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Sre Real Estate, LLC, A South v. City of Sturgis

March 8, 2013

SRE REAL ESTATE, LLC, A SOUTH
DAKOTA LIMITED LIABILITY COMPANY;
AND DICK AND JANE'S OF STURGIS, LLC, A SOUTH DAKOTA LIMITED LIABILITY COMPANY,
PLAINTIFFS,
v.
CITY OF STURGIS, A MUNICIPAL CORPORATION, DEFENDANT, AND STATE OF SOUTH DAKOTA, INTERVENOR.



The opinion of the court was delivered by: Jeffrey L. VIKEN Chief Judge

ORDER

INTRODUCTION

Plaintiffs SRE Real Estate, LLC ("SRE") and Dick and Jane's of Sturgis, LLC ("Dick and Jane's") (collectively referred to as "plaintiffs") filed a verified complaint against defendant City of Sturgis. (Docket 1). The complaint asserts the City of Sturgis violated plaintiffs' rights under the First Amendment and the Due Process Clause of the United States Constitution by denying Dick and Jane's a certificate of occupancy necessary to operate in the City of Sturgis. Id. The State of South Dakota, through the Attorney General, filed a motion for leave to intervene in the action. (Docket 40). The court granted the motion. (Docket 44).

Pending before the court are cross motions for summary judgment filed by the State of South Dakota, City of Sturgis (collectively referred to as "defendants"), and plaintiffs. (Dockets 113, 116, and 124). Based on the court's analysis, the plaintiffs' motion for summary judgment is granted in part and denied in part and the motions for summary judgment by the State of South Dakota and the City of Sturgis are denied.

MATERIAL FACTS

A. SDCL Ch. 11-12 and City of Sturgis Ordinance § 2.03.13 In 2008, the South Dakota Legislature approved and adopted HB 1151, which subsequently became SDCL Ch. 11-12. That Chapter covers planning and zoning of adult-oriented businesses. During the initial hearing on HB 1151 before the House Local Government Committee, Representative Manny Steele, the prime sponsor, stated, referring to adult-oriented businesses, these businesses have a "constitutional right to be open" but when they have "a negative effect and [are] a blight on [the] community, I believe it is proper for those in authority to take some action." (Docket 115-5 at 3). In his presentation of the bill, Rep. Steele remarked, "[t]he bill I present you today is very similar to a bill passed in the Arizona legislature, and that bill that was passed there was contested in court. . . . Their ruling was that the Arizona bill was constitutionally acceptable."*fn1 (Docket 115-5 at 3-4).

Chris Hupke testified before the House Local Government Committee Hearing, explaining the committee should not pass the bill based on content and that what the bill "recognizes is that certain activities within that business can and do lead to negative secondary effects." Id. at 7. Mr. Hupke repeated that "this is not about one business and it's not about whether or not we approve or disapprove of the content of those businesses. This has nothing to do with their content." Id. at 9.

The South Dakota House and Senate passed HB 1151 and it ultimately became law. Any existing adult-oriented businesses not in compliance with SDCL Ch. 11-12 at the time it was passed were "grandfathered in" and not made subject to the requirements of SDCL Ch. 11-12.

"Adult oriented businesses" include "any adult arcade, adult bookstore or video store, cabaret, adult live entertainment establishment, adult motion picture theater, adult theater, massage establishment that offers adult service, or nude model studios." SDCL § 11-12-1(5). "Adult bookstore or video store" is defined under the statute as: a commercial establishment that offers for sale or rent any of the following as one of its principal business purposes:

(a) Books, magazines, periodicals, or other printed matter, photographs, films, motion pictures, videocassettes or reproductions or slides, or other visual representations that depict or describe specific sexual activities or specific anatomical areas;

(b) Instruments, devices, or paraphernalia, that are designed for use in connection with specific sexual activities.

SDCL § 11-12-1(2)(a) and (b) (emphasis added). The phrase "one of its principal business purposes" is not defined in the statute.

The spacing requirement of Ch. 11-12 provides: No adult oriented business established after June 30, 2008, may be located within one-fourth mile of a child welfare agency, a private or public school, a public playground, a public recreational facility, a residence, or a place of worship. For the purposes of this section, measurements shall be made in a straight line in all directions, without regard to intervening structures or objects, from the nearest point on the property line of a parcel containing an adult oriented business to the nearest point on the property line of a parcel containing a child welfare agency, a private or public school, a public playground, a public recreational facility, a residence, or a place of worship. An adult oriented business lawfully operating in conformity with this section does not violate this section if a child welfare agency, a private or public school, a public playground, a public recreational facility, a residence, or a place of worship subsequently locates within one-fourth mile of the adult oriented business. A violation of this section is a Class 1 misdemeanor. Each day of violation constitutes a separate offense.

SDCL § 11-12-2 (emphasis added).

