Tool Box v. Ogden City Corp.

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JAN 21 2004
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

THE TOOL BOX, a Utah corporation,

Plaintiff-Appellant,
v. No. 01-4134
OGDEN CITY CORPORATION, a
Utah municipal corporation,

Defendant-Appellee.

ON REHEARING EN BANC
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
(D.C. NO. 1:00-CV-62-B)

W. Andrew McCullough of McCullough & Associates, LLC, Midvale, Utah
(Michael W. Gross of Schwartz & Goldberg, PC, Denver, Colorado, with him on
the briefs), for Plaintiff-Appellant.

Donald L. Dalton of Dalton & Kelley, Salt Lake City, Utah, for Defendant-
Appellee.

Before TACHA, Chief Judge , SEYMOUR, PORFILIO, EBEL, KELLY,
HENRY, BRISCOE, LUCERO, MURPHY, HARTZ, O’BRIEN,
McCONNELL, and TYMKOVICH, Circuit Judges.

HARTZ , Circuit Judge.
 The Tool Box, Inc., wishes to open a nude-dancing establishment in Ogden

City, Utah, within the boundaries of the Ogden Commercial and Industrial Park

(the Industrial Park). Because the Industrial Park is zoned M-2, the location of

the establishment would not violate the requirements of the City’s ordinance

regulating businesses that are sexually oriented (the BSO Ordinance). The

Industrial Park is also subject, however, to the Ogden Commercial and Industrial

Park Protective Covenants (the Protective Covenants), which were adopted by the

City as owner of the land within the Industrial Park. The City denied Tool Box a

building permit for the proposed nude-dancing establishment after ruling that the

establishment would violate the Protective Covenants.

Tool Box brought suit under 42 U.S.C. § 1983 in federal court, seeking

damages and injunctive relief against the City for violation of its constitutional

rights. The district court granted the City’s motion for summary judgment. Tool

Box appealed, contending that the broad, vague language of the Protective

Covenants conveyed unbridled discretion to the City, so that the Covenants

constituted a prior restraint prohibited by the First Amendment (as applied to the

States through the Fourteenth Amendment). A divided panel of this court agreed

and reversed the district court. Tool Box v. Ogden City Corp. , 316 F.3d 1167

(10th Cir. 2003). We granted the City’s request for en banc review and now

affirm the judgment below.

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Background

The City created the Industrial Park on City-owned property in 1976. The

Protective Covenants were adopted in 1995 in anticipation of the sale, lease, and

other development of the property. The record on appeal does not indicate how

the covenants were authorized. But the parties have treated them as the

equivalent of a municipal ordinance, which we will do as well.

The Protective Covenants recite both permitted and prohibited uses.

Paragraph IV, entitled “Permitted Uses,” states:

The purpose of the Industrial Park to be developed on the lands
described in Exhibit A is to create a wholesome environment for the
conduction of selective manufacturing and marketing enterprises
which do not create a hazard or are not offensive due to appearance
or to the emission of noxious odors, smoke or noise, and to promote
research laboratories and regional office facilities.

Allowed uses in the Industrial Park shall include manufacturing,
fabrication, wholesale and distribution purposes, offices, service
facilities for the Industrial Park occupants, and similar uses which
create benefits to local commerce and the development for additional
employment opportunities.

App. at 26. Paragraph V, entitled “Prohibited Uses,” states:

No portion of the property may be occupied for any of the following
uses:
(1) Residential purposes, except for the dwelling of watchman or
other employees attached to a particular enterprise authorized in the
area.
(2) Manufacture, storage distribution or sale of explosives.
(3) Storage in bulk of junk, wrecked autos or other unsightly or
second-hand materials.

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 (4) No portion of the premises or any portion thereof of any building
or structure thereon at any time shall be used for the manufacturing,
storage, distribution or sale of any products or items which shall
increase the fire hazard of adjoining premises, or which emit noise or
vibrations which will injure the reputation of said premises of the
neighboring property or for any use which is in violation of the
ordinances of Ogden City and the laws of the State of Utah.

