H & A Land Corp v. City of Kennedale TX

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
February 22, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk

No. 05-11474
Consolidated with 06-10304

H AND A LAND CORP.; ET AL,

Plaintiffs,

RELIABLE CONSULTANTS, INC., doing business as Dreamer’s,

Intervenor Plaintiff-Appellee,

v.

CITY OF KENNEDALE, TEXAS,

Defendant-Intervenor Defendant-Appellant.

Appeals from the United States District Court for the
Northern District of Texas, Fort Worth

Before SMITH, BENAVIDES, and PRADO, Circuit Judges.

BENAVIDES, Circuit Judge:

Kennedale, Texas, appeals the district court’s grant of

summary judgment. We reverse and remand.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This appeal raises a single question: Does the evidence

offered by the city of Kennedale sufficiently support its ordinance
regulating sexually oriented businesses?

In 1999, Kennedale annexed land that included multiple

sexually oriented businesses, thereby subjecting those businesses

to the city’s ordinances. The ordinances prohibit the operation of

sexually oriented businesses within 800 feet of churches, schools,

residences, day care centers, parks, and other sexually oriented

businesses, as well as within specified overlay districts.

Additionally, the ordinances require sexually oriented businesses

to obtain a license to operate. In justifying its ordinances,

Kennedale relied on (1) studies from nine other cities, (2) an

opinion survey of land use appraisers conducted by the city’s

attorney, and (3) citizen commentary from public meetings, all

regarding the harmful secondary effects of sexually oriented

businesses on surrounding land uses.

Following annexation, the ordinances allowed affected

businesses three years to recoup their investments and relocate.

Following criticism that the regulations failed to leave a

sufficient number of alternative locations for already existing

sexually oriented businesses, the city amended the ordinances to

identify specific parcels of land upon which sexually oriented

businesses may locate.

Reliable Consultants, Inc., d/b/a “Dreamers” (hereinafter

“Reliable”) is an off-site store, meaning that it sells video

tapes, DVD’s, magazines, and other print materials, but that none

of the materials can be viewed or consumed on the premises, and the

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store offers no live entertainment, viewing booths, or theaters.1

After finding the ordinances were content neutral, the

district court relied on Encore Videos, Inc. v. City of San

Antonio, 330 F.3d 288 (5th Cir. 2003), to find that the City’s

evidence of secondary effects failed to show that the ordinances

were narrowly tailored to further a substantial government

interest. The court declined to consider additional evidence

Kennedale offered, and granted Reliable’s motion for a permanent

injunction. Kennedale appealed.

II. STANDARD OF REVIEW

We review a district court’s summary judgment ruling and

other legal issues de novo. N.W. Enters. Inc. v. City of Houston,

352 F.3d 162, 172 (5th Cir. 2003). We review a district court’s

factual findings for clear error. Kona Tech. Corp. v. S. Pac.

Transp. Co., 225 F.3d 595, 601 (5th Cir. 2000). The Supreme

Court’s admonition that cities not justify ordinances by relying on

“shoddy data or reasoning,” City of Los Angeles v. Alameda Books,

535 U.S. 425, 438 (2002) (plurality opinion), requires factual

findings, but turns on the legal interpretation of what the Supreme

Court meant by “shoddy.” Therefore, we review a district court’s

findings as to the existence of a city’s evidence for clear error,

but we review de novo whether that evidence falls within the

1
Originally, there were five affected sexually oriented
businesses/plaintiffs, but all but one settled during the course of
litigation, leaving Reliable as the lone plaintiff-appellee.

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Supreme Court’s admonition.

III. DISCUSSION

“Zoning regulations restricting the location of adult

entertainment businesses are considered time, place, and manner

restrictions . . . if they do not ban [adult-entertainment]

businesses throughout the whole of a jurisdiction and are ‘designed

to combat the undesirable secondary effects of such businesses’

rather than to restrict the content of their speech per se.”

Encore Videos, 330 F.3d at 291 (quoting City of Renton v. Playtime

Theaters, Inc., 475 U.S. 41, 49 (1986)) (citing Lakeland Lounge v.

