      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                       NO. 03-08-00213-CV



  Susan Combs, Comptroller of Public Accounts of the State of Texas, and Gregg Abbott,
                 Attorney General of the State of Texas, Appellants

                                                  v.

             Texas Entertainment Association, Inc. and Karpod, Inc., Appellees


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
      NO. D-1-GN-07-004179, HONORABLE SCOTT H. JENKINS, JUDGE PRESIDING



                               DISSENTING OPINION


               Because I believe that the statutory scheme at issue in this case should have been

reviewed using intermediate scrutiny rather than strict scrutiny and because I believe that the statute

does not violate the First Amendment, I respectfully dissent from the result reached by the majority.

               As mentioned in Justice Henson’s opinion, section 47.052 of the business and

commerce code provides as follows: “A fee is imposed on a sexually oriented business in an amount

equal to $5 for each entry by each customer admitted to the business.” Tex. Bus. & Com. Code

Ann. § 47.052(a) (West Supp. 2008) (emphasis added). The code defines “sexually oriented

business” as follows:


       a nightclub, bar, restaurant, or similar commercial enterprise that:

       (A) provides for an audience of two or more individuals live nude entertainment or
       live nude performances; and
       (B) authorizes on-premises consumption of alcoholic beverages, regardless of
       whether the consumption of alcoholic beverages is under a license or permit issued
       under the Alcoholic Beverage Code.


Id. § 47.051(2) (West Supp. 2008); see also id. § 47.051(1) (West Supp. 2008) (defining “nude”).

Accordingly, the code imposes a fee on businesses that provide nude erotic entertainment and permit

the consumption of alcohol on the their premises. By requiring all the conditions to be satisfied

before a fee may be imposed, the code necessarily exempts establishments that provide erotic

entertainment but do not allow for the consumption of alcohol or that allow alcohol consumption but

do not allow their erotic entertainers to perform fully nude. The code also requires that a large

portion of the fee collected be given to the State’s sexual assault program fund. Id. § 47.054

(West Supp. 2008).


First Amendment

               The statute in question, by its terms, does not specifically impose restrictions on the

type of erotic entertainment performers may engage in or that patrons may observe. In other words,

the statute does not address the expressive nature of the entertainment at issue. Instead, the statute

affects the ability of businesses to combine the entertainment and the consumption of alcohol.

Although no specific limits on expression are imposed, the statute still has First Amendment

implications because it affects the manner in which businesses may provide erotic expression. See

Illusions-Dallas Private Club, Inc. v. Steen, 482 F.3d 299, 307 (5th Cir. 2007). In light of this, I

would analyze the constitutionality of the statute by employing traditional First Amendment

jurisprudence; however, I would note that while this type of regulation does have First Amendment

implications, live erotic entertainment “falls only within the outer ambit of the First Amendment’s


                                                  2
protection.” City of Erie v. Pap’s A. M., 529 U.S. 277, 289 (2000); see also Barnes v. Glen Theatre,

Inc., 501 U.S. 560, 584 (1991) (Souter J., concurring) (distinguishing between societal interest in

protecting erotic expression and greater interest in protecting “untrammeled political debate”);

Doran v. Salem Inn, Inc., 422 U.S. 922, 932 (1975) (explaining that nude dancing at bars

“involves only the barest minimum of protected expression”); Ben’s Bar, Inc. v. Village of Somerset,

316 F.3d 702, 707 (7th Cir. 2003) (noting that nude dancing is only given diminished protection

under First Amendment); see also Fantasy Ranch Inc. v. City of Arlington, 459 F.3d 546, 554

(5th Cir. 2006) (explaining that although live erotic entertainment is protected by First Amendment,

governments can regulate it).1


Alcohol Prohibitions for Sexually Oriented Businesses

               As a preliminary matter, I would note that a state may, in an effort to combat

secondary effects associated with sexually oriented businesses, entirely prohibit the consumption of

alcohol within sexually oriented businesses. See Ben’s Bar, 316 F.3d at 706, 728 (7th Cir. 2003)

(upholding constitutionality of ordinance that prohibited consumption of alcohol within sexually

oriented businesses); see also 181 South Inc. v. Fischer, 454 F.3d 228, 233-34 (3d Cir. 2006)

(concluding that regulation prohibiting erotic expression at locations licensed to sell alcohol did not

violate First Amendment). If a state may completely prohibit the consumption of alcohol within



       1
          In her opinion, Justice Henson agrees that the type of expressive conduct at issue in this
case only barely falls within the protections of the First Amendment. However, rather than
concluding that the conduct’s placement on the edge of protected speech subjects the behavior to less
constitutional protection, she confusingly concludes that the type of expressive conduct at issue in
this case warrants the highest judicial scrutiny, presumably higher than that afforded to behaviors
more truly expressive in nature, to prevent unfair suppression.