Id. at 26-27. Other paragraphs relate to yard space, loading docks, parking

requirements, building and construction requirements, storage, signs, and

landscaping and maintenance. Id. at 27-28.

To enforce the Protective Covenants, the Industrial Park Review Board (the

Review Board) was created. Composed of three persons appointed by the

Mayor—two City employees and a representative of an owner of land in the

Industrial Park—the Review Board makes the initial decision, which can be

appealed to the Mayor. Id. at 26.

In the meantime, in 1990 the City enacted its BSO Ordinance. As do

numerous such ordinances enacted around the country, the BSO Ordinance limits

BSOs to areas of the City with certain zoning classifications and also controls the

density of BSOs. Among the areas where zoning permits BSOs is the Industrial

Park. In July 2000, 5.19% of the City’s area, not including the Industrial Park,

was available for such businesses. App. at 58. There were three BSOs operating

in the City at that time. Id.

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 In late 1999 a private owner of property in the Industrial Park agreed to

lease the property to Tool Box’s owner for the purpose of constructing a nude-

dancing establishment. Id. at 36. Tool Box then sought City approval. On

January 3, 2000, the Ogden City attorney informed Tool Box that the Protective

Covenants “will not constitute a bar to your client’s proposed business.” App. 38.

But the Review Board disagreed. On April 12, 2000, it ruled as follows:

1. In the judgement of the board, the proposed use is not in keeping
with the stated purposes of the industrial park which is to create a
wholesome environment for selective manufacturing, fabrication and
other allowed uses.
2. The proposed use conflicts with those types of businesses which
are identified as “allowed uses” and which advance the purposes for
which the industrial park was established.

Id. at 40. On appeal the Mayor affirmed, stating:

[T]he decision of the Review Board [is] a reasonable and carefully
considered determination that the Protective Covenants do not allow
for a sexually oriented business use and that such a use is not
consistent with the purpose and intent of the Protective Covenants to
promote selective manufacturing and marketing enterprises.

Id. at 44. As a result, a building permit was denied. Tool Box filed suit on

June 1, 2000.

Discussion

Tool Box’s sole claim on appeal is that denial of the building permit

violated the First Amendment because the Restrictive Covenants grant such

unbridled discretion to the City as to constitute a prior restraint on expression.

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The legal issue before us can best be understood by initially discussing what is

not at issue on appeal.

First, perhaps surprisingly, Tool Box has not challenged the specific

decision by the City to prevent it from opening a nude-dancing club. Nude

dancing is constitutionally protected expressive conduct. See Barnes v. Glen

Theatres, Inc. , 501 U.S. 560, 566 (1991) (“[N]ude dancing . . . is expressive

conduct within the outer perimeters of the First Amendment, though . . . only

marginally so.”). Tool Box might therefore have rested its claim on the allegation

that the City denied it a building permit in order to prevent expression that the

City found offensive—in other words, that the purpose of the building-permit

denial was to stifle the expressive conduct of nude dancing. See, e.g., Bd. of

County Comm’rs v. Umbehr , 518 U.S. 668 (1996) (county cannot refuse to renew

contractor’s trash-hauling contract in retaliation for criticism of the county). But

Tool Box is not pursuing such a claim.

Second, Tool Box does not challenge the Protective Covenants under the

four-part test of United States v. O’Brien, 391 U.S. 367 (1968). Courts use this

test when someone claims that application of a law has infringed on the person’s

freedom of speech, but “the governmental purpose in enacting the [law] is

unrelated to the suppression of expression.” City of Erie v. Pap’s A.M., 529 U.S.

