                                No. 86-273
                IN THE SUPREME COURT OF THE STATE OF MONTANA
                                       1987


CITY OF GREAT FALLS, MONTANA,
a municipal corporation,
                 Plaintiff and Respondent,
         -vs-
M.K. ENTERPRISES, INC., a corporation,
TIM WOLF and ROBERT WOLF, individuals,
d/b/a RED DOOR ADULT BOOK STORE, et al.,
                 Defendants and Appellants.


APPEAL FROM:     District Court of the Eighth Judicial ~istr?ct,
                 In and for the County of Cascade,
                 The Honorable Thomas McKittrick, Judge presiding.
COUNSEL OF RECORD:
       For Appellants:
                 Goldman & Goldman; Bernard J. Goldman argued, Missoula,
                 Montana (M.K. Enterprises & Treasure State Sales)
                 Datsopoulos, MacDonald & Lind; Edward A. Murphy argued,
                 Missoula, Montana (Wolf d/b/a Red Door Adult Book
                 Store)
       For Respondents:
                 David Gliko argued, City Attorney, Great Falls,
                 Montana


                                       submitted:        December 9 , 1 9 8 6

                                         Decided:        February 5, 1987

~iled:   FEB 5 - 1987

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Mr. Justice Fred J. Weber delivered the Opinion of the Court.

     This is an appeal from an Eighth Judicial District,
Cascade County decision upholding the constitutionality of a
Great Falls city ordinance. The ordinance establishes a $ 3 0 0
per booth annual license fee on video booths used to view
adult movies. We affirm.
     The issue is whether the trial court erred in concluding
that the $ 3 0 0 annual fee for adult movie video booths was
reasonable as a regulatory measure and therefore not a viola-
tion of the First Amendment of the United               States
Constitution.
     In January 1983 the City Commission of Great Falls
adopted Ordinance No. 2311 "providing for the establishment
of license fees to be paid by operators of coin-operated
devices depicting sexual activities." The annual license fee
imposed under this ordinance is $ 3 0 0 per booth. At the time
of the trial of this case, there were a total of 59 booths in
four adult bookstores in the City of Great Falls.
     The booths are small cubicles in which customers view
movies on a television or movie screen. To view the movie,
the customer is required to deposit money in a coin box. It
has not been argued that any movies shown were obscene or
otherwise illegal, but they are admittedly sexually explicit.
     This case began when the City of Great Falls (City)
filed actions against two owners of adult bookstores for
failing to pay the annual license fee.        The actions were
consolidated, together with another case filed by a third
adult bookstore owner who was challenging the constitutional-
ity of the ordinance.     A trial was conducted at which the
City presented evidence of actual and anticipated costs
justifying the fee.     After considering the evidence before
it, the District Court concluded that the City had met its
burden of proving that the $300 fee is reasonable and "de-
signed to further valid, nonspeech-related municipal inter-
ests."   On appeal, the bookstores argue that the City has
failed to prove that the $300 fee is justified by the costs
established, or that it is either nominal or imposed to
defray the expenses of policing the booths.

     Did the trial court err in concluding that the $300
annual fee for adult movie video booths was reasonable as a
regulatory measure and therefore not a violation of the First
Amendment of the United States Constitution?
     The First Amendment to the Federal Constitution provides
that "Congress shall make no law ...    abridging the freedom
of speech, or of the press."    This right of free speech is
protected from state infringement through application of the
Due Process Clause of the Fourteenth Amendment. Grosjean v.
American Press Co. (1936), 297 U.S. 233, 56 S.Ct. 444, 80
L.Ed. 660.    Although many persons find them distasteful,
booths for viewing adult oriented films which are not obscene
or otherwise illegal are protected by the First Amendment. A
license fee on such protected activities will pass constitu-
tional muster only if the fee is nominal and imposed as a
regulatory measure to defray the expenses of policing the
activity in question.    Murdock v. Pennsylvania (1943), 319
U.S. 105, 63 S.Ct. 870, 87 L.Ed. 1292. These expenses may
include more than routine processing of licenses; among
permissible costs is the cost of "protecting those on the
streets and at home against the abuses of solicitors."
Murdock, 319 U.S. at 116, citing Cox v. New Hampshire (1941),
312 U.S. 569.
     The District Court cited cases involving fees on adult
video booths and expanding the statement in Murdock that the
allowable license fee may include the costs of policing the
activity being licensed.  In Bayside ~nterprises, Inc. v.
Carson (D.C.Fla. 1979), 470 F.Supp. 1140, 1149, the court
stated:

    As it now stands, the Code will merely serve per-
    fectly valid municipal interests in public safety
    and welfare, most notably the presence of safe and
    sanitary conditions and the prevention of criminal
    conduct. These interests are wholly unrelated to
    suppressing free speech and, significantly enough,
    the plaintiffs have presented no evidence that
    furthering these interests through the Code's fee
    system would have the effect of suppressing free
    speech.   Put another way, there is no evidence
    before this Court that these fees will drive the
    plaintiffs out of business or in any way hamper
    their ability to communicate through purveying
    their books and films.    In sum, the City has met
    its burden of proving that these fees are reason-
    able, and that they are designed to further valid,
    nonspeech-related municipal interests. According-
    ly, they must be held constitutional.
     The District Court also relied upon a North Dakota case
in which a $300 per booth license fee for adult video booths
was upheld.   In City of Minot v. Central Ave. News, Inc.
(N.D. 1981), 308 N.W.2d 851, 860, the court stated:

     . . . Central does not point to, nor has our own
    research unearthed, authority to the effect that a
    city must, before implementing a licensing scheme
    with a fee, demonstrate what the administrative
    costs would have been in the past had the licensing
    scheme been in effect. Moreover, we believe that
    Central's reliance upon Bayside Enterprises, Inc.
    - Carson, 450 F.Supp. 696 (M.D.Fla. 1978), to
    v.
    support its contention is misplaced.    In Bayside,
    the licensinq fee in question was struck down not
    because it was specula<ive, but because the City of
    Jacksonville's projected costs of enforcing a newly
    enacted licensing ordinance for adult bookstores
    were unreasonable. Thus, regarding the licensing
    fee at issue in the instant case, we are left to
    determine only its reasonableness.
Based on evidence of anticipated costs of routine policing of
the video booths, together with anticipated costs of proceed-
ing on violations of the law, the court upheld the $300 per
booth annual fee.
      In the present case, the District Court's findings and
conclusions outline the testimony given at the hearing as to
costs of regulating and policing the booths.      The evidence
established past police department costs of $44 per year for
routine investigation to verify licensing requirements;
$1,408 in expenses incurred in 1982-83 for a stakeout related
to an outbreak of venereal disease traced to one of the
booths; and $220 in expenses for a child pornography check.
An experienced detective testified on estimated future police
department costs and expenses relating to adequate policing
of the booths. He estimated that it would cost $1,786.88 per
year to police the booths to insure adequate enforcement of
the State child pornography law, S 45-5-625, MCA; $8,064 per
year to police the booths to insure adequate enforcement of
the State deviate sexual conduct law, S 45-5-505, MCA; and
$2,688 per year to police the booths to insure adequate
enforcement of the State obscenity law, S 45-8-201, MCA. The
officer testified that at the time of the hearing the deviate
sexual conduct law and the obscenity law were not being
enforced in the City of Great Falls. A second law enforce-
ment officer testified on the need for enforcement of the
laws prohibiting minors in these establishments.
      The District Court also heard testimony that City-County
health enforcement costs and expenses for the booths in
1982-83 were $2,155.19, relating to the venereal disease
traced to a video booth. There was uncontroverted testimony
of homosexual and heterosexual intimate conduct between
persons either sharing a booth or using "glory holes" in the
walls; between the booths.    Yearly health enforcement costs
were set at $551.65, plus an anticipated increase in costs of
monitoring and follow up contact tracing resulting from
sexual contact in the booths and the risk of sexually trans-
ferable communicable diseases.      Administrative licensing
expenses were established as $18.29 for the cost of issuing
the original license for each establishment and estimated
annual renewal expense of $29.44 for each establishment.
     This Court has indicated that estimates of future ex-
penses may be included for purposes of setting a license fee.
State v. Police Court (1923), 68 Mont. 435, 443-44, 219 P.
810, 812. Until law enforcement efforts have been in effect
for a substantial period of time, we recognize that the costs
of enforcement cannot precisely be established.      The cost
estimates provided by the City total over $13,000 per year,
plus the anticipated increased health department costs. As
stated previously, health department costs were over $2,000
in 1982-83 from one outbreak of venereal disease. At $300
per booth, the city will receive income of $17,700 per year
on 59 booths. We conclude that the lower court was correct
in not requiring proof of expenses precisely equalling the
amount which will be collected on 59 video booths.
     The bookstores also argue that it was not proven that
enforcement of the child pornography law was in any way
connected with operation of the video booths. The need for
enforcement of the child pornography law is not eliminated
because no child pornography has been found in the booths in
the past.   That conclusion would ignore the very nature and
purpose of the booths - to show sexually titilating films for
all manner and persuasion of customers.
     The City has proposed random checks by plainclothes
officers to enforce the deviate sexual conduct statute. Our
conclusion that this proposal is reasonable is not changed by
the bookstores' proposal of alternative methods, which they
say infringe less on the right of free speech. Without going
into detail, we conclude that the enforcement methods pro-
posed by the bookstores would not be effective.
     There was no evidence that the $300 per booth fee will
drive the bookstores out of business or prohibit them from
communicating through the films.     Although the bookstores
have questioned some of the enforcement cost figures, we
affirm the holding of the lower court that the City has
submitted sufficient evidence to justify the $300 per booth
fee. We affirm the conclusion of the District Court that the
City has met its burden of proving that the fee imposed is
justified by the costs established and is set at an amount
designed to defray the expenses of policing the booths.
     Affirmed.




