News courtesy of Angelina Spencer, Executive Director of ACE National
In November, Texas clubs got some good news in their fight against a so-called “sin tax” that forced clubs to pay a $5 —then $10 — per-head tax on every customer that came through their doors. 9000 Airport LLC successfully obtained a preliminary injunction against Glenn Hegar, the Comptroller of Texas, concerning the contentious Sexually Oriented Business Fee Act (SOBF). The Court’s decision halts the enforcement of the Act, which levied the $10 entry fee on customers of sexually oriented businesses that offer live nude entertainment and serve alcohol on the premises.
The SOBF, established in 2007, aimed to support various sexual assault programs, including prevention campaigns and services for victims (which, it can be argued, was the government’s way of establishing a link between adult nightclubs and sexual assault). The fee increase was set by the Texas Legislature through House Bill 3345 in September 2023. However, the Comptroller’s stance that the SOBF is content-neutral and focused on the businesses’ secondary effects rather than targeting expression did not hold up in court.
The House Appropriations Committee Report on 3345 explained the background and purpose of the amendment:
“Unpredictable revenues from court fees and stagnant fees imposed on sexually oriented businesses coupled with increasing demand for services and resulting appropriations have caused a structural deficit leading to the potential depletion of revenues to support these services. H.B. 3345 seeks to allow for more predictable revenue to support state services to victims of sexual assault, human trafficking, and domestic abuse . . . by allowing the legislature to revisit the amount of the sexually oriented business fee every two years during the budgeting process.”
The plaintiff, 9000 Airport LLC, is an adult nightclub that opened in September of 2023, and operates as a BYOB establishment.
The Court’s ruling underscored the lack of “powerful evidence of harm” to state interests that would outweigh the irreparable harm faced by the plaintiff, a point that the Comptroller failed to demonstrate satisfactorily. This significant legal victory for 9000 Airport LLC emphasizes the ongoing judicial scrutiny over legislation impacting businesses and freedom of expression.
Now, for the less-than-great news.
Last week, Dallas police began enforcing the city’s new sexually-oriented business ordinance, which limits hours of operation at strip clubs. Under the new ordinance, businesses must close from 2 a.m. to 6 a.m. The Dallas Police Department sent a letter to and visited each licensed business, outlining the revised ordinance. Law enforcement found all clubs in compliance.
Back in January 2022, on the same day Dallas City Council approved the ordinance, four adult cabarets, one adult bookstore, and the Texas Entertainment Association, filed a complaint against the city, arguing the ordinance violates First Amendment rights to freedom of expression.
In October, the 5th U.S. Circuit Court of Appeals sided with the City of Dallas and overruled a lower court’s ruling, one that had halted the ordinance’s enforcement.
The 5th U.S. Circuit Court of Appeals said the ordinance is likely constitutional because the City’s evidence “reasonably showed a link between [sexually-oriented businesses] late-night operations and an increase in ‘noxious side effects,’ such as crime.” The ruling also noted that “the ordinance left ample opportunity for adult entertainment workers to purvey their speech at other times of the day and night.”
While the court noted that erotic dancing is a protected form of expression, its ruling supports the argument that the ordinance does not ban the businesses wholesale, but rather restricts the “time, place and manner of their operation.”
