           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                             April 9, 2009

                                       No. 08-10491                    Charles R. Fulbruge III
                                                                               Clerk

ILLUSIONS - DALLAS PRIVATE CLUB INC doing business as, Penthouse
Key Club, a Not-for-Profit Texas Corporation; HOTEL DEVELOPMENT
TEXAS LED, a Texas Limited Liability Company; SILVER CITY, an
Unincorporated Membership Organization; GREEN STAR INC, a Texas
Corporation

                                                   Defendants-Appellants
v.


JOHN T STEEN, JR, in his Official Capacity as Chairman of the Texas
Alcoholic Beverage Commission; GAIL MADDEN, in her Official Capacity as
a Member of the Texas Alcoholic Beverage Commission; ALLEN STEEN, in
his Official Capacity as Administrator of the Texas Alcoholic Beverage
Commission

                                                   Plaintiffs-Appellees




                   Appeal from the United States District Court
                        for the Northern District of Texas
                             USDC No. 3:04-CV-0201




Before GARWOOD, OWEN, and HAYNES, Circuit Judges.
O R D E R:*

       *
         Pursuant to 5TH CIR . R. 47.5, the Court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
                                           No. 08-10491

       This appeal concerns various Dallas nightclubs’1 First Amendment
challenge to section 32.03(k) of the Texas Alcoholic Beverage Code,2 which
prevents sexually oriented businesses located in “dry” areas of Texas from
obtaining or maintaining private club permits.3 Following a bench trial, the
district court granted judgment for the State, holding that section 32.03(k)
survives First Amendment scrutiny.
       During the pendency of this appeal, a Texas state district court rendered
a final judgment in an different case involving Silver City, concluding that
section 32.03(k) was enacted in violation of article III, section 35(a) of the Texas
Constitution and is therefore void. The parties informed this Court of the Texas
court’s judgment by letter, each conceding that eventual affirmance of the Texas
district court’s judgment by the Texas appellate courts would likely moot this
appeal. The State has since filed a timely notice of appeal from the state court
judgment.
       It is well established that appellate courts are “bound to consider any
change, either in fact or in law, which has supervened since the [district court’s]
judgment was entered.” Patterson v. Alabama, 294 U.S. 600, 607 (1935); see also
Watts, Watts & Co. v. Unione Austriaca di Navigazione, 248 U.S. 9, 21 (1918);
Concerned Citizens of Vicksburg v. Sills, 567 F.2d 646, 649 (5th Cir. 1978)
(noting that “an appellate court is obligated to take notice of changes in fact or
law occurring during the pendency of a case on appeal which would make a


       1
        The original petitioners in this case were Illusions - Dallas Private Club Inc., Hotel
Development Texas Ltd, Silver City, and Green Star Inc. Illusions and Hotel Development
have since sought and received a consent dismissal. For the sake of simplicity, this order
refers to the remaining petitioners collectively as the “Clubs.”             The Clubs are
sexually-orientated businesses located in one or more “dry” areas of Texas that held private
club permits prior to the enactment of section 32.03(k).
       2
       T   EX .   ALCO . BEV . CODE § 32.03(k).
       3
        Private club permits allow businesses to serve alcoholic beverages, even if located in
“dry” subdivisions of the State.

                                                  2
                                  No. 08-10491

lower court’s decision, though perhaps correct at the time of its entry, operate to
deny litigants substantial justice[.]” (internal quotation marks and citation
omitted)). “In such cases, where circumstances have changed between the ruling
below and the decision on appeal, the preferred procedure is to remand to give
the district court an opportunity to pass on the changed circumstances[.]”
Concerned Citizens, 567 F.2d at 649 (internal quotation marks and citation
omitted); see also Patterson 294 U.S. at 607 (“We may recognize such a change,
which may affect the result, by setting aside the judgment and remanding the
case so that the state court may be free to act.”).
      In light of the developments in the Texas state court which impact the
very section addressed by the appeal before us, we find it prudent to vacate the
district court’s judgment without regard to the merits and remand so the district
court can consider the precise impact of the Texas state court’s judgment on this
case and the appropriate course of future action, such as a stay or a dismissal as
moot or unripe. The district court is in a better position, in the first instance,
than this court to receive appropriate briefing, make any necessary findings of
fact and conduct any appropriate hearings to determine (subject to appeal by any
party to this court) whether or not this case should be stayed or dismissed as
moot or unripe in light of the changed circumstances.
      VACATED without regard to the merits and REMANDED.




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