277, 289 (2000). A law passes muster under O’Brien if (1) the law “is within the

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constitutional power of the government to enact,” id. at 296; (2) the law “furthers

an important or substantial government interest,” id.; (3) “the government interest

is unrelated to the suppression of free expression,” id. at 301; and (4) “the

restriction is no greater than is essential to the furtherance of the government

interest,” id. For example, the Supreme Court has employed the O’Brien test to

reject a Vietnam War protester’s challenge to the law prohibiting the burning of

draft cards, O’Brien, 391 U.S. at 382, and to reject a nude-dancing

establishment’s challenge to a law banning all public nudity. Pap’s A.M., 529

U.S. at 296-302. The district court found that the Protective Covenants satisfy the

O’Brien test.

Nor does Tool Box challenge the Protective Covenants as a time-place-and-

manner restriction on speech. Because the covenants were used to prohibit a

nude-dancing establishment, they might be characterized as a law that, while not

outright banning such establishments from the City, excludes them from a

particular portion of town—the Industrial Park. (Indeed, the Mayor ruled that

“the Protective Covenants do not allow for a sexually oriented business use.”

App. at 44.) Content-neutral time-place-and-manner restrictions are

constitutional if “they are designed to serve a substantial governmental interest

and do not unreasonably limit alternative avenues of communication.” City of

Renton v. Playtime Theatres, 475 U.S. 41, 47 (1986). The Supreme Court has

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held that city ordinances limiting the locations of adult-film theatres for the

purpose of avoiding their secondary effects (effects which can be summarized as

urban blight, see id. at 47-51), rather than for the purpose of regulating the

content of the films, are content-neutral, id. at 47-49, and can be constitutional as

time-place-and-manner restrictions. Id. Whether the Protective Covenants pass

muster in this regard is not before us.

What is before us is a claim by Tool Box that the Protective Covenants act

as a prior restraint that constitutes unconstitutional censorship. The Supreme

Court has held that in certain circumstances a licensing scheme that confers

excessive discretion on public officials may be treated as a form of censorship.

See, e.g., Cox v. Louisiana, 379 U.S. 536, 557 (1965). Tool Box contends that the

Protective Covenants provide such a vague standard regarding what is prohibited

in the Industrial Park that they confer the sort of excessive discretion barred by

Supreme Court precedent. We disagree.

To see why this contention fails, it is necessary to examine why the grant of

excessive discretion in a licensing scheme can be important to First Amendment

interests. The Supreme Court’s most extensive exposition of the matter appears

in City of Lakewood v. Plain Dealer Publ’g Co., 486 U.S. 750 (1988), written by

Justice Brennan for a 4-3 majority, which struck down a municipal ordinance

governing the placement of newspaper racks on city property. The Court said,

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“[I]n the area of free expression a licensing statute placing unbridled discretion in

the hands of a government official or agency constitutes a prior restraint and may

result in censorship.” Id. at 757. It then noted two “identifiable risks to free

expression” engendered by a grant of excessive discretion. The first risk is self-

censorship. As the Court wrote:

[T]he mere existence of the licensor’s unfettered discretion, coupled
with the power of prior restraint, intimidates parties into censoring
their own speech, even if the discretion and power are never actually
abused. . . . Only standards limiting the licensor’s discretion will
eliminate this danger by adding an element of certainty fatal to self-
censorship.

Id. at 757-58.

The second risk arises because the grant of wide discretion in a law

increases the difficulty of determining whether a particular application of the law

was the “licensor’s legitimate denial of a permit” or the licensor’s “illegitimate

abuse of censorial power.” Id. at 758.

Standards provide the guideposts that check the licensor and allow
courts quickly and easily to determine whether the licensor is
discriminating against disfavored speech. Without these guideposts,
post hoc rationalizations by the licensing official and the use of
shifting or illegitimate criteria are far too easy, making it difficult for
courts to determine in any particular case whether the licensor is
permitting favorable, and suppressing unfavorable, expression. . . .
In sum, without standards to fetter the licensor’s discretion, the
difficulties of proof and the case-by-case nature of “as-applied”
challenges render the licensor’s action in large measure effectively
unreviewable.

Id. at 758-59.