                                                  3
sexually oriented businesses, it seems logical to assume that a state may also impose less exacting

alcohol restrictions on sexually oriented businesses provided that the restriction is also designed to

combat negative secondary effects. Cf. Pap’s A. M., 529 U.S. at 301 (upholding city ordinance that

imposed restriction that was less onerous than complete ban on erotic dancing and noting that there

may be more than one method for government to choose to address serious problems associated with

sexually oriented businesses).

               The statute at issue in this case imposes a fee on establishments providing

erotic entertainment and allowing their customers to consume alcohol. There can be little doubt that

a fee is less restrictive than an absolute ban,2 and as discussed more thoroughly later, the statute was

designed to address potential negative secondary effects arising from the pairing of

erotic entertainment and alcohol consumption by providing revenue for the State’s sexual assault

program fund. See 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 511 (1996) (stating

proposition that greater governmental powers include lessor ones); cf. New York State Liquor

Auth. v. Bellanca, 452 U.S. 714, 717 (1981) (explaining that state’s ability to ban sale of alcohol

entirely encompasses lesser power to ban sale of alcohol at certain locations).3 I can find no


        2
           Regardless of the amount of the fee, the imposition of a fee for engaging in certain
activities is less restrictive than banning the activity in its entirety because individuals have the
option of engaging in the activity by paying the fee. Although businesses may challenge the amount
of the fee as being excessive, those arguments are fundamentally different than challenging the
State’s authority to impose the fee at all.
        3
           Justice Henson tries to dismiss the State’s “greater power includes the lesser power” by
relying on a hypothetical described in Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987).
In that case, the Supreme Court noted that a state could prohibit people from shouting the word “fire”
in crowded theaters without violating the First Amendment because the prohibition would fall within
a state’s power to protect the public safety. Id. at 837. However, the Court also theorized that a state

                                                   4
compelling distinction between statutes designed to curb potential negative secondary effects by

prohibiting, in their entirety, the pairing of alcohol consumption and erotic entertainment and statutes

designed to curb unwanted secondary effects by imposing a fee on establishments allowing the

two activities that would render the later unconstitutional but the former constitutional.

Consequently, I fail to see how the majority can conclude that the statute at issue violates the

First Amendment.


Intermediate Scrutiny Applies

                Once it has been determined that a statute regulates activity protected by the

First Amendment, courts must then determine what level of scrutiny to employ when reviewing the

statute. As a preliminary matter, I would note that courts often apply intermediate scrutiny to

governmental regulations of sexually oriented businesses. See Fantasy Ranch, 459 F.3d at 555




could not adopt the ban but also allow individuals to violate the ban if they chose to contribute $100
to the state treasury. Id. The Court noted that the second situation would amount to a lesser
restriction than a total ban but also concluded that the addition to the ban would be unrelated to the
purpose of protecting the public safety and would, in fact, alter the purpose of the ban. Id. In effect,
the Court reasoned that the imposition of the fee was improper because imposing the fee would not
further the state’s interest in encouraging public safety. In other words, the Court determined that
“the condition substituted for the prohibition [would] utterly fail[] to further the end advanced as the
justification for the prohibition.” Id.

        The fee at issue in this case is unlike the one described above because the fee in this case is
designed to further the same interest that a total ban on erotic entertainment and alcohol consumption
would accomplish: minimizing potential negative secondary effects resulting from the consumption
of alcohol and the viewing of erotic entertainment. Accordingly, the fee at issue in this case is
actually more similar to the other hypothetical described in Nollan, in which the Court theorized that
because a state could refuse to issue a building permit in order to protect public’s interest in a beach,
the State could also legitimately grant the permit but impose limitations designed to protect the
public’s interest in that property. Id. at 836-37.

