9000 Airport LLC v. Hager

UNITED STATES DISTRICT COURT November 09, 2023

SOUTHERN DISTRICT OF TEXAS Nathan Ochsner, Clerk

HOUSTON DIVISION

9000 AIRPORT LLC, §

§

Plaintiff, §

§

VS. § CIVIL ACTION NO. 4:23-CV-03131

§

GLENN HEGAR, §

§

Defendant. §

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

Before the Court is the plaintiff’s, 9000 Airport LLC, motion for preliminary

injunction (DE 4). The defendant, Glenn Hegar, as Comptroller of Texas, has

responded (DE 14) and the plaintiff has replied (DE 15). After reviewing the motions,

the pleadings, the record, and the applicable law, the Court determines that the

plaintiff’s motion should be GRANTED.

II. FACTUAL BACKGROUND

In 2007, the Texas Legislature instituted the Sexually Oriented Business Fee

Act (“the SOBF”). Tex. Bus. & Com. Code §§ 102.051-.056. The Act imposes a $5 fee

per customer entry on “sexually oriented businesses” (“SOBs”). To trigger the fee, the

SOBs must feature both live nude entertainment and on-premises alcohol

consumption. Id. The statute defines “nude” as being entirely unclothed or being

clothed in any manner that exposes any portion of the breast below the top of the

areola (for women) or any portion of the genitals or buttocks. Id. at § 102.051(1).

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The SOBF’s stated purpose is to dedicate funds to “the sexual assault program

fund, to cover the costs of programs that relate to sexual assault prevention,

intervention and research provided by state, local and nonprofit agencies.” House

Committee on Ways & Means, Committee Report on Committee Substitute House

Bill 1751, 80th Leg., R.S., at 1 (Tex. 2007). These programs include: “(1) sexual

violence awareness and prevention campaigns; (2) victims of human trafficking; (3)

sexual assault nurse examiner programs; (4) increasing the level of sexual assault

services in this state; (5) victim assistance coordinators; and (6) technology in rape

crisis centers.” Senate Research Center (Engrossed), House Bill 3345 Bill Analysis,

88th Leg., R.S., at 1 (Tex. 2023). The statute directs the Comptroller to deposit the

fees extracted under the SOBF to the sexual assault program fund (“The Fund”). The

Comptroller adopted 34 TAC § 3.722 to implement the fee.

The SOBF also requires recordkeeping and inspection requirements. An SOB

must “record daily in the manner required by the comptroller the number of

customers admitted to the business. The business shall maintain the records for the

period required by the comptroller and make the records available for inspection and

audit on request by the comptroller.” Tex. Bus. & Com. Code § 102.052(b).

In September of 2023, the Texas legislature doubled the fee to $10 per

customer-entry via House Bill 3345, which amends the SOBF—specifically, Tex. Bus.

& Com. Code § 102.052(a). The House Appropriations Committee Report on House

Bill 3345 explains the background and purpose of the amendment:

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Unpredictable revenues from court fees and stagnant fees

imposed on sexually oriented businesses coupled with increasing

demand for services and resulting appropriations have caused a

structural deficit leading to the potential depletion of revenues to

support these services. H.B. 3345 seeks to allow for more predictable

revenue to support state services to victims of sexual assault, human

trafficking, and domestic abuse . . . by allowing the legislature to revisit

the amount of the sexually oriented business fee every two years during

the budgeting process.

House Committee on Appropriations, Committee Report on House Bill 3345, 88th

Leg., R.S., at 1 (Tex. 2023). Representative Greg Bonnen, who introduced H.B. 3345,

explained that reduced court activities during COVID significantly diminished the

Fund.1 And during a Texas Senate Finance Committee hearing, Senator Huffman, a

sponsor of H.B. 3345, noted that “[we] have struggled to keep this fund current.

They’ve fallen in recent years.”2 She added that increasing the fee on SOBs “seemed

like a reasonable addition to me, considering inflation and other issues.”

The plaintiff, 9000 Airport LLC, is an adult nightclub that opened in

September of 2023. The club features costumed dancers who strip down to nudity,

allegedly conveying messages of eroticism and the beauty of the body. The plaintiff

operates as a “bring your own beer” establishment, allowing customers to bring and

drink alcohol. The plaintiff believes that it is subject to the SOBF, and therefore must

pay the $10 per-entry fee. The plaintiff sued the Comptroller and brought this motion

to preliminarily enjoin the Comptroller from enforcing H.B. 3345, the SOBF itself,

and the regulations implementing the SOBF.

1 https://tlchouse.granicus.com/MediaPlayer.php?view_id=78&clip_id=24547 (April 17, 2023)

Appropriations Hearing, beginning at 13:25) (last accessed November 6, 2023).

2 https://tlcsenate.granicus.com/MediaPlayer.php?clip_id=17875 (May8, 2023) Texas Senate Finance

Committee Hearing, beginning at 03:11) (last accessed November 6, 2023).

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III. CONTENTIONS OF THE PARTIES

The plaintiff argues that the SOBF and H.B. 3345 violate its First, Fourth, and

Fourteenth Amendment rights. The plaintiff maintains that it is likely to succeed on

the merits of its First Amendment claim because the SOBF is content-based, not