        Justices
Mr. Justice John C. Sheehy, dissenting:


     It is not an easy or pleasant task to defend the
purveyors of sexually-explicit films from a confiscatory tax
in the guise of a license fee.       Yet, the constitutional
protection of the First Amendment is like the air we breathe,
it is there for the good and the bad. For the same reasons
that I would strike down a law that levied a $2,000 annual
license fee on individual lawyers (proposed in the 50th
Legislature) I must urge striking down the exorbitant license
fee in this case. License fees are levied under the police
power of the state and their assessment cannot go beyond the
cost of policing the activity licensed, otherwise exorbitant
fees violate the principle of uniform taxation, and are held
to be confiscatory.     If the First Amendment is involved,
there is additionally a problem of prior constraint.     Once
permitted, exorbitant license fees will be enacted on the
wildest speculation and spread to other, perhaps cleaner
endeavors. As the Spanish proverb said, "When you see your
neighbor being shaved, prepare yourself for the barber."
     The claimed costs by the city in justifying the license
fee are exaggerated or illusory.    For example, of the 455
venereal disease cases in Cascade County in 1982, two were
traced to contacts at an adult bookstore.         No further
incidence of venereal disease traceable to adult bookstores
or adult film booths have occurred in that county to the time
of trial here. Yet the majority allow $1,400.00 per year in
expenses for a stakeout, and $2,155.19 in annual city and
county health costs as if these were annual recurring costs.
     The detectives in this case have acknowledged that they
found no instances of child pornography in the time that
these booths have existed in Great Falls. It is a crime in
Montana, § 45-5-625, MCA, to use a child for or to expose him
to pornographic material anywhere in the State.       At the
present time the City of Great Falls has no program for
enforcement of this act. If the statute were to be enforced
by the City of Great Falls, the cost of enforcement should be
an obligation of the general taxpayers.
     Likewise it is a crime under 5 45-8-201, MCA, purposely
or knowingly to provide, sell or deliver obscene material to
anyone under age 18. This statute applies everywhere in the
State of Montana.    The City of Great Falls has no present
program for the enforcement of the obscenity statute. Again
the enforcement, if and when it occurs in the City of Great
Falls should be an obligation of the general taxpayers.
     It is likewise a crime in the State of Montana to engage
in deviate sexual conduct under § 45-5-505, MCA. No instance
of a prosecution for such conduct related to the booths
appears in the evidence of this case. If there is a program
for enforcement of this statute in the City of Great Falls,
again it should be the obligation of the general taxpayers.
     In Wendling v. City of Duluth (D.C. Minn. 1980), 495
F.Supp 1380, 1384, 1385, the Court said:
     The narrow question here is whether the imposition
     of a license fee to finance enforcemeit of a
     separate obscenity ordinance can be considered the
     permissible policing of activities as prescribed in
     the Murdock case, or whether Murdock requires that
     the fee be no greater than is necessary to
     administer and enforce the licensing ordinance
     itself. A review of the case law suggests that the
     latter is the correct view.
     The majority rely upon Bayside Enterprises, Inc. v.
Carson (D.C. Fla. 1979), 470 F.Supp. 1140. In that case, the
Court upheld a $35 license fee. It was a follow-up case from
an earlier one, Rayside Enterprises, Inc. v. Carson (M.D.
Fla. 1978), 450 F.Supp. 696, that struck down a $100 fee on
the grounds that the fee was speculative because the
projected costs of enforcing a licensing ordinance for adult
bookstores was unreasonable.
     I would strike down the $300 fee as unreasonable, and
because of its unreasonableness, a prior constraint on the
First Amendment rights of the $-ken ees.
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                                                Justice




M r . Justice William E . Hunt, S r . :

        I concur in the dissent of M r . Justice Sheehy.