Jackson, 973 F.2d 1255, 1257–58 (5th Cir. 1992)). Time, place, and

manner restrictions on speech violate the First Amendment unless

they are content-neutral, are designed to serve a substantial

governmental interest, do not unreasonably limit alternative

avenues of communication, and are narrowly tailored. See Encore

Videos, 330 F.3d at 291–92.

Kennedale’s ordinances meet the narrow tailoring standard if

they “target[] and eliminate[] no more than the exact source of the

evil [they] seek[] to remedy.” Encore Videos, 330 F.3d at 293;

Frisby v. Schultz, 487 U.S. 474, 485 (1988). Thus, an ordinance

meant to deter property depreciation may only regulate businesses

for which a connection to property depreciation can be

demonstrated.

To show that an ordinance advances its goals, a city “may rely

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on any evidence that is ‘reasonably believed to be relevant.’”

Alameda Books, 535 U.S. at 438. However, “[t]his is not to say

that a municipality can get away with shoddy data or reasoning.

The municipality’s evidence must fairly support the municipality’s

rationale for its ordinance.” Id. at 438.2

On-site businesses (i.e., adult theaters or strip clubs) pose

a greater threat of secondary effects than off-site sexually

oriented businesses (i.e., adult bookstores).3 Therefore, a city

that enforces an ordinance meant to prevent harmful secondary

effects associated with the operation of an off-site business must

rely on evidence showing that off-site businesses, rather than the

broader category of sexually oriented businesses that includes on-

site businesses, cause harmful secondary effects. Encore Videos,

330 F.3d at 295 (requiring city to “provide at least some

substantial evidence of secondary effects specific to adult

businesses that sell books or videos solely for off-site

entertainment” to meet narrow tailoring requirement).

In Encore Videos, we invalidated San Antonio’s ordinance

2
Though this was a plurality opinion, a review of the
concurrences and dissent demonstrates that the Court would
unanimously support this admonishment.
3
See Encore Videos, 330 F.3d at 295 (“Off-site businesses
differ from on-site ones, because it is only reasonable to assume
that the former are less likely to create harmful secondary
effects. If consumers of pornography cannot view the materials at
the sexually oriented establishment, they are less likely to linger
in the area and engage in public alcohol consumption and other
undesirable activities.”)

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regulating sexually oriented businesses because the city failed to

present adequate evidence showing a connection between off-site

businesses and harmful secondary effects. San Antonio’s evidence

consisted of three studies conducted in other cities showing a

connection between sexually oriented businesses, without isolating

off-site businesses and secondary effects. Encore Videos, 330 F.3d

at 294–95. Those studies did not provide any information exclusive

to off-site businesses, so a substantial portion of the ordinance’s

burden on speech did not serve to advance its goals, and it failed

the narrow tailoring prong. Id. at 295.

This case differs from Encore Videos because Kennedale, unlike

San Antonio, offers evidence that purports to show a connection

between purely off-site businesses, or “bookstores,” and harmful

secondary effects. To determine whether the ordinance at issue is

narrowly tailored, we must determine whether Kennedale could

reasonably believe that the evidence is relevant to show the

requisite connection to harmful secondary effects. Alameda Books,

535 U.S. at 438. In other words, we ask whether that evidence

“fairly support[s] the [city’s] rationale for its ordinance.” Id.

Applying our holding from Encore Videos, Kennedale cannot

reasonably believe its evidence is relevant unless it sufficiently

segregates data attributable to off-site establishments from the

data attributable to on-site establishments. Encore Videos, 330

F.3d at 294–95.

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 Kennedale’s evidence consisted of studies from nine cities, as

well as an opinion survey of land use appraisers conducted by the

city’s attorney, and citizen commentary from public meetings.

Seven of Kennedale’s nine studies from other cities fail to

differentiate between on-site and off-site businesses. The 1984

Indianapolis and 1986 Oklahoma City studies, however, included

surveys of real estate appraisers that focused strictly on “adult

bookstores.” The overwhelming majority of survey respondents in

both studies predicted that the presence of an adult bookstore

would negatively affect real estate value in the surrounding area.

