Strip Clubs Lose Benefits of Grandfather Deal

(CN) - A pair of El Paso strip clubs must submit to more stringent city ordinances against sexually oriented businesses, a federal appeals court ruled.

Lamplighter Lounge and Foxy's Nightclub had settled earlier litigation with the city in 1995, when the parties entered into an agreed judgment that allowed both clubs to continue operating as long as they "remain[ed] in operation at their current locations by their current owners and operators."

The agreement exempted the clubs from complying with a stricter ordinance passed in 2007 that requires closure of sexually oriented businesses by 2 a.m. and prevents dancers from getting within 6 feet of customers.

Asking the court to rule that the agreement was void, the city filed a complaint for declaratory judgment against club operators El Paso Entertainment Inc., JEDJO Inc., CR&R Inc., El Tapatio Inc. and Y&F Inc.

A federal judge sided with the city on summary judgment, and the New Orleans-based federal appeals court affirmed, finding that one of the defendants had sold all of its shares.

Part of the decision turned on whether the terms "owners and operators" in the agreed judgment refer to natural and individual persons.

"Specifically, defendants argue that the city's evidence on this issue was principally provided by the testimony of Laura Gordon, the city attorney who negotiated the agreed judgment and was 'an interested party' that defendants imply was not a credible witness," the three-judge panel found. "Defendants also assert that this definition of the terms 'owners and operators' does not appear in the agreed judgment, drafts of it, or correspondence between the parties during the negotiations. Defendants contend that this means that the city could not have intended for 'owners and operators' to refer to natural persons. These arguments, however, are insufficient to create 'a definite and firm conviction that a mistake has been committed' by the district court."

But the panel disagreed that the defendants did not intend both terms to mean individuals and natural persons. It also rejected challenges to the lower court's interpretation of the plain language of the agreement.

The lower court did not abuse its discretion when it excluded the testimony of a pair of defense witnesses who were to testify as to the meaning of the agreed judgment, according to the unsigned opinion.

In motions in limine, El Paso characterized one witness as irrelevant to the case at hand, and the other as a surprise witness whose role as counsel to the defendants throughout the negotiation of the agreed judgment precluded him from testifying.

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