600 Marshall Entm't Concepts, LLC v. City of Memphis

705 F.3d 576

600 MARSHALL ENTERTAINMENT CONCEPTS, LLC, dba The Spot, Plaintiff–Appellant,

v. The CITY OF MEMPHIS, Defendant–Appellee,Memphis Medical Center, a Division of the Memphis Bio–Works Foundations, Intervenor–Appellee.

No. 11–6362.

United States Court of Appeals, Sixth Circuit.

Argued: Dec. 4, 2012.

Decided and Filed: Feb. 1, 2013.^*

ARGUED:Bradley J. Shafer, Shafer & Associates, P.C., Lansing, Michigan, for Appellant. J. Michael Fletcher, Memphis, Tennessee, for Appellees. ON BRIEF:Bradley J. Shafer, Matthew J. Hoffer, Shafer & Associates, P.C., Lansing, Michigan, Edward M. Bearman, The Law Office Of Edward M. Bearman, Memphis, Tennessee, for Appellant. J. Michael Fletcher, Memphis, Tennessee, Saul C. Belz, Michael D. Tauer, Glanklerbrown, PLLC, Memphis, Tennessee, for Appellees.

Before: McKEAGUE and GRIFFIN, Circuit Judges; DLOTT, Chief District Judge.

OPINION

McKEAGUE, Circuit Judge.

600 Marshall Entertainment Concepts, LLC (“600 Marshall”) is a nightclub in Memphis, Tennessee. It is located in a zoning district where adult entertainment has been prohibited since 1993. Although already allowed to present most forms of adult entertainment under a grandfather clause in the zoning ordinances, 600 Marshall desires to present adult entertainment in the form of compensated dancers (“nude dancing” for short).¹ 600 Marshall also claims that a city ordinance requiring a permit to present compensated dancers (the “Dance Hall Ordinance”) is unconstitutional, both as an improper prior restraint and as vague. Finally, 600 Marshall claims that a city official's actions violated its procedural due process rights. 600 Marshall seeks nominal damages for these violations under 42 U.S.C. § 1983. Upon remand from another panel of this Court, the district court ruled adversely to 600 Marshall on these issues. We affirm.

I. BACKGROUND

This is 600 Marshall's second appeal to this Court in this case. In 600 Marshall Entertainment Concepts, LLC v. City of Memphis (600 Marshall), 375 Fed.Appx. 513 (6th Cir.2010), 600 Marshall appealed from an adverse judgment in a bench trial, and another panel of this Court remanded for further factual findings and legal conclusions. After several of the remand issues were resolved adversely to 600 Marshall, it brought this second appeal.

Underlying Facts²

600 Marshall is a nightclub in Memphis, Tennessee. It is located within a zoning district known as the Central Business District (“CBD”). The CBD was created by city ordinance in 1981. Adult entertainment was permitted in the CBD from 1981 to 1993. “Adult entertainment” is defined in the zoning title of the Memphis Code of Ordinances to encompass things such as adult book stores, adult movie theaters, and live performances involving nudity or sexual acts. See Memphis, Tenn., Code § 16–8–2. In 1993, Memphis and Shelby County issued Joint Ordinance No. 4209 (the “1993 Ordinance”), which eliminated adult entertainment as one of the permitted uses within the CBD.

While the zoning ordinances define and prohibit adult entertainment, the presentation of compensated dancers—whether or not they are engaged in nude dancing—is regulated by the Dance Hall Ordinance. See Memphis, Tenn., Code § 6–20. A substantially similar version of this Ordinance was enacted in 1971. See Editor's Note to Memphis, Tenn., Code § 31–21 (1967). The current version requires any establishment wishing to present compensated dancers to first obtain a dance permit and pay a $500 fee.³ Memphis, Tenn., Code §§ 6– 20– 1, 6– 20– 4, 6– 20–11. To obtain a dance permit, applicants must complete an “Application for Public Dance Hall Permit.” The application asks whether the establishment will “feature adult entertainment” and, if so, to describe the type of entertainment that will be provided. In 2005 when the controversy in this case began, no dance permit had been issued for the businesses at the 600 Marshall location since at least 1991.

Various entities have operated at the 600 Marshall location as a bar, club, or other similar facility since at least the 1970's. From the 1970's until the early 2000's, operators at the location occasionally presented or allowed various types of adult entertainment. The district court found evidence that at least through the late 1990's, that adult entertainment included nude dancing. See 600 Marshall Entm't Concepts, LLC v. City of Memphis (600 Marshall), 812 F.Supp.2d 870, 877 (W.D.Tenn.2011).