Section 2.03.13 of the Sturgis Municipal Code requires the building inspector to "issue an occupancy certificate upon completion of [a] building or prior to change of occupancy if the building is found to be in compliance with the City of Sturgis Ordinances and laws of the State of South Dakota." Sturgis, SD, Municipal Code § 2.03.13. (Docket 121-1). SDCL Ch. 11-12 is among those laws the City of Sturgis considers when issuing occupancy certificates.

B. Dick and Jane's of Sturgis

David Eliason is the President of both SRE and Dick and Jane's. (Docket 118 at ¶ 25). Dick and Jane's sought to open and operate a retail establishment selling a variety of clothing, lingerie, bath and body products, shoes, hosiery, party supplies, gag gifts, costumes, books, magazines, videos, and novelties, including some materials falling under SDCL § 11-12-1(2)(a) and (b). (Docket 126 at ¶ 1). The proposed location of Dick and Jane's was 2611 Lazelle Street in Sturgis, South Dakota. SRE secured that business location. Dick and Jane's entered into an operating agreement with SRE to conduct business at 2611 Lazelle Street.

Around July 1, 2010, Mr. Eliason first made contact with Rick Bush, Community Development Director for the City of Sturgis. (Docket 118 at ¶ 28). Mr. Bush handles planning and zoning, building inspections, code enforcement, any permits, and he works with the City's administration and attorneys on ordinance review. (Docket 125-1 at 7:15-20). During this initial conversation, Mr. Eliason told Mr. Bush he intended to sell gift items, South Dakota made products and a variety of other goods, services and trinkets at Dick and Jane's. (Docket 118 at ¶ 29). Mr. Eliason made no mention during this conversation that he intended to sell adult products defined under SDCL § 11-12-1(2)(a) and (b). Id. at ¶ 30.

About July 9, 2010, Mr. Eliason initiated a second conversation with Mr. Bush. Id. at ¶ 35. Mr. Eliason told Mr. Bush he intended to sell products defined under SDCL § 11-12-1(1)(a) and (b). Id. at ¶ 36. Sometime after this second conversation, Mr. Eliason and Mr. Bush met in person. Mr. Eliason inquired whether a building permit would be necessary to hang up a slat wall at the 2611 Lazelle Street location. Id. at ¶¶ 37-38. During this same meeting, Mr. Eliason discussed with Mr. Bush other retail stores with which Mr. Eliason had been involved, including Olivias of South Dakota.*fn2

During this meeting, Mr. Eliason told Mr. Bush he would be selling products defined under SDCL § 11-12-1(2)(a) and (b) at the 2611 Lazelle Street location. Id. at ¶ 40. However, Mr. Eliason also told Mr. Bush these products would not be the principal purpose of the 2611 Lazelle Street location and would not be anywhere near 50 percent of the inventory. Id. Mr. Bush told Mr. Eliason that upon approval of the building permit and after the inspection for the property was completed, the City would issue a certificate of occupancy.*fn3 Id. at ¶ 41.

Sturgis Municipal Code § 2.03.13 requires a certificate of occupancy for a newly constructed building or whenever a change in occupancy occurs, as defined in the City of Sturgis Building Code. Under § 2.03.13, Dick and Jane's was required to obtain a certificate of occupancy prior to operating because a change in occupancy from a Class B motor vehicle showroom to a Class M retail business would take place. Id. at ¶¶ 42, 47. The Code states "[t]he Building Inspector shall issue an occupancy certificate upon completion of the building or prior to the change in occupancy if the building is found to be in compliance with the City of Sturgis ordinances and the laws of the State of South Dakota." Sturgis, SD, Municipal Code § 2.03.13.

At a July 20, 2010, meeting, Mr. Eliason and Mr. Bush discussed products that would be offered for sale at Dick and Jane's and the signage for Dick and Jane's. (Docket 118 at ¶¶ 52-54). The preliminary designs for Dick and Jane's signage referred to some of the merchandise as being "Adult Novelties & DVDs." (Docket 123-5). However, the final rendering did not include the word "Adult," rather it referred to "Naughty Novelties & DVDs." (Docket 123-3). Mr. Eliason and Mr. Bush discussed various items that would be offered at Dick and Jane's including the "Fatty Patty" love doll, Hitachi Magic Wand,*fn4 and other massagers. (Docket 118 at ¶ 55).

During the course of the meeting, Mr. Bush asked Mr. Eliason for a copy of the business plan for Dick and Jane's including a detailed inventory list. (Docket 118 at ¶¶ 57, 60). Mr. Bush testified at his deposition that he requested the business plan "as a resource" because the typical business plan provided to the City included "hours of operation, what they are, in fact, selling, a complete list of their inventory, who to contact, who the emergency information contact people are, et cetera." (Docket 118 at ¶ 59). Mr. Eliason told Mr. Bush he did not have an inventory list to provide because all the inventory had not been shipped or stocked. (Docket 120-1 at 15-16). Although unavailable at the time, it was later determined that Dick and Jane's inventory ...


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