                                                   5
(5th Cir. 2006) (listing various instances in which courts have applied intermediate scrutiny); see

also 729, Inc. v. Kenton County Fiscal Court, 515 F.3d 485, 504 (6th Cir. 2008) (explaining that

regulations pertaining to sexually oriented businesses are reviewed under intermediate rather than

strict scrutiny due to “the peculiar ‘secondary effects’ associated with adult businesses”). When

determining whether to apply intermediate or strict scrutiny, courts look to the purpose of the

regulation at issue. Illusions, 482 F.3d at 308. If the statute “is intended to suppress expressions

contained in erotic dancing, then it is subject to strict scrutiny,” but if the statute “has a purpose

unrelated to the suppression of speech, then it is subject to intermediate scrutiny.” Id.

               Although the statute at issue in this case mentions “live nude entertainment” and “live

nude performances,” the statute imposes no direct limitation on the type of expression that may be

exhibited through erotic entertainment. Cf. id. at 309 (explaining that fact that statute “references

content” does not necessarily mean that statute is “intended to suppress speech, even without a

legislative record to suggest a purpose unrelated to speech”). Moreover, it only imposes a fee if a

sexually oriented business decides to pair erotic entertainment with the consumption of alcohol. In

other words, a business may avoid any imposition of the fee described in the statute by not allowing

its customers to consume alcohol. See id. (noting that fact that sexually oriented business could

remove itself from reach of regulation by not allowing alcohol consumption weighs in favor of

determination that regulation should be reviewed under intermediate scrutiny). Accordingly, the

statute seems concerned with the regulation of alcohol or the regulation of the pairing of alcohol and

erotic entertainment rather than the suppression of any specific erotic expression. Cf. Ben’s Bar,

316 F.3d at 726 (explaining that regulation prohibiting consumption of alcohol within



                                                  6
 sexually oriented business was “not a restriction on erotic expression, but a prohibition of

 nonexpressive conduct (i.e., serving and consuming alcohol) during the presentation of

 expressive conduct”).

               For these reasons, I believe that the statute has a purpose unrelated to the suppression

of expression and is, therefore, subject to intermediate scrutiny. Cf. Sammy’s of Mobile Ltd. v. City

of Mobile, 140 F.3d 993, 996 (11th Cir. 1998) (noting that ordinances prohibiting sale or consumption

of alcohol at sexually oriented business are content-neutral and should be analyzed under

intermediate scrutiny).

               This conclusion is also supported by the fact that courts have reviewed regulations

pertaining to sexually oriented businesses and imposing more significant restrictions under

intermediate scrutiny. For example, courts have employed intermediate scrutiny when reviewing

regulations limiting the locations in which sexually oriented businesses may operate. See, e.g., City of

Los Angeles v. Alameda Books, Inc., 535 U.S. 425, 440 (2002) (plurality opinion) (applying

intermediate scrutiny to ordinance that prohibited more than one sexually oriented business

per building and did not contain a provision exempting preexisting businesses); Renton v. Playtime

Theatres, Inc., 475 U.S. 41, 49 (1986) (utilizing intermediate-scrutiny test when reviewing regulation

limiting the locations in which adult movie theaters may operate).

               In addition, courts have also employed intermediate scrutiny when reviewing

limitations placed on actual erotic expression. See, e.g., Fantasy Ranch, 459 F.3d at 557 (applying

intermediate scrutiny to ordinance imposing proximity limitations, which required performers to be

six feet away from customers or to be separated from their customers by wall); Hang-On, Inc.

v. City of Arlington, 65 F.3d 1248, 1254-55 (5th Cir. 1995) (applying intermediate scrutiny when

                                                   7
reviewing statute prohibiting contact between erotic entertainers and customers). Furthermore, the

Supreme Court has applied intermediate scrutiny when reviewing the constitutionality of an ordinance

prohibiting public nudity, which had the effect of requiring erotic entertainers to wear minimal attire.

Pap’s A. M., 529 U.S. at 296-302.

               Finally, courts have employed intermediate scrutiny to review complete bans on the

consumption of alcohol within sexually oriented businesses. See Ben’s Bar, 316 F.3d at 722.

Similarly, intermediate scrutiny has been applied to a statute that completely prohibited the issuance

or renewal of alcohol permits for sexually oriented businesses located inside dry political

subdivisions. Illusions, 482 F.3d at 303, 307, 310; see Tex. Alco. Bev. Code Ann. § 32.03(k)

(West 2007); see also Tex. Elec. Code Ann. § 501.021 (West Supp. 2008) (allowing voters to

determine whether to allow sale of alcohol within political subdivision).

