                                                                                                                           Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-18-2006

181 South Inc v. Fischer
Precedential or Non-Precedential: Precedential

Docket No. 05-1882




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                                             PRECEDENTIAL

            UNITED STATES COURT OF APPEALS
                 FOR THE THIRD CIRCUIT


                           No. 05-1882


           181 SOUTH INC., a New Jersey Corporation
                   d/b/a MOULIN ROUGE,

                            Appellant,

                                v.

JERRY FISCHER, in his official capacity as Director, Division
of Alcoholic Beverage Control, Department of Law and Public
      Safety, an Agency of the State of New Jersey; THE
    MUNICIPAL BOARD OF ALCOHOLIC BEVERAGE
   CONTROL OF THE CITY OF ATLANTIC CITY, NEW
JERSEY, an Agency of the City of Atlantic City, New Jersey, a
                      Municipal body,

                            Appellees.




          On Appeal from the United States District Court
                   for the District of New Jersey
                       (D.C. No. 04-cv-05916)
            District Judge: Honorable Robert B. Kugler




               Argued January 12, 2006
 Before: FUENTES, ROSENN * , and ROTH **, Circuit Judges.


      *
       This case was argued before a panel consisting of Judges
Roth, Fuentes, and Rosenn. Judge Rosenn passed away after
argument, but before the filing of this opinion. The decision is
                       (Filed July 18, 2006)

Stephen D. Holtzman
Holtzman & McClain
819 New Road
P.O. Box 869
Northfield, NJ 08225

Daniel A. Silver (Argued)
Silver & Silver
One Liberty Square
New Britain, CT 06051

ATTORNEYS FOR APPELLANT

Lorinda Lasus (Argued)
Office of the Attorney General of New Jersey
Division of Alcoholic Beverage Control
140 East Front Street
Trenton, NJ 08625

ATTORNEY FOR APPELLEE JERRY FISCHER




                    OPINION OF THE COURT


FUENTES, Circuit Judge.

       The appellant, 181 South Inc. (“181 South”), operates an
adult cabaret called Moulin Rouge, located in Atlantic City, New
Jersey. The club holds a liquor license issued by the City of
Atlantic City pursuant to various New Jersey regulations. One of
the club’s main attractions involves topless dance performances



filed by a quorum of the panel. 28 U.S.C. § 46(d).
**Effective May 31, 2006 Judge Roth assumed senior status.

                                2
that include sexually explicit dance routines. Fearing that these
performances may result in substantial financial penalties or loss of
its liquor license, 181 South filed a complaint to challenge the
constitutionality of a state regulation prohibiting “any lewdness or
immoral activity” on liquor-licensed premises. On cross-motions
for summary judgment, the District Court denied 181 South’s
request for declaratory and injunctive relief and granted summary
judgment in favor of ABC Director Fischer. For the reasons that
follow, we will affirm the District Court and hold that the
Regulation, as construed by New Jersey courts, is not
unconstitutional.

I.     Background

        The New Jersey Legislature has delegated authority over the
manufacture, sale and distribution of alcoholic beverages in the
state to the New Jersey Division of Alcoholic Beverage Control
(the “ABC”) and has authorized the Director of the ABC, currently
appellee Jerry Fischer, to enforce the State’s rules and regulations
related to alcohol. See N.J. Stat. Ann. § 33:1-3 (2006); Id. § 33:1-
23. The ABC has broad authority in this realm and is statutorily
authorized to promulgate rules and regulations “as may be
necessary for the proper regulation and control of the manufacture,
sale and distribution of alcoholic beverages.” Id. § 33:1-39.

        The ABC regulation at issue in this case reads, in relevant
part, as follows:

       (a) No licensee shall engage in or allow, permit or suffer on
       or about the licensed premises:
       1.     Any lewdness or immoral activity. . .