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 When these risks are sufficiently great, the remedy is to strike the licensing

law in its entirety. The licensing law cannot be applied to anyone. As in

Lakewood, a person subject to the law will prevail on a prior-restraint claim

without having to prove that a license had been or would be denied as a result of

the person’s past or anticipated speech or expressive activity.

Of course, such invalidation of a licensing scheme carries with it a cost.

Providing officials with discretion is not an unmitigated evil. Rather than

requiring the City Attorney to spend weeks trying to draft covenants that address

every possible use of property in the Industrial Park, it may be the better part of

wisdom to speak in more general terms of the park’s purpose and count on City

officials to exercise sound discretion in furtherance of that purpose. No law can

anticipate every eventuality. Even judges complain about being denied discretion

when a law does not allow for exceptions in circumstances they believe to be

exceptional (as with the present controversy regarding sentencing guidelines). Cf.

Virginia v. Hicks, 123 S. Ct. 2191, 2197 (2003) (overbreadth doctrine creates

“substantial social costs . . . when it blocks application of a law to

constitutionally unprotected speech, or especially to constitutionally unprotected

conduct”).

Accordingly, the Supreme Court in Lakewood made clear that not every

grant of licensing discretion must be struck down. Although censorship risks are

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theoretically present in any licensing law granting broad discretion, the Court was

concerned only with those licensing schemes most likely to be in fact an

instrument of censorship. It recognized that protection of First Amendment

freedoms does not require permitting unbridled-discretion challenges to all

licensing laws. After discussing the problems that can be generated by licensing

laws, the Court wrote:

This is not to say that the press or a speaker may challenge as
censorship any law involving discretion to which it is subject. The
law must have a close enough nexus to expression, or to conduct
commonly associated with expression, to pose a real and substantial
threat of the identified censorship risks.

Lakewood, 486 U.S. at 759. Examples of licensing laws with such a nexus are

laws governing charity solicitation, parade permits, film censorship, and

regulation of handbills, leaflets, or sound trucks. Id. at 756 n.6.

The Court later described laws that do not have the requisite “nexus to

expression, or to conduct commonly associated with expression”:

In contrast to the type of law at issue in this case, laws of
general application that are not aimed at conduct commonly
associated with expression and do not permit licensing
determinations to be made on the basis of ongoing expression or the
words about to be spoken, carry with them little danger of
censorship.

Id. at 760-61. Of particular interest to the case before us, the Lakewood Court

provided a specific illustration of a licensing law not subject to a challenge for

granting excessive discretion:

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 For example, a law requiring building permits is rarely effective as a
means of censorship. To be sure, on rare occasion an opportunity for
censorship will exist, such as when an unpopular newspaper seeks to
build a new plant. But such laws provide too blunt a censorship
instrument to warrant judicial intervention prior to an allegation of
actual misuse. And if such charges are made, the general application
of the statute to areas unrelated to expression will provide the courts
a yardstick with which to measure the licensor’s occasional speech-
related decision.

Id. at 761.

Applying this framework to the Protective Covenants, we determine that

they lack the requisite nexus and are exempt from a First Amendment challenge

that they permit unbridled discretion. They constitute a law of “general

application,” id. at 760; they apply to every business that seeks to locate in the

Industrial Park. The Protective Covenants are “not aimed at conduct commonly

associated with expression,” id. at 760-61; they are aimed generally at all features

of a business that are conducive, or detrimental, to the advancement of a vigorous

center of business development. Indeed, Tool Box concedes in its opening brief

“that the covenants themselves were [not] designed to prevent [it] from

conducting expressive activities.” Aplt. Br. at 16.

Nor are there any provisions in the Protective Covenants that “permit

licensing determinations to be made on the basis of ongoing expression or the

words about to be spoken.” Lakewood, 486 U.S. at 761. Perhaps one could say

that the covenants are vague enough that they could be used to deny a license (a

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building permit) because of ongoing or anticipated expression. But that is not

what the Lakewood Court meant by the quoted language. After all, the Court was

describing which types of licensing laws granting unbridled discretion are the

ones that pose a particular threat to First Amendment interests and are therefore

subject to challenge on that ground. The Court’s discussion would have served

no purpose if a law is subject to such challenge whenever it grants broad

discretion. Indeed, the Court explicitly excluded from such challenge a building-

permit law, even though the law’s broad grant of discretion could enable the city

to censor “an unpopular newspaper seek[ing] to build a new plant.” Id. at 761.