On August 15, 2005, Charles G. Westlund entered into an agreement to purchase 600 Marshall. Westlund purchased the property intending to operate an adult nightclub featuring nude dancing. That same day, 600 Marshall applied for a dance permit through the City's Permits and Licensing Department. On its application, 600 Marshall indicated that it would feature adult entertainment. On September 16, 2005, it was issued a dance permit. The dance permit said “NO NUDITY” in large letters.

Ten days later, Lilli Jackson, an official with the Permits and Licensing Department, informed 600 Marshall that her office was reviewing whether the dance permit was issued in error. On October 4, 2005, Jackson sent 600 Marshall a letter revoking the dance permit, stating that upon further review, the City had determined that 600 Marshall was within the Central Business Improvement District ⁴ and therefore ineligible for a dance permit. Evidently Jackson believed that a dance permit would authorize 600 Marshall to present adult entertainment, an activity prohibited in the CBD. Because the letter did not contain a provision staying the revocation, the permit became null and void when the letter was issued. Without a dance permit, 600 Marshall could not present compensated dancers in any form.

600 Marshall sought review of the decision to revoke its dance permit through the procedure specified in the Dance Hall Ordinance. See Memphis, Tenn., Code § 6–20–10. On November 2, 2005, a three-member panel designated by Larry Godwin, Director of Police Services, heard 600 Marshall's appeal and ultimately found that the dance permit was “wrongfully revoked and that the permit should be reissued immediately conditioned on prohibition of any adult entertainment or activity ... unless and until the Petitioner receives the proper approvals from the Building Official.” See Petitioner's App. 59–60. Dedrick Brittenum, a member of the panel, testified that the reason for the panel's decision was that in their view the issuance of a dance permit is unrelated to the presence of adult entertainment. On December 15, 2005, Godwin rejected the panel's findings and recommendations, writing: “I do not accept the recommendation of this Panel. This application is denied.” Id. at 61. Godwin testified that he was unfamiliar with the dance permit scheme and assumed that the purpose of the panel was to determine why the dance permit was issued in error, not whether it should be re-issued. Godwin was not present at the administrative hearing and did not review the transcript or evidence from the hearing.

On November 17, 2005, subsequent to the panel hearing but prior to Godwin's ultimate decision regarding the panel's recommendation, 600 Marshall sought judicial review of the administrative denial of its dance permit pursuant to Tenn.Code Ann. § 27–9–111(e). On November 28, 2005, Memphis removed the action to the District Court for the Western District of Tennessee based on the civil rights and constitutional claims alleged in 600 Marshall's petition.

The district court denied 600 Marshall's request for a preliminary injunction and conducted a two-day bench trial, which resulted in a finding that 600 Marshall had not carried its burden of showing a lawful, sufficiently continuous, non-conforming adult entertainment use that would entitle it to “grandfathering.” The district court declined to reach 600 Marshall's constitutional claims, concluding that it need not do so because it ruled against 600 Marshall on statutory grounds. Sometime between the preliminary injunction hearing and the bench trial, as a result of negotiations, 600 Marshall received a dance permit with a nudity restriction.

The First Appeal

600 Marshall appealed, and another panel of this Court remanded the case for additional factual findings and legal conclusions. See 600 Marshall, 375 Fed.Appx. at 521. Specifically, the panel observed that the district court's basis for rejecting 600 Marshall's grandfathering argument was that the location had not obtained dance permits after 1991, and therefore any adult entertainment would have been conducted unlawfully. Id. at 519. But the panel noted that “[t]he universe of adult entertainment, as defined, is not identical to the universe of activity that requires a [dance permit].” Id. Therefore, adult entertainment that did not involve compensated dancing would have been lawful and entitled to grandfathering. Id. The panel further stated that “because 600 Marshall was denied a remedy on other grounds, the district court was required to address constitutional claims that, if successful, would entitle 600 Marshall to a remedy.” Id. at 520.

Therefore, the Panel instructed the district court to consider five issues on remand:

(1) It should determine whether there was lawful adult entertainment of a type that did not require a dance permit prior to 1993.

(2) It should consider whether prior owners of 600 Marshall abandoned or discontinued adult entertainment use under Memphis, Tenn., Code § 16–116–2(F), and also whether any prior owner effected a change in use under § 16–116–2(E).

(3) If the district court concluded that 600 Marshall was entitled to grandfathering based on prior adult entertainment activities that did not require a dance permit, it should consider whether allowing adult entertainment that does require a dance permit would violate Memphis, Tenn., Code § 16–116–2(C)(3), which prohibits the expansion of a nonconforming use “in such a manner as to conflict with, or to further...