               The statute at issue in this case does not require sexually oriented businesses to move

from their current locations, imposes no direct limitation on the type of erotic expression entertainers

may provide, and does not completely ban the consumption of alcohol within a sexually oriented

business. Rather, the statute imposes a fee on a sexually oriented business only if it chooses to allow

the consumption of alcohol on its premises. Nothing in the cases relied upon by either of the other

two justices convinces me that a more exacting standard should be employed to review a statute that

has a more modest impact on First Amendment expression than the regulations described above.


The Statute Survives Intermediate Scrutiny

               Having determined that the statute in question in this case should be reviewed under

intermediate scrutiny, I would then determine whether the statute may be upheld under that level of

scrutiny. In the context at issue in this case, a regulation satisfies intermediate scrutiny if it was

                                                   8
issued “pursuant to a legitimate governmental power”; “does not completely prohibit

adult entertainment”; “is aimed not at the suppression of expression, but rather at combating negative

secondary effects”; and “is designed to” further a “substantial governmental interest and the

restriction on expressive conduct is no greater than is essential in furtherance of that interest.”

Illusions, 482 F.3d at 311.

               There is no dispute that the legislature has the authority to regulate both alcohol

consumption and sexually oriented businesses. Cf. Ben’s Bar, 316 F.3d at 722 (explaining that

regulation of alcohol consumption falls within state’s police powers). In addition, as described

earlier, the statute in question does not completely ban erotic entertainment. Cf. California v. LaRue,

409 U.S. 109, 118-19 (1972) (upholding constitutionality of regulation that prohibited certain types

of erotic expression in bars and noting that state did not ban the expression entirely, but merely

prohibited it in establishments that allow for the consumption of alcohol). Consequently, the first two

elements are met.

               Regarding the third element, as described previously, nothing in the statute directly

addresses any aspect of erotic expression; rather, the statute addresses the pairing of erotic expression

with the consumption of alcohol. Moreover, rather than prohibiting any particular act of expression,

the statute simply imposes a fee on establishments that desire to allow the consumption of alcohol

on their premises and that provide erotic entertainment.

               Furthermore, the statute attempts to address some of the potentially negative secondary

effects from the pairing of alcohol and erotic expression by using a portion of the total fees collected

to provide revenue for the State’s sexual assault program fund. Additionally, the legislative history



                                                   9
for the statute demonstrates that the purpose of the statute was to provide funding for programs

alleviating the impact of secondary effects. See Senate Research Ctr., Bill Analysis, Tex. H.B. 1751,

80th Leg., R.S. (2007) (stating that fee will be used to fund “programs that relate to sexual assault

prevention, intervention, and research”); House Research Org., Bill Analysis, Tex. H.B. 1751,

80th Leg., R.S. (2007) (listing various sexual assault programs that money raised by fee could be used

for). Although the effect of the fee on potential secondary effects may be more attenuated than a

complete ban on alcohol consumption within businesses providing erotic entertainment would be, a

state must be given a reasonable opportunity to experiment with solutions to serious problems

affecting its populace. See Pap’s A. M., 529 U.S. at 301.

               In light of the preceding, I would conclude that the statute is aimed at combating

negative secondary effects and is not aimed at the suppression of expression. Cf. Fantasy Ranch,

459 F.3d at 557 (concluding that intermediate scrutiny was appropriate because the ordinance was

“predominately targeted to the prevention of secondary effects, not to the suppression of symbolic

expression”). For the reasons that follow, I would also conclude that the fourth element is satisfied.

               To satisfy the “substantial interest” requirement of the final element, the State must

present some evidence demonstrating a connection “between the combination of alcohol

[consumption] and erotic dancing and negative secondary effects.” Illusions, 482 F.3d at 312-13; see

Fantasy Ranch, 459 F.3d at 561 (requiring only that regulation be supported by evidence that could

reasonably be viewed as relevant to effects in question). However, the burden on the State is very

light, Illusions, 482 F.3d at 312, and the State is not required to prove that its regulation is the only

way to combat potential negative secondary effects, see Alameda Books, 535 U.S. at 437.