The Court reasoned that an as-applied challenge would protect First Amendment

rights adequately in such an instance. Hence, when the Court refers to licensing

laws that “permit” decisions to be made on the basis of expression, it must be

referring to laws that by their explicit language affirmatively permit expression-

based decisions. There is no such language in the Protective Covenants.

Moreover, prior application of the Protective Covenants provided precisely

the feature referred to in Lakewood as making as-applied First Amendment review

effective. The Court wrote that if there is a charge of misuse of a law requiring

building permits, then “the general application of the statute in areas unrelated to

expression will provide the courts a yardstick with which to measure the

licensor’s occasional speech-related decision,” id. at 761, thereby making an

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unbridled-discretion challenge unnecessary for the protection of First Amendment

rights. Here, there was such a yardstick. Indeed, if Tool Box had pursued an as-

applied challenge to the denial of its building permit, it could have offered in

support of its claim the City attorney’s opinion on the applicability of the

Protective Covenants to the Tool Box proposal. Nothing prevented Tool Box

from bringing an as-applied challenge to the Mayor’s decision; it simply chose

not to.

Conclusion

We therefore conclude that the Protective Covenants do not create an

unconstitutional prior restraint. Because Tool Box raises no other argument on

appeal, we VACATE the panel decision and AFFIRM the district court’s

judgment.

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01-4134, Tool Box v. Ogden City Corp .
PORFILIO , Senior Circuit Judge, dissents.

I respectfully dissent. I believe the panel properly decided the case, Tool

Box v. Ogden City Corp ., 316 F.3d 1167 (10th Cir. 2003), and nothing in the

majority en banc opinion changes my mind. I adhere to the analysis wisely set

forth by Judge Aldisert. Nonetheless, I have some additional observations

prompted by the en banc review.

I have difficulty understanding the court’s contention that Tool Box has not

challenged the Protective Covenants on an “as applied” basis. Although the City

has continually argued this position, my recollection is that at every junction of

this appeal, including oral argument before the en banc court, counsel for Tool

Box made clear his client’s claim was based on two grounds. One was a facial

challenge, but the other was that the Covenants were invalid as they were applied

to Tool Box.

Indeed, it was upon the “as applied” basis that Tool Box filed the motion

for partial summary judgment which provoked the ultimate resolution of this case

in the district court. Id. at 1173. In analyzing this claim for the panel, Judge

Aldisert refined the controversy by pointing out:

The protective covenants do not incidentally impact protected speech
but merely permit such impact through the discretion of the Review
Board and the Mayor, the district court erred in considering the
protective covenants under the O’Brien test.
Id. at 1179 (emphasis in original) ( citing United States v. O’Brien , 391 U.S. 367

(1968)).

Facially, the Covenants do not imply an attempt to regulate speech. In very

general terms, they describe permissible uses of the property within the industrial

park. Certain conditions, such as fire hazards, noise, “vibrations which will injure

the reputation of said premises of the neighboring property,” are forbidden. Also

prohibited is “any use which is in violation of the ordinances of Ogden City and

the laws of the State of Utah.” In particular, however, the Covenants are silent on

whether a sexually oriented business falls within or without their reach. The

majority takes comfort, then, in the “general application” of the Covenants which

permits the court to avoid a challenge to the patent unbridled discretion vested in

the Board and the Mayor. I do not believe that comfort is warranted.

Generally “laws that are not aimed at conduct commonly associated with

expression” will not give rise to a charge of censorship. City of Lakewood v.

