S.A. Restaurants, Inc. v. Deloney

909 F. Supp. 2d 881, 2012 WL 6622616, 2012 U.S. Dist. LEXIS 183185
CourtDistrict Court, E.D. Michigan
DecidedDecember 4, 2012
DocketCase No. 11-13985
StatusPublished

This text of 909 F. Supp. 2d 881 (S.A. Restaurants, Inc. v. Deloney) is published on Counsel Stack Legal Research, covering District Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
S.A. Restaurants, Inc. v. Deloney, 909 F. Supp. 2d 881, 2012 WL 6622616, 2012 U.S. Dist. LEXIS 183185 (E.D. Mich. 2012).

Opinion

[886]*886 OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS AND PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT, DECLARING STATE STATUTE UNCONSTITUTIONAL ON ITS FACE, ENJOINING ENFORCEMENT, AND DISMISSING REMAINDER OF COMPLAINT

DAVID M. LAWSON, District Judge.

The plaintiff, S.A. Restaurants, Inc., operated an “adult cabaret” on Eight Mile Road in Detroit, Michigan that featured topless dancing entertainment. For a number of years, its attempt to transfer its Topless Activity Permit to a prospective purchaser were frustrated, it says, because of the delay in the approval process that was countenanced by the Michigan liquor control statutes and corresponding regulations. After the transfer finally occurred, the plaintiff filed the present lawsuit against the current Michigan Liquor Control Commissioner in his official and individual capacities, arguing that the statute is unconstitutional as applied and on its face, and seeking declaratory and injunctive relief and damages. Thereafter, the defendant filed a motion to dismiss and the plaintiff filed a motion for partial summary judgment. The Court heard oral argument on November 26, 2012 and now concludes that the plaintiffs claim for damages cannot survive, nor can its as-applied challenge to the statute. However, the plaintiff has standing to assert a facial challenge to the statute, which the Court finds is a prior restraint on expressive activity and lacks the procedural safeguards that the First Amendment requires. Therefore, the Court will grant in part and deny in part the defendant’s motion to dismiss and the plaintiffs motion for partial summary judgment, declare the statute unconstitutional with respect to the permit transfer process, and enjoin its enforcement.

I.

The following facts are taken from the complaint. The plaintiff, S.A. Restaurants, Inc., operated “an adult cabaret” offering “live, non-obscene clothed and semi-nude (‘topless’) dance entertainment” at 20771 W. Eight Mile Road, Detroit, Michigan. Compl. at ¶ 4. The defendant, Andrew J. Deloney, is the current chairman of the Michigan Liquor Control Commission (MLCC), the state agency charged with issuing topless activity permits. According to public records, Deloney was appointed chairman of the MLCC on June 10, 2011 and assumed his duties on July 5, 2011.

Michigan law governs the issuance and transfer of licenses to sell alcoholic beverages at bars and restaurants. When those establishments also offer live entertainment, additional permits must be authorized by the MLCC. The plaintiff is challenging the constitutionality of Michigan Compiled Laws § 436.1916, which governs the issuance and transfer of ownership of Entertainment and Topless Activity Permits. An Entertainment Permit is required to present any performance for public viewing; both an Entertainment Permit and a Topless Activity Permit are required to present exotic dancing.

The plaintiff had been attempting to transfer its Class C Liquor License with Sunday Sales and Entertainment and Topless Activity Permits to ABCDE Operating, LLC, doing business as the Penthouse Club, since January 31, 2007. Under Michigan law, the MLCC will not issue permits without the approval of “the local legislative body of the jurisdiction within which the premises are located.” Mich. Comp. Laws § 436.1916(10)(b). The MLCC apparently applied this require[887]*887ment to transfer requests as well, since on March 7, 2007, the MLCC sent a Local Approval Notice to the City of Detroit. On February 6, 2008, the City of Detroit issued a temporary occupancy permit to the Penthouse Club for the Eight Mile Road location and the MLCC approved a management agreement allowing the Penthouse Club to do business under the plaintiffs license and permits. However, the application for the transfer of those permits was not acted upon between March 2, 2007 and September 2010. The plaintiff argues that the delay has caused damages in an amount exceeding $1,000,000 because under the management agreement the plaintiff has had to pay ABCDE Operating, LLC, ten percent of the revenue of the Penthouse Club, and that revenue for the relevant period has exceeding $10,000,000.