N.J. Admin. Code § 13:2-23.6(a)(1) (2005). The ABC enacted the
Regulation to reflect “the long-standing judicial recognition that
[“lewdness or immoral”] activity in conjunction with alcoholic
beverage consumption can give rise to unacceptable social
behavior.” 22 N.J. Reg. 1820 (June 18, 1990). ABC Director
Fischer has also stated in a Certification submitted to the District
Court that the purpose of the Regulation is to limit the harmful
secondary effects of the combination of alcohol and “lewd or

                                 3
immoral activity,” including overconsumption of alcohol and
inappropriate physical contact between customers and dancers.
The New Jersey Superior Court, Appellate Division, has construed
the Regulation’s prohibition of “lewd or immoral activity” as
prohibiting entertainment where “‘the predominant object and
natural effect upon the observers-patrons of one portion of the
performance [is] erotic excitation.’” In re G & J.K. Enters., Inc.,
500 A.2d 43, 46 (N.J. Super. Ct. App. Div. 1985) (quoting Davis
v. New Town Tavern, 117 A.2d 415, 415 (N.J. Super. Ct. App.
Div. 1955)) (emphasis added).1

       In May of 2003, the ABC cited 181 South for three separate
violations of the Regulation, which were deemed to have occurred
based on an undercover investigation by the state police. Though
there were alleged violations of other ABC rules and regulations,
what is important here is that the state police noted three female
adult entertainers on 181 South’s premises engaging in what the
police determined to be prohibited activity under the Regulation.
In one instance police observed an entertainer rubbing her breasts
and vagina while onstage. She then proceeded to straddle a patron,
pushing her breasts in his face and then rubbing her leg in the
patron’s pelvic area before rubbing his inner thighs with her hands.
Police also witnessed a second entertainer caressing her breasts and
massaging her vaginal area onstage. They then observed that
entertainer give a patron a one-on-one dance during which she
straddled him and pushed her pelvic area into his pelvic area to
simulate sexual intercourse. Finally, a third entertainer–from
whom one of the officers received a one-on-one dance–was seen
rubbing her breasts and massaging her vagina to simulate the act of
masturbation.



       1
        When interpreting a State regulation, we generally defer to
the interpretations of state trial or intermediate appellate courts.
See Nationwide Mut. Ins. Co. v. Buffetta, 230 F.3d 634, 637 (3d
Cir. 2000) (“The opinions of intermediate appellate state courts are
‘not to be disregarded by a federal court unless it is convinced by
other persuasive data that the highest court of the state would
decide otherwise.’” (quoting West v. Am. Tel &Tel., 311 U.S. 223,
237 (1940)).

                                 4
         Upon being cited for these violations, 181 South negotiated
a payment to the ABC in the sum of $10,000 in lieu of a suspension
of its liquor license.2 After it paid the negotiated fee, and prior to
reopening after a renovation, 181 South filed the instant lawsuit,
arguing that the Regulation is unconstitutional because it proscribes
protected forms of expression and fails to make clear what conduct
is or is not permitted on the premises of a liquor licensee. The
District Court granted summary judgment in favor of ABC Director
Fischer, holding the Regulation to be constitutional.3 This appeal
followed.4

II.    Discussion

        181 South contends that the District Court erred in finding
the Regulation constitutional and granting ABC Director Fischer’s
motion for summary judgment. On appeal it has raised four issues.
181 South claims that the District Court erred in rejecting 1) its
First Amendment, facial challenge to the Regulation; 2) its claim
that the Regulation is unconstitutionally overbroad; and 3) its claim
that the Regulation is unconstitutionally vague. In addition, 181
South asserts that the District Court erred in permitting the


       2
        Under the penalties set forth in a schedule at New Jersey
Admin. Code § 13:2-19.11(I), violations of the Regulation are
punishable by suspension of one’s liquor license for 30, 45, 60 or
90 days, or in some instances where there have been serial
violations, license revocation. Under New Jersey Admin. Code
§ 13:2-19.11(b), however, the “Director may suspend or revoke a
license, even for a first violation.”
       3
       Listed Appellee the Municipal Board had its Motion for
Summary Judgment denied without prejudice because it failed to
submit adequate briefing.
       4
        The District Court had federal question jurisdiction under
28 U.S.C. § 1331 and jurisdiction to address declaratory and
injunctive relief under 28 U.S.C. § 2201 and 28 U.S.C. § 2202. We
have jurisdiction pursuant to 28 U.S.C. § 1291. In reviewing
grants of summary judgment, our standard of review is plenary.
Hampe v. Butler, 364 F.3d 90, 93 (3d Cir. 2004).

