Lirot explained. “Operate professional facilities. Be sensitive to what we portray to the community. Because though current judges don’t care what secondary effects we cause, eventually somebody will wake up, look at us for what we are and say, ‘These are hard working, professional business people, simply trying to be good corporate citizens and provide valuable entertainment and valuable jobs to the community and they need to be treated like any other businesses’.”

John Weston

12EXPO johnw1John Weston started his presentation by mentioning a text message he’d received on his way to the panel session that morning. It said that all laws limiting adult businesses had just been struck down with a Supreme Court ruling and that adult enterprises were free at last.
“And then I woke up,” smirked Weston.
He explained that, though he was joking about the text, if such a thing were to actually happen, it might not be the blessing it sounds like, at first blush.
“Every John, Eric and Harry would be your competitor. And as John Gray pointed out at yesterday’s keynote address, you wouldn’t be competing just among yourselves. You would be competing among 400 million people in the U.S. and billions around the world.”
Weston recalled that in the ‘70s, the industry came within one Supreme Court vote of throwing out every obscenity statute in the U.S. Weston explained to his clients at the time that, for the same reasons previously stated in his opening joke, it wasn’t necessarily a bad thing that the laws still stand.
Weston recalled that, when he was able to get the license for John Gray’s first Spearmint Rhino club years ago, Gray told him that the business zone where the club was located permitted restaurants but not nightclubs, and the club didn’t serve food. Weston told him the club would be a restaurant that didn’t serve food. Instead, they would serve various kinds of bottled water.
When Weston presented the concept to the city attorney, he realized Weston had something up his sleeve, chuckled and let it pass. But today things are different, explained Weston.
“Today, it’s not going to happen,” said Weston. “People don’t have senses of humor (toward adult businesses), and it’s a different world with the respect to the judiciary.”
Weston explained that our adversaries in government had become much more clever, as evidenced by the consolidation of industry-killing ordinances that had previously been upheld into the CDAs and by other adult regulations. Going head-to-head with this, the U.S. is a very different country today than it was in the ‘90s.
“And truth be told, you’re responsible,” explained Weston. “Just think of the changes in our language: lap dance, stripper pole, strip club. All of those things have become part of the common parlance. You can’t watch a sitcom without hearing them.”
Weston explained that when he and his legal panel colleagues started practicing First Amendment law, such cases were held in a high regard in courtrooms everywhere.
“We could look at a judge, even in the smallest court in the most remote hamlet in the land and say, ‘Your honor, this is a case governed by the First Amendment’,” explained Weston. “And things changed. The judge would sit up a little straighter. The court reporter would pay a little bit more attention. There was an almost religious hush that came over the courtroom. It didn’t mean you always won, but everybody understood this was a special and unique case.”

12EXPO johnw2There has been an increase in courts that are theocracies that see themselves as enforcers of [religious] code, which is diametrically opposed to what this country has historically been about and why and how it was founded. “The enemy is that linkage between right wing religiosity and government, [and how that relates to] our elected officials and our judges,” said Weston.

Weston noted that those days are gone and we must recognize today’s realities. There has been an increase in courts that are theocracies [a theocracy is a form of government run by officials who claim to be divinely inspired—Ed.] that see themselves as enforcers of code, which is diametrically opposed to what this country has historically been about and why and how it was founded.
“The enemy is not conservatism,” cautioned Weston. “The enemy is that linkage between right wing religiosity and government, [and how that relates to] our elected officials and our judges.”
Weston echoed the observations of his fellow panelists about the advantages of pole taxes. “To the extent that you become a necessary adjunct of government, the motivation to eradicate you get’s diminished,” he said.
An early adult business client of Weston was in a legal battle with their town. Tragically, three local police officers were gunned down. The next day, Weston delivered a $25,000 check to the relief fund for the officers’ families on behalf of his clients. That gesture dramatically changed things between the business and the city.
“Not because we bought anything or were trying to curry favor, but because we were able to establish the proposition that our client’s business was in the community not simply to provide entertainment, not simply to what some in the community might consider the baser, lower instincts but they were there for good (purposes),” said Weston. “As good neighbors and good corporate citizens, we were able to contribute to the well being of our fellow citizens. We were able to get our client viewed by the community in a different light.”
Weston explained that club operators have control over their destiny. “Don’t allow dancers in skimpy outfits to smoke outside the club, in view of neighbors,” he said. “Giving the outside of the club to the city will help you to keep the inside within your control. Restrain your advertising. Pay your taxes. Obey every rule you can, to the letter. Why? Because it makes you a good corporate citizen and a good corporate neighbor.
“Find ways to give government money,” he continued. “Dancer licensing, (for example). If there are ways to make yourself more and more indispensable to your government, do so; it only makes sense. Join civic organizations. Why not? You’re as much a part of the business community as anyone. And I guarantee it’s gonna be a lot harder for someone you’ve worked with at 4 a.m., dishing out Thanksgiving dinners and had lunches with, to want to close you down than if your business were a nameless, garish, bright yellow building with flashing lights and nearly naked girls standing outside.
“Reach out and get to know local law enforcement, city attorneys and local officials,” Weston added. “Regularly read your city council agendas. Contribute early and often. Don’t wait until the wolf is at your proverbial door. The bottom line is, don’t be a pain in the ass.”  
Weston suggested finding ways to give back to your community, either alone, with other clubs, or through civic associations. Women’s causes are ideal for this industry, but there are many other worthy causes. Read your newspapers. There are always parks being shut down and library hours shortened due to lack of funds that you could contribute.
Find a cause. Make a difference. It’s the right thing to do, it doesn’t take very much money and, when the inevitable legislation is contemplated against you, it will definitely help you.
Weston reiterated an idea with clear merit, which he has previously proposed. He suggests the adult nightclub industry should adopt a national cause and support it.


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