                                                   10
                The link between sexually oriented businesses and negative secondary effects has been

discussed in various cases, Pap’s A.M., 529 U.S. at 300 (noting that crime and other safety issues are

caused by “presence of nude dancing establishments”), and courts have also identified a state’s

interest in combating these effects as a substantial interest, see, e.g., Barnes, 501 U.S. at 583 (Souter,

J., concurring) (concluding that states have substantial interest in preventing negative secondary

effects associated with sexually oriented businesses). In fact, the Supreme Court has reasoned that

governments are not required to obtain new evidence regarding negative secondary effects when

passing new regulations for sexually oriented businesses and may instead rely on evidence previously

discovered, including evidence summarized in prior cases. Pap’s A.M., 529 U.S. at 296-97. In

addition, the legislature has specifically identified a link between sexually oriented businesses and

negative secondary effects. In particular, the legislature has determined that it is appropriate to

impose regulations on sexually oriented businesses that are not imposed on other businesses because

“sexually oriented businesses may be detrimental to the public health, safety, and welfare by

contributing to . . . the growth of criminal activity.” Tex. Loc. Gov’t Code Ann. § 243.001(a)

(West 2005).

                Although the link between sexually oriented businesses and negative secondary effects

has been previously established, evidence was also presented at trial suggesting a link between

sexually oriented businesses and the types of behavior that the sexual assault fund is designed to

combat. See Barnes, 501 U.S. at 582 (Souter J., concurring) (explaining that when determining

whether statute is constitutional, courts should focus on whether there is current governmental interest

and not on whether interest was thoroughly articulated when regulation was issued); Fantasy Ranch,



                                                   11
459 F.3d at 560 (stating that governments may justify enactment of regulation with evidence

presented at trial). In fact, the district court found that the State “presented persuasive trial evidence

supporting a possible link between the business activity subject to the tax and the secondary effects

addressed by the sexual assault program fund.” Specifically, expert testimony was introduced stating

that viewing erotic entertainment while consuming alcohol increases the likelihood that sexually

assaultive behaviors might ensue. Moreover, various expert witnesses also stated that it was

reasonable for legislators to conclude that there is a causal link between viewing erotic entertainment

while consuming alcohol and sexually assaultive behavior.

                For these reasons, I would conclude that the State has a substantial interest in

combating negative secondary effects and that the statute at issue furthers that interest. See Illusions,

482 F.3d at 312 (explaining that courts must determine whether substantial interest exists and whether

regulation facilitates that interest).

                Regarding the restrictive component of the final element, as mentioned previously, the

statute at issue imposes no affirmative ban on any expressive conduct. Instead, the statute imposes

a fee on establishments providing erotic entertainment that also allow their patrons to consume

alcohol. Nothing prohibits businesses from continuing to provide erotic entertainment and allow

patrons to consume alcohol provided that the businesses pay the fee. Alternatively, businesses may

continue to provide erotic entertainment without paying the fee if they stop allowing their customers

to consume alcohol or if they require their performers to wear minimal clothing. See Pap’s A.M.,

529 U.S. at 301 (commenting that requiring performers to wear minimal clothing has de minimus

impact on erotic expression).



                                                   12
                Given that the statute does not directly target any type of expressive conduct, that the

statute provides multiple avenues in which businesses may continue providing erotic entertainment,

and that courts have upheld other regulations actually limiting the type of erotic expression that may

be conveyed, see id. at 284, 301 (upholding ordinance requiring dancers to wear minimal attire while

engaged in erotic entertainment); Hang On, 65 F.3d at1256-57 (stating that ordinance prohibiting

contact between customers and erotic performer did not burden protected expression more than is

essential to “interest in preventing prostitution, drug dealing, and assault”), I would conclude that the

statute’s restriction on expressive conduct is no greater than is essential.

                Having determined that all four prongs of intermediate scrutiny were satisfied, I would

hold that section 47.052 of the business and commerce code does not violate the First Amendment

of the federal constitution.4




                                               ___________________________________________

                                               David Puryear, Justice

Before Chief Justice Jones, Justices Puryear and Henson

Filed: June 5, 2009




         4
           Because the district court concluded that the statute violated the First Amendment, it made
 no determination regarding the Association’s other attacks on the statute. Having found that the
 statute does not violate the First Amendment, I would reverse the judgment of the district court and
 remand the case for consideration of the other issues raised in the case.

                                                   13
