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Gene Lovelace Enterprises, LLC v. City of Knoxville

Court of Appeals of Tennessee, Knoxville

December 15, 2014

GENE LOVELACE ENTERPRISES, LLC ET AL.
v.
CITY OF KNOXVILLE

Session Date October 2, 2014

Appeal from the Circuit Court for Knox County Nos. 2-391-05 & 2-494-05 Harold Wimberly, Judge

This case involves the enforceability of an ordinance enacted by the City of Knoxville to impose licensing requirements for owners and employees of sexually oriented businesses. Plaintiffs, Gene Lovelace Enterprises, LLC a/k/a Last Chance Theatre & Musical Club 2000 at Alcoa Highway and Eugene Lovelace d/b/a Bambi's, [1] filed this action against the City, seeking a judgment declaring the ordinance unconstitutional and an injunction prohibiting enforcement. A similar action was subsequently filed by plaintiffs, Business Financial Services of Knoxville, Inc. d/b/a West Knoxville News and Katch One, Inc. d/b/a Katch One Lounge. The two cases were consolidated. The City filed a motion for summary judgment, asserting that the City Council had appropriately enacted the ordinance to combat negative secondary effects caused by sexually oriented businesses. The plaintiffs presented evidence that there were no negative secondary effects associated with such businesses in the Knoxville area, including expert opinions and a study based on empirical data from the relevant locality. The trial court granted summary judgment to the City, finding that "relevant authorities cited by the City establish that the ordinance in question is of a type which may be validly and constitutionally enacted by a municipality such as defendant." Gene Lovelace Enterprises, LLC and Bambi's LLC have appealed that ruling. We reverse the trial court's grant of summary judgment to the City and remand the case for further proceedings.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed; Case Remanded

Arthur G. Seymour, Jr., and Matthew A. Grossman, Knoxville, Tennessee, for the appellants, Gene Lovelace Enterprises, LLC a/k/a Last Chance Theatre & Musical Club 2000 at Alcoa Highway, and Bambi's LLC.

Scott D. Bergthold, Stephen S. Duggins, and Bryan A. Dykes, Chattanooga, Tennessee, for the appellee, the City of Knoxville.

Thomas R. Frierson, II, J., delivered the opinion of the Court, in which D. Michael Swiney, J., and D. Kelly Thomas, Jr., Sp. J., joined.

OPINION

THOMAS R. FRIERSON, II, JUDGE

I. Factual and Procedural Background

In late 2003, the City's adult business location ordinances were struck down as unconstitutionally vague by this Court in City of Knoxville v. Entm't Resources, LLC, No. E2002-01143-COA-R3-CV, 2003 WL 22762195 at *7 (Tenn. Ct. App. Nov. 21, 2003). That decision was affirmed by our Supreme Court in City of Knoxville v. Entm't Resources, LLC, 166 S.W.3d 650 (Tenn. 2005). Thereafter, the City enacted both a location ordinance and a licensing ordinance to regulate sexually oriented businesses.[2] The licensing ordinance at issue requires that any person operating a sexually oriented business possess a sexually oriented business license granted by the City. Further, any person employed by such an establishment must also have a license. The ordinance defines "employ, employee, and employment" as "any person who performs any service on the premises of a sexually oriented business, on a full time, part time, or contract basis, whether or not the person is denominated an employee, independent contractor, agent, or otherwise."

These ordinances were presented to the Metropolitan Planning Commission ("MPC") for its approval prior to being placed before the City Council ("Council"). The MPC voted to deny recommendation regarding the licensing ordinance. The licensing ordinance was subsequently placed on the Council's agenda. The Council held discussions regarding the ordinance and considered numerous documents in support of the ordinance submitted by the City's retained outside counsel, Scott Bergthold. Those documents included court opinions regarding adult businesses and the regulation thereof, reports and studies from other cities regarding the negative secondary effects of adult businesses, periodical articles, and police reports from other localities. The ordinance was approved by the Council in May 2005.

Following enactment of the ordinance, the instant action was filed by Gene Lovelace Enterprises, LLC a/k/a Last Chance Theatre & Musical Club 2000 at Alcoa Highway and Bambi's LLC ("Plaintiffs"), and other adult businesses to challenge the validity of the ordinance. Their claim was that the City Council's decision to pass the ordinance was based on "shoddy" or misleading information provided by attorney Bergthold. The City filed an answer and counter-claim, seeking a judgment declaring the ordinance constitutional.

The City filed a motion for summary judgment in March 2010. Plaintiffs sought and were granted additional time for discovery following the filing of the motion for summary judgment. Plaintiffs deposed Dr. Larry Miller and filed an affidavit from him, as well as two other expert affidavits regarding the alleged inaccuracy of the information provided to the Council in general and as applied to the City of Knoxville. Plaintiffs subsequently sought to depose the City's retained outside counsel, Scott Bergthold. The City filed a motion for a protective order, and the court granted the motion based on "immunities and privileges claimed." On December 5, 2012, the court granted summary judgment to the City. Plaintiffs timely appealed.[3]

II. Issues Presented

Plaintiffs present the following issues for our review, which we have restated slightly:

1. Whether the trial court erred by granting summary judgment to the City.
2. Whether the trial court erred by failing to consider Plaintiffs' contention that enactment of the subject ordinance was invalid and ineffective due to unmet procedural requirements.
3. Whether the trial court erred by applying intermediate scrutiny analysis to the ordinance rather than strict scrutiny analysis.
4. Whether the ordinance is facially overbroad and invalid due to its definition of "employee."
5. Whether the trial court erred by granting a protective order to prevent Plaintiffs from deposing attorney Bergthold.

III. Standard of Review

Our Supreme Court has succinctly described the applicable[4] standard of review of a trial court's grant of summary judgment:

A summary judgment is appropriate only when the moving party can demonstrate that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Tenn. R. Civ. P. 56.04; Hannan v. Alltel Publ'g Co., 270 S.W.3d 1, 5 (Tenn. 2008). When ruling on a summary judgment motion, the trial court must accept the nonmoving party's evidence as true and resolve any doubts concerning the existence of a genuine issue of material fact in favor of the nonmoving party. Shipley v. Williams, 350 S.W.3d 527, 536 (Tenn. 2011) (quoting Martin v. Norfolk S. Ry., 271 S.W.3d 76, 84 (Tenn. 2008)). "A grant of summary judgment is appropriate only when the facts and the reasonable inferences from those facts would permit a reasonable person to reach only one conclusion." Giggers v. Memphis Hous. Auth., 277 S.W.3d 359, 364 (Tenn. 2009) (citing Staples v. CBL & Assocs., Inc., 15 S.W.3d 83, 89 (Tenn. 2000)). ...

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