                                  5
Certification of Appellee Fischer to be used as a limiting statutory
construction of the Regulation. We address each issue in turn.

       A.     First Amendment Facial Challenge

       We begin our analysis of the current state of First
Amendment protections as they relate to erotic dance in liquor-
licensed locations with California v. LaRue, 409 U.S. 109 (1972),
a Supreme Court opinion with facts similar to those present here.
In LaRue, the California Department of Alcoholic Beverage
Control had adopted regulations that prohibited the following
conduct, among others, on liquor-licensed premises:

•      the actual or simulated “touching, caressing or fondling of
       the breast, buttocks, anus or genitals”;
•      the actual or simulated “displaying of the pubic hair, anus,
       vulva or genitals”; and
•      the permitting by a licensee of “any person to remain in or
       upon the licensed premises who exposes to public view any
       portion of his or her genitals or anus.”

Id. at 111-12. The Supreme Court rejected a First Amendment
challenge to the regulations. As the majority explained, “as the
mode of expression moves from the printed page to the
commission of public acts that may themselves violate valid penal
statutes, the scope of permissible state regulations significantly
increases.” Id. Paraphrasing United States v. O’Brien, 391 U.S.
367 (1968), the Court noted approvingly that in that case “the
extent to which ‘conduct’ was protected by the First Amendment
depended on the presence of a ‘communicative element.’” LaRue,
409 U.S at 117. The Court then observed that the California
regulations prohibited performances “that partake more in gross
sexuality than of communication.” Id. at 118. Importantly, the
Court observed that the regulations did not seek to ban all
performances they addressed, but only those performances that take
place in establishments licensed by the state of California to sell
liquor by the drink. Id.

     In upholding the constitutionality of the regulations in
LaRue, the Court paused to observe that performances such as

                                 6
those proscribed in California are not without First and Fourteenth
Amendment protection. However, the Court noted, “we would
poorly serve both the interests for which the State may validly seek
vindication and the interests protected by the First and Fourteenth
Amendments were we to insist that the sort of bacchanalian
revelries the [California] Department sought to prevent by these
liquor regulations were the constitutional equivalent of a
performance by a scantily clad ballet troupe in a theater.” Id.
In closing, the LaRue Court observed that, given the “added
presumption in favor of the validity of the state regulation in this
area that the Twenty-first Amendment [which repealed Prohibition
and granted states broad leeway over the regulation of intoxicating
liquors] requires, we cannot hold that the regulations on their face
violate the Federal Constitution.” Id.

        Though LaRue’s holding remains good law, its reliance on
the Twenty-first Amendment was later undercut by 44 Liquormart
Inc. v. Rhode Island, 517 U.S. 484 (1996). There, the Court held
that “the Twenty-first Amendment does not qualify the
constitutional prohibition against laws abridging the freedom of
speech embodied in the First Amendment.” Id. at 516. The 44
Liquormart Court took care to note, however, that “the Court’s
analysis in LaRue would have led to precisely the same result if it
had placed no reliance on the Twenty-first Amendment.” Id. at
515. The Court observed that, without regard to states’ regulatory
authority over alcoholic beverages under the Twenty-first
Amendment, a given state may

       prohibit the sale of alcohol in inappropriate locations.
       Moreover. . . the States’ inherent police powers provide
       ample authority to restrict the kind of “bacchanalian
       revelries” described in the LaRue opinion regardless of
       whether alcoholic beverages are involved.

Id. (citing Young v. Am. Mini Theatres Inc., 427 U.S. 50 (1976)
and Barnes v. Glen Theatre, Inc., 501 U.S. 560 (1991)).

        Though the argument could be made that the Regulation is
constitutional because it falls under a state’s right “to prohibit the
sale of alcohol in inappropriate locations” and to “restrict the kind

