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Retailer's Legal Wars: 1

Retailer's Legal Wars: 1

July 7, 2005
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" legal disputes, and the press coverage they generate, often are a boon to business "

When the Justice Department filed federal obscenity charges against Rob Zacari, aka Rob Black, and his company, Extreme Associates, the case garnered splashy headlines, network news coverage and the attention of just about everyone in the adult entertainment industry.

Perhaps because such cases are so widely publicized and sensational in nature, people in the industry tend to see them as barometers of the government's success in interfering with adult commerce. When a company like Extreme Associates wins, the industry relaxes a bit, and it's back to business as usual.

What few people realize, though, is that for every high-profile obscenity prosecution the federal government rains down upon well-known adult studios, there are a dozen local governments waging small-scale wars against mom-and-pop adult retailers.

While Zacari may be taking a shelling of nuclear proportions, the little guys are on the front lines under heavy fire. In fact, legal skirmishes against sex shops are so common and widespread that XBiz could fill its monthly Legal Reality section with nothing but updates on pending cases. While no two are identical, there are patterns that emerge as well as striking similarities in their causes and often-surprising outcomes.

90 Percent Success
The weapon most often used by county and city governments to try to eliminate adult-oriented businesses is zoning ordinances, many of which place restrictions on the sale of hardcore material within certain distances of schools and churches. Officials often mistakenly believe that adult retailers will simply move on to the next town when they discover there aren't enough pieces of property available with adequate infrastructure within designated areas.

But First Amendment attorney Larry Walters told XBiz that, more often than not, the communities quickly find out that the tact won't work because it renders the ordinances unconstitutional and gives attorneys grounds for legal challenges based on the U.S. Supreme Court's ruling in Renton vs. Playtime Theatres Inc. In that decision, the court said communities must provide stores, even ones selling goods that some members of the community may find offensive, with adequate alternative avenues for conducting businesses.

"These ordinances have all sorts of defects, and a trained legal mind can go through them and find two or three defective items to challenge," Walters told XBiz. "As much as [city officials] wish to keep the serpent out of paradise, they have no legal recourse and are forced to reach some sort of compromise."

Walters estimates that 90 percent of the stores his firm has represented were able to open or remain open under some circumstances. Much of the time, these compromises involve the passage of a curative ordinance to establish an "adult-business zone" within the community, with an exception made for the store that challenged the existing ordinance.

"The best-case scenario is for the store to be grandfathered in," Walters said. When this happens, the town essentially ends up giving a store a monopoly by being forced to allow it to continue operating in a more favorable location outside the proscribed adult-business zone.

"Maybe they don't have enough lights, or the sewers are bad, and the courts will find the ordinances are unconstitutional," Walters said. "If [a store owner] can find a place like that, you've found a gold mine."

Which is exactly what happened recently in New Albany, Ky. City officials had declared a moratorium on sexually oriented businesses late last year to restructure and significantly tighten its zoning ordinance in an effort to keep New Albany DVD from opening. But the effort, it turned out, was in vain because a district judge ruled the new law was too broad. As a result, not only was the store allowed to open but it also was grandfathered in against any future zoning changes.

Happens All The Time
The New Albany DVD case is far from extraordinary. As much as local officials are willing to dig in and spend countless taxpayer dollars trying to resist adult businesses, they seldom succeed. In fact, some retailers have become so adept at suing - and beating - communities trying to use suspect ordinances to illegally keep them from doing business that they welcome such challenges.

In the past decade, 11 cities have tried to keep John Haltom's sex shops out, and 11 cities have failed. Haltom has gone to jail twice on charges related to his stores; however, both cases were eventually overturned. "No one can stop me," said Haltom, whose latest foe was the city of Alton, Ill., which put up an ill-fated stand against Haltom's Johnny Vegas Lingerie Boutique. "We have now perfected how we do it. We know how to bait cities into doing something illegal, like trying to revamp their zoning to exclude us. After that, it's a slam dunk."

Don Kleinhans, owner of Pure Pleasure Megacenters, echoed Haltom's sentiment. Last year, the mayor of Crystal City, Mo., refused to grant Kleinhans' store a license, then the city council refused to hear his appeal. So Kleinhans went ahead and opened the store anyway, hoping to force the issue into court. The strategy worked: Two days later, a judge ordered the store closed pending a full hearing.

On the surface, it was a setback for Kleinhans, but the judge also issued a stern warning to the City Council that it had better produce serious evidence showing why Pure Pleasure should not have been issued a license. Council members saw the writing on the wall, and, rather than waste more taxpayer money on fruitless litigation, admitted they had no valid legal reason to continue opposing the store and issued a license.

One would think that the unfounded harassment retailers face would eventually take its toll and prompt many to throw their arms up in defeat. But Kleinhans said there is a silver lining - legal disputes, and the press coverage they generate, often are a boon to business.

"We've run into this stuff before," Kleinhans said. "We had a store in Kentucky where it happened, and what really intrigues me is our store in Louisville did fourfold [in sales] what the other stores have done within the first six months. The only thing I can attribute it to is the number of protestors. The more protestors we had, the more media coverage we received. Ultimately, what it does is give us about $10 million in advertising."

Walters added, "You can't buy that kind of publicity." He pointed to the example of one store in a conservative Florida town on the Georgia border where business went up by 300 percent every time protestors came out. "From the moment [the store] opened, there were protestors waving signs that said, 'Porn kills,' but, amazingly enough, there also were counter-protestors who showed up with signs that said, 'Stay out of my bedroom.' Some customers would come in and buy a toy or a movie and say, 'I don't even like this stuff, but I don't want anyone telling me I can't buy it.'"

In part two we'll look at big bills, squeaky wheels and a sticky mess...


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