Plain Dealer Publ’g Co. , 486 U.S. 750, 760-61 (1988). Yet, the majority has

overlooked the exception to this rule. Indeed, as the Court has distinguished:

[A] law requiring building permits is rarely effective as a means of
censorship. To be sure, on rare occasion an opportunity for
censorship will exist, such as when an unpopular newspaper seeks to
build a new plant. But such laws provide too blunt a censorship
instrument to warrant judicial intervention prior to an allegation of
actual misuse. And if such charges are made, the general application
of the statute to areas unrelated to expression will provide the courts

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 a yardstick with which to measure the licensor’s occasional speech-
related decision .

Id. at 761 (emphasis added).

This case presents one of the instances in which a charge has been made that

a “licensor” has applied a facially neutral law to deny protected expression.

Hence, whether Tool Box has presented a facial or an as applied attack, or whether

the Covenants are written in language of general applicability, does not govern the

outcome of this case. Under either attack, the Court has acknowledged the claim

of censorship can be made. Id.

That the City made its decision on the basis of protected speech is not even

in controversy here. Nude dancing is protected expression, even if marginally so.

Additionally, an analysis of the Covenants themselves underscores that the Tool

Box permit was denied because the ruling officials believed, without statutory

direction, nude dancing is not “wholesome.”

Following those stark points, I look first to the fact the Covenants state their

purpose is to “create a wholesome environment for the conduction [sic] of

selective manufacturing and marketing enterprises.” (emphasis added). It should

be significant, therefore, that when this purpose was adopted, the conduct of a

sexually oriented business was both a use permitted within the industrial park by a

specific ordinance and was not a violation of any other of the City ordinances.

Thus, I presume when the drafters of the Covenants adopted the wholesomeness

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test, they had to have known a sexually oriented business was lawfully permitted

within the industrial park.

Next, neither the Board, the Mayor, nor the majority of this court cites any

specific language in the Covenants to show how the use proposed by Tool Box was

not permitted. Although each points to generalized justifications, nothing within

the text of the Covenants makes the proposed use by Tool Box a violation of those

general terms. Indeed, the Covenants are silent on sexually oriented businesses all

together. Yet, the basis for the Board’s decision and the ruling of the Mayor was

that Tool Box’s proposed use would not comport with the need to create a

“wholesome environment,” and that it “conflicts with those types of business [sic]

which are defined as ‘allowed uses’ and which advance the purposes for which the

industrial park was established.” But how the connection was made between the

proposed use and a violation of the Covenants is not explained by either the Board,

the Mayor, or the majority.

The Covenants do not define “wholesomeness” nor do they even suggest

nude dancing is not “wholesome.” Nonetheless, the Board and the Mayor decided

such is the case. Under these Covenants, the determination of what is wholesome

and what is not is left to the unfettered determination of the Board and the Mayor.

Yet, despite the protected status of nude dancing, which the majority concedes, it

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appears nude dancing is unwholesome and repugnant in the City of Ogden because

the Board simply said so.

The same can be said for the other reason the Board denied the Tool Box

application. In what way does nude dancing conflict with the other businesses in

the industrial park? Tool Box would not violate any of the named conditions the

Covenants provide as impermissible business conduct. Nothing in the record

suggests it would be a fire hazard, or would be “noisy,” or create illicit

“vibrations” that would “injure the reputation” of other property owners. It must

be, then, that the decision of the Board was based solely upon its own notions of

“wholesomeness.”

Moreover, there is nothing before us to suggest the enforcement of the

Covenants was for any purpose other than to stifle protected expression. Although

the majority alludes to “the ‘content-neutral’ purpose of limiting the secondary

effects” of nude dancing, there is nothing in the record to suggest that purpose was

actually pursued.

For these reasons, as well as those set forth in the panel opinion, I must

dissent. I disagree Tool Box “cannot” properly challenge the “improper purpose

of stifling expression protected by the First Amendment.” Maj. Op. at 14. While

not an advocate of the values of nude dancing personally, I still find censorship by

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subterfuge constitutionally repugnant. I would reverse the holding of the district

court.

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