In People Theatres of N.Y. Inc. v. City of New York, 2017 N.Y. Slip Op. 04385, various owners of adult businesses (“Plaintiffs”) brought separate actions against the City of New York (“City”) based upon First Amendment challenges seeking relief against zoning ordinances that bar adult establishments from operating in, among other areas, all residential districts and most commercial and manufacturing districts (“Ordinance“). The cases were consolidated; and after the trial court’s initial determination, the cases experienced a complex procedural history, having been appealed to the Court of Appeals twice over the course of fifteen (15) years. A comprehensive discussion of this case and its lengthy history can be found in this extended blog post.
Here, the Ordinance at issue sought to combat negative secondary impacts relating to sexually focused businesses, which impacts were demonstrated in a 1994 study conducted by the City. Whether and how the Ordinance applied to particular adult businesses was the impetus for prior litigation in 1995. In 1998, the City created the so-called 60/40 rule. Under this rule, any commercial establishment with at least 40% of its customer-accessible floor/cellar area or stock-in-trade used for adult purposes qualified as an “adult establishment” covered by the Ordinance. Plaintiffs modified their businesses to comply with the 60/40 rule. The City, however, believed that while many operators were achieving “technical compliance” with the rule, their compliance was a sham. According to the City, the businesses still primarily focused on sexually explicit activities or materials; and their non-explicit materials were an afterthought that did not generate sales. To shore up enforcement, the City amended the Ordinance in 2001 to effectively eliminate the 60/40 rule (“2001 Amendments”).
The main issue in this case was the relationship between (1) the standard that applies to First Amendment challenges in the context of ordinances affecting adult uses, and (2) the burden of proof a municipality must meet in order to sustain such ordinances. The Court held that “intermediate scrutiny” applies in this type of First Amendment adult use zoning context, which requires that an ordinance be narrowly tailored to the municipality’s justified purpose and assure reasonable alternative avenues of communication. When applying intermediate scrutiny, a court must balance the interests at stake while assessing a municipality’s factual judgments. The burden of proof relative to the municipality’s factual judgments is “modest” (no pun intended) and akin to substantial evidence, which is accorded more deference than that given to administrative agencies.
As such, the standard of review in this case is intermediate scrutiny, while the burden of proof is similar to substantial evidence.
The governing legal precedent is set forth in Los Angeles v. Alameda Books, Inc., 535 U.S. 425 (2002), wherein the Supreme Court set forth the three-part burden shifting test, which describes a municipality’s burden of proof to sustain its laws in the face of a First Amendment challenge. First, the municipality must “fairly support” its rationale for the ordinance. Second, a challenger must cast direct doubt upon the rationale – either by (I) demonstrating the municipality’s evidence does not support the rationale, or (ii) furnishing evidence disputing the municipality’s factual findings. If the challenger cannot cast doubt, then the municipality wins. If the challenger is able to cast doubt, then the third step comes into play; and the burden shifts back to the municipality to supplement the record with evidence renewing support to justify the ordinance.
Here, after applying the Alameda three-prong test, the Court reversed the Appellate Division holding that the lower court’s mechanical approach was improper and confused the ultimate standard of review (intermediate scrutiny) with the evidentiary burden (similar to substantial evidence) borne by the City. Because the third step of the Alameda analysis obliges a modest burden of proof akin to substantial evidence, it was an error for the lower courts to determine that the City failed to meet its burden. In this instance, the City met its burden of showing continued focus on sexually explicit activities and materials by the Plaintiffs’ businesses – despite any 60/40 compliance. Therefore, the Appellate Division was reversed and the Ordinance was sustained.