The defendant’s response to the plaintiffs motion for summary judgment presents a somewhat different account of the transfer process. According to the defendant, in February 2007, the plaintiff ceased operation of its business and placed its license and permits into escrow. The MLCC received a request from ABCDE seeking the transfer of the license and permits on February 1, 2007. However, the MLCC was unable to process the request until December 28, 2007 because the plaintiff had not provided the necessary documents. On January 25, 2008, the MLCC’s Lansing division received a report from the Enforcement Division recommending approval of ABCDE’s request, but indicating that ABCDE needed to provide a lease agreement and verification of loan proceeds and to submit to inspection prior to approval.

According to the plaintiff, ABCDE filed a complaint against the City of Detroit on November 24, 2008, alleging that a moratorium imposed by the City of Detroit on the consideration of MLCC applications was unconstitutional. In response to this suit, the City of Detroit rewrote its procedures with respect to MLCC applications so as to place them in compliance with the applicable law. The plaintiff states that the new policies went into effect on June 28, 2009. According to the defendant, the policies were not adopted until August 25, 2009. In any event, on September 5, 2009, ABCDE submitted a petition to the City of Detroit seeking approval for the issuance of a topless activity permit, which the City of Detroit addressed but declined to approve or deny on November 20, 2009.

On December 22, 2009, ABCDE filed a lawsuit in federal court against the City of Detroit seeking to compel approval of the topless activity permit. See Case No. 09-14969. Judge George Steeh of this Court entered an order deeming ABCDE’s transfer petition approved on January 21, 2010. In response to that order, the MLCC sent ABCDE a letter advising ABCDE that approval could not be considered because there were four code violations pending against the plaintiff that had allegedly occurred on January 28, 2010. The City of Detroit issued a complaint against the plaintiff on April 9, 2010 for additional violations; the complaint was resolved after a hearing on June 7, 2010.

On February 16, 2010, ABCDE filed another lawsuit in this district, this time against Nida Samona, the then-MLCC commissioner. See Case No. 10-10646. The complaint is similar to the complaint currently before this Court, with the exception of the requested money damages and the defendant. ABCDE sought unspecified compensatory damages and a preliminary and permanent injunction. The case apparently was resolved; a stipulated dismissal with prejudice was entered in that case on July 28, 2010.

[888]*888Nonetheless, the MLCC denied the plaintiffs transfer request on June 23, 2010. According to the defendant, the denial was based on negative prior operating history of the members of ABCDE, the lack of a 10% down payment of the purchase price, and negative prior operating history of the lender. The plaintiff states that after that denial, two of the three members of ABCDE withdrew from the company. ABCDE appealed to the MLCC Administrative Commissioners, and after the submission of additional documentation by ABCDE, the MLCC approved the transfer on June 30, 2011.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Café Erotica of Florida, Inc. v. St. Johns County
360 F.3d 1274 (Eleventh Circuit, 2004)
Ex Parte Young
209 U.S. 123 (Supreme Court, 1908)
Roth v. United States
354 U.S. 476 (Supreme Court, 1957)
Bantam Books, Inc. v. Sullivan
372 U.S. 58 (Supreme Court, 1963)
Freedman v. Maryland
380 U.S. 51 (Supreme Court, 1965)
O'Shea v. Littleton
414 U.S. 488 (Supreme Court, 1974)
Warth v. Seldin
422 U.S. 490 (Supreme Court, 1975)
City of Los Angeles v. Lyons
461 U.S. 95 (Supreme Court, 1983)
Pennhurst State School and Hospital v. Halderman
465 U.S. 89 (Supreme Court, 1984)
Kentucky v. Graham
473 U.S. 159 (Supreme Court, 1985)
Anderson v. Liberty Lobby, Inc.
477 U.S. 242 (Supreme Court, 1986)
Virginia v. American Booksellers Assn., Inc.
484 U.S. 383 (Supreme Court, 1988)
City of Lakewood v. Plain Dealer Publishing Co.
486 U.S. 750 (Supreme Court, 1988)
Will v. Michigan Department of State Police
491 U.S. 58 (Supreme Court, 1989)
FW/PBS, Inc. v. City of Dallas
493 U.S. 215 (Supreme Court, 1990)
Lujan v. Defenders of Wildlife
504 U.S. 555 (Supreme Court, 1992)
R. A. v. v. City of St. Paul
505 U.S. 377 (Supreme Court, 1992)

Cite This Page — Counsel Stack

Bluebook (online)
909 F. Supp. 2d 881, 2012 WL 6622616, 2012 U.S. Dist. LEXIS 183185, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sa-restaurants-inc-v-deloney-mied-2012.