The Indianapolis survey, conducted by the City of Indianapolis in

conjunction with Indiana University School of Business, Division of

Research, polled 20% of the national membership of the American

Institute of Real Estate Appraisers.4 Eighty percent of the

respondents predicted that an adult bookstore would negatively

impact residential property values, and seventy-two percent

believed commercial property value would also be negatively

effected. The Oklahoma City study, which surveyed one hundred

Oklahoma City real estate appraisers, produced similar results:

Seventy-four percent predicted a negative impact on real estate

value in the surrounding area.

Appellee Reliable argues that the term “bookstore,” used in

both surveys, is a term of art and does not sufficiently specify

4
In the Indianapolis study, 1527 questionnaires were mailed,
and 507 (33%) were returned.

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off-site premises. They argue instead that adult bookstores often

include peep shows, arcades, and other forms of on-site

entertainment, rendering them on-site establishments. However, the

Supreme Court has previously used the term “bookstore” as

distinguishable from “adult video arcades.” Alameda Books, 535

U.S. at 442 (discussing city’s prohibition on “combination of adult

bookstores and arcades”). This was a survey sent to and completed

by real estate appraisers, and so what matters is how those

appraisers would have understood the survey’s reference to an adult

bookstore.

Standing alone, it is reasonable to infer that the survey

respondents interpreted “bookstore” as signifying an off-site

establishment. Webster’s Dictionary defines “bookstore” as “a

place of business where books are the chief stock in trade.”

WEBSTER’S NEW INT’L DICTIONARY 253 (3d ed. 1981). There is no reason to

expect that simply adding the word “adult” to the term would

completely transform the nature of the business activity described.

Moreover, the Indianapolis survey also asked respondents to explain

their prediction that an adult bookstore would negatively impact

property value: 29% believed such an establishment would attract

“undesirables” to the neighborhood, 14% felt it would create a bad

image of the area, and 15% felt that it offended prevailing

community attitudes. These reasons are equally applicable to an

on-site or off-site establishment, and are distinguishable from the

problems we have found to be unique to on-site businesses. See

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Encore Videos, 330 F.3d at 295 (“If consumers of pornography cannot

view the materials at the sexually oriented establishment, they are

less likely to linger in the area and engage in public alcohol

consumption . . . .”). It is reasonable for Kennedale to believe

that the appraisers responding to the survey understood the term

“adult bookstore” to mean off-site businesses, such as that

operated by the plaintiff-appellee.

Kennedale’s ordinances purport to protect against harmful

secondary effects. The Indianapolis and Oklahoma City studies

support the belief that off-site sexually oriented businesses cause

harmful secondary effects to the surrounding area in the form of

decreased property value. So long as they are not relying on

shoddy data or reasoning, we afford substantial deference to cities

with regards to the ordinances they enact. See Alameda Books, 535

U.S. at 451 (Kennedy, J., concurring) (noting that “a city must

have latitude to experiment” and “courts should not be in the

business of second-guessing fact-bound empirical assessments of

city planners”). The Indianapolis survey, in particular, was

drafted by experts, pretested, and administered to a large,

national pool of respondents. It is not “shoddy.” We therefore

find that Kennedale has produced evidence that it could have

reasonably believed was relevant, and thus could have properly

relied upon. The ordinances are narrowly tailored to advance a

substantial governmental interest.

The other evidence produced by Kennedale to justify its

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ordinance — an opinion survey of land use appraisers conducted by

the city’s attorney, and citizen commentary from public meetings —

has also been hotly debated by the parties. Given our findings

above, however, we need not reach that additional evidence.

Similarly, our finding moots the question of whether the district

court erred in excluding additional evidence of secondary effects.

By finding that Kennedale’s ordinances were not narrowly

tailored, the district court never reached the final element of the

time, place, and manner analysis: whether the ordinances

unreasonably limit alternative avenues of communication. We

therefore remand this case to the district court to make those

findings.

IV. CONCLUSION

For the foregoing reasons, we REVERSE the district court’s

summary judgment and remand for findings as to whether the

ordinances leave open sufficient alternative channels of

communication.

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