Texas argues for fee placed on nude dancing venues before Fifth Circuit

NEW ORLEANS (CN) — A Texas venue offering cabaret with nude dancing told a federal appeals panel Wednesday that a fee aimed at "sexual oriented" businesses is overbroad and restricts free expression based on the content of the performances.

In Texas, establishments like 9000 Airport, an adult nightclub featuring costumed dancers who strip bare, are subject to a “Sexual Orientated Business Fee” that requires adult venues to pay a fee per customer admitted in.

The nightclub opened in September 2023, the same month Texas legislature doubled the fee from $5 per person to $10 per person. The fee specifically applies to venues with nude dancing and alcohol consumption. The club doesn’t sell alcohol but allows patrons to bring their own.

Claiming that Texas Comptroller of the Public Accounts Glenn Hegar violated its First, Fourth and 14th Amendment rights in a 2023 lawsuit, the nightclub argued the fee constituted a unconstitutional content-based restriction.

Appealing a lower court decision that sided with the nightclub and placed a preliminary injunction on enforcement of the fee, the comptroller's office instead argues that the fee is less about the content of the nude performances but rather the performances in conjunction with the alcohol consumption, and mitigating the secondary violent effects of mixing the two.

U.S. Circuit Judge Catharina Haynes, an appointee of George W. Bush, asked a couple of times during the hearing for more information about the specific combination of nudity and alcohol the fee appears to target.

“Can you tell us a little more about why nude dancing and alcohol can’t mix?” Haynes asked attorney Ben Mendelson who argued on behalf of Hegar.

Mendelson replied that courts have a history of acknowledging a correlation between alcohol consumption and sexual violence.

“Courts have found that the way to cut down on sexual violence is to raise the price of alcohol,” he said.

"Unfortunately, the [Texas Entertainment Association] does know that sometimes sexual violence does happen, and that’s why they have strict rules,” Mendelson added.

U.S. District Judge Kenneth Hoyt of the Southern District of Texas had agreed with the nightclub in a November 2023 ruling, finding that the state’s law that seeks to charge businesses that combine nudity and alcohol is undeniably content-based and issuing a preliminary injunction on enforcement of the fee.

“The comptroller offers no explanation as to why the combination of alcohol and nude dancing creates worse secondary effects than nude dancing alone,” Hoyt found in his order. “Absent an explanation, the alcohol requirement does little to dispel the appearance that the statute is targeted at nude dancing.”

Haynes weighed out the purported effects of dancing and alcohol.

“Alcohol has nothing to do with the actual dance,” Haynes said. "But alcohol — sitting there drinking some wine while watching someone dance has nothing to do [with the fee], so their dance is not changed. Except, the problem is, the people sitting there drinking alcohol might attack them…”

“That’s right,” Mendelson said. “There is no First Amendment right to consume alcohol.”   

Money collected from the fee goes into a fund used to educate and protect against sexual violence. When raising the fee in 2023, members of the Texas Legislature explained that revenue to the fund has gotten low due to the Covid-19 pandemic shutdown and subsequent rising inflation costs.

In his November order, Hoyt additionally found that needing more funds to help victims of sexual violence cannot be the reason the state is upping the fee.

Attorney J. Michael Murray, representing 9000 Airport Wednesday, told the judges the fee is absolutely content based.  

“This is not a time, place or manner fee,” Murray said. Such restrictions, which limit an activity in a time, place or manner, are considered content-neutral and permissible under the First Amendment and can be used to regulate.

“It doesn’t regulate the business operations and all,” Murray said of the fee.

He likened this fee to if a fee were to be theoretically placed on ink at a newspaper press. So, he said, if there were a fee on the ink, maybe the paper would go entirely online to avoid paying it, but that would mean the fee was forcing it to change its practices.

“The idea that a newspaper could give up its print edition just to avoid use tax would never work,” Murray said. Just as 9000 Airline could not give up offering dancing just to avoid being taxed on it.

Though the three-judge panel Wednesday appeared to agree with Hoyt that the fee is content based, Mendelson said the situation was more like “shouting ‘fire’ into a crowded theatre.” He said that’s what is happening with 9000 Airline, “mixing a restricted use with a non-restricted use.”

U.S. Circuit Judge Leslie Southwick, also an appointee George W. Bush, added that the fee appeared to be in violation of the First Amendment.

“It seems to me that this is a kind of tax,” Southwick said. Content, he pointed out, is covered under the First Amendment.

U.S. Circuit Judge Dana Douglas, an appointee of President Biden, rounded out the three-judge panel. The judges did not say when or how they will rule.

Follow @SabrinaCanfiel2

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