Texas Strip Club Fees Upheld by High Court

(CN) - The Texas Supreme Court upheld a law that forces strip clubs serving alcohol to pay the state $5 for every patron they serves, a fee that one state judge said amounted to an unconstitutional tax of protected expression.

Comptroller Susan Combs argued on appeal that the fee is not directed at nude dancing but rather the negative secondary effects, such as rape, prostitution and disorderly conduct, of such entertainment, especially when coupled with alcohol.

The Texas Supreme Court agreed and reversed the judgment of the Austin-based Third Court of Appeals. The trial court, which had also struck down the law, must now conduct further proceedings on the case.

Under the Sexually Oriented Business Fee Act, which Texas enacted in 2007, nude-entertainment clubs that serve alcohol must pay $5 for every customer admitted. The comptroller estimates that 169 Texas businesses meet the criteria, and the law would direct the first $25 million collected to the state's sexual assault program fund. Remaining funds would go toward helping low-income residents pay for health insurance.

One club owner, Karpod Inc., partnered with an umbrella organization for such business in a lawsuit that attacked the fee as a violation of the First Amendment. After a bench trial, a judge concluded that erotic dancing is protected expression under the First Amendment, that the fee is a content-based tax and that the comptroller failed to show that the tax is necessary to serve a compelling state interest and is narrowly tailored for that purpose.

The trial court permanently enjoined collection of the fee, and the Texas Supreme Court granted the comptroller's petition for review after a divided appellate panel affirmed.

Two U.S. Supreme Court cases informed resolution of this case.

In City of Erie v. Pap's A.M., a Pennsylvania strip club fought passage of a public indecency ordinance that made it a crime to knowingly appear nude in public, and required nude erotic dancers to wear pasties and a G-string.

A majority of justices found that the Erie law did not violate the First Amendment because it was "aimed at preventing crime and other secondary effects caused by the presence of adult entertainment establishments."

The Supreme Court also found that any effect on the overall expression was minimal since the law still allowed nude dancers to perform in G-strings and pasties.

In City of Los Angeles v. Alameda Books, the high court upheld a zoning ordinance that prohibited more than one adult entertainment business in the same building.

The justices held that a "time, place, manner" zoning restriction on adult businesses does not violate the First Amendment if it is aimed at secondary effects on the surrounding community as opposed to the adult entertainment content.

Texas' law meets the same criteria, the state Supreme Court found.

"The fee in this case is clearly directed, not at expression in nude dancing, but at the secondary effects of nude dancing when alcohol is being consumed," Justice Nathan Hecht wrote for the court. "An adult entertainment business can avoid the fee altogether simply by not allowing alcohol to be consumed. For these reasons, we conclude that the fee is not intended to suppress expression in nude dancing."

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