                                  7
of ‘bacchanalian revelries’ described in the LaRue opinion,” 5 we
decline to base our holding on this point. Rather, we agree with the
Seventh Circuit and conclude that “after 44 Liquormart[,] state
regulations prohibiting the sale or consumption of alcohol on the
premises of adult entertainment establishments must be analyzed
in light of American Mini Theatres and Barnes.” Ben’s Bar, Inc.
v. Vill. of Somerset, 316 F.3d 702, 712 (7th Cir. 2003); see also
Giovani Carandola, Ltd. v. Bason, 303 F.3d 507, 513 n.2 & 519
(4th Cir. 2002) (pointing out 44 Liquormart’s reliance on the
“leading cases addressing the proper secondary effects analysis of
ordinary public decency regulations,” American Mini Theatres and
Barnes, and noting that “the result in LaRue remains sound not
because a state enjoys any special authority when it burdens speech
by restricting the sale of alcohol, but rather because the regulation
in LaRue complied with the First Amendment”); Sammy’s of
Mobile Ltd. v. City of Mobile, 140 F.3d 993, 996 (11th Cir. 1998)
(noting that ordinances such as the one in LaRue are content-
neutral and, after 44 Liquormart, should be analyzed under the
immediate scrutiny test articulated in Barnes and O’Brien); Odle v.
Decatur County, 421 F.3d 386, 399 (6th Cir. 2005) (agreeing with
the “number of courts [that] have interpreted [44] Liquormart’s
reaffirmation of LaRue’s holding to mean that the LaRue
regulations would have survived intermediate scrutiny–and . . . that
they would have had to survive such scrutiny to comport with the
First Amendment”) (footnote omitted).

       In American Mini Theatres, a case relating to adult
entertainment zoning ordinances, the Supreme Court declared that
“[r]easonable regulations of the time, place, and manner of



       5
        See BZAPS, Inc. v. City of Mankato, 268 F.3d 603, 608
(8th Cir. 2001) (determining that an adult entertainment liquor
regulation is constitutional based solely on LaRue); Sammy’s of
Mobile, Ltd. v. City of Mobile, 140 F.3d 993, 996 n.5 (11th Cir.
1998) (relying in part on LaRue in upholding an ordinance relating
to nude dancing in liquor-licensed locations); Giovani Carandola,
Ltd. v. Bason, 303 F.3d 507, 523 (4th Cir. 2002) (Niemeyer, J.,
dissenting) (noting that “LaRue remains binding precedent with
respect to similarly worded statutes”).

                                 8
protected speech, where those regulations are necessary to further
significant governmental interests, are permitted by the First
Amendment.” 427 U.S. at 63 n.18. Barnes, a case involving a
public indecency statute as applied to nude dancing, adopted the
four-part O’Brien test for determining the constitutionality of a
government rule or regulation proscribing protected expressive
conduct. Such a rule or regulation is justified if 1) it is “within the
constitutional power of the Government”; 2) it “furthers an
important or substantial governmental interest”; 3) “the
governmental interest is unrelated to the suppression of free
expression”; and 4) “the incidental restriction on alleged First
Amendment freedoms is no greater than is essential to the
furtherance of that interest.” Barnes, 501 U.S. at 567 (quoting
O’Brien, 391 U.S. at 377).

        Applying this test, the Regulation, as interpreted by the New
Jersey courts, does not violate the First Amendment. First, New
Jersey’s regulation of the sale of alcoholic beverages at
“inappropriate locations” falls within its general police power. 44
Liquormart, 517 U.S. at 515. Accordingly, the Regulation is an
exercise of power within New Jersey’s constitutional authority.
See Ben’s Bar, 316 F.3d at 722 (upholding a similar regulation on
this prong of the Barnes test). Second, it is well-established that
New Jersey’s interest in curtailing the “unacceptable social
behavior” that can arise in conjunction with adult entertainment is
important and substantial. See City of Erie v. Pap’s A.M., 529 U.S.
277, 296-97 (2000) (noting the importance of combating the
harmful secondary effects of nude dancing). Third, New Jersey’s
interest in enacting the Regulation is unrelated to the suppression
of free expression, because the Regulation does not prohibit
individuals from participating in “lewd or immoral activity.”
Rather, it only prohibits such activity from taking place on the
premises of liquor-licensed establishments. In other words, the
Regulation “is not a restriction of erotic expression, but a
prohibition of nonexpressive conduct (i.e., serving and consuming
alcohol)” on premises where such expression takes place. Ben’s
Bar, 316 F.3d at 726. Finally, the Regulation’s restriction on First
Amendment freedoms is no greater than is essential to the
furtherance of that interest. Indeed, it is tailored precisely to pursue
its stated purpose: the reduction of the “unacceptable social

                                   9
behavior” that so often arises in conjunction with the combination
of erotic entertainment and alcohol. See Ben’s Bar, 316 F.3d at
727 (noting that “as a practical matter, a complete ban of alcohol
on the premises of adult entertainment establishments is the only
way the [municipality] can advance [its] interest” in “combating
the secondary effects resulting from the combination of nude and
semi-nude dancing and alcohol consumption”); Pap’s A.M., 529
U.S. at 301 (noting that the ordinance in question in that case,
relating to nude dancing, “regulates conduct, and any incidental
impact on the expressive element of nude dancing is de minimus”).
We are thus satisfied that the Regulation passes the Barnes test and
accordingly does not violate the First Amendment’s guarantee of
freedom of expression.

       B.     Overbreadth

        181 South next contends that even if the Regulation is
constitutional under the Barnes test, it is unconstitutionally
overbroad on its face because it proscribes a substantial number of
legitimate expressions of First Amendment rights. In order to show
that a statute is unconstitutionally overbroad, 181 South must show
that the Regulation is “not readily subject to a narrowing
construction by the state courts” and that its “deterrent effect on
legitimate expression is both real and substantial.” Erznoznik v.
Jacksonville, 422 U.S. 205, 216 (1975). A limiting construction
may be found where a state court or enforcement agency has
opined as to how the statute should be interpreted. Ward v. Rock
Against Racism, 491 U.S. 781, 795-96 (1989).

        As discussed above, the Regulation’s prohibition of “lewd
and immoral activities” on liquor-licensed premises has been
construed by the New Jersey Superior Court as prohibiting
entertainment where “the predominant object and natural effect
upon the observers-patrons of one portion of the performance [is]
erotic excitation.” G & J.K., 500 A.2d at 46. The G & J.K. court
also offered guidance to officials charged with enforcing the
Regulation by holding that exposing breasts and bare anal area to
patrons constitutes a violation of the Regulation. See id. at 48. 181
South’s overbreadth challenge therefore fails the Erznoznik test
because the Regulation has been narrowed by statements of

                                 10
interpretation by state courts.

        Moreover, under the second prong of the Erznoznik test, the
New Jersey courts’ narrowing construction of the Regulation limits
its reach mainly to entertainment similar to that shown at Moulin
Rouge. We are thus satisfied that the Regulation satisfies that
prong as well. See Broadrick v. Oklahoma, 413 U.S. 601, 615
(1973) (“particularly where conduct and not merely speech is
involved, we believe that the overbreadth of a statute must not only
be real, but substantial as well, judged in relation to the statute’s
plainly legitimate sweep”); see also Virginia v. Hicks, 539 U.S.
113, 122 (2003) (“The overbreadth claimant bears the burden of
demonstrating, ‘from the text of [the law] and from actual fact,’
that substantial overbreadth exists.”) (quoting N.Y. State Club
Ass’n v. City of New York, 487 U.S. 1, 14 (1988)).

       C.     Vagueness

        181 South’s next contention is that the Regulation is
unconstitutionally vague. This claim fails as well. The Supreme
Court has held that “[a] plaintiff who engages in some conduct that
is clearly proscribed cannot complain of the vagueness of the law
as applied to the conduct of others. A court should therefore
examine the complainant’s conduct before analyzing other
hypothetical applications of the law.” Vill.of Hoffman Estates v.
Flipside, Hoffman Estates, 455 U.S. 489, 495 (1982) (footnote
omitted). As discussed above, the conduct observed on 181
South’s premises clearly falls within the ambit of the conduct the
Regulation proscribes at liquor-licensed businesses. Thus, the
Regulation was not vague as applied to 181 South, and we need not
hypothesize as to its potential vagueness in other cases.

       D.     The Fischer Certification

        Finally, 181 South maintains that the District Court erred in
permitting the certification of ABC Director Fischer to be used as
a limiting statutory construction of the Regulation. Because we
believe that the Regulation is not unconstitutional based solely on
its construction by New Jersey courts, we need not reach this issue.



                                  11
III.   Conclusion

      For the reasons stated above, we will affirm the District
Court’s grant of ABC Director Fischer’s motion for summary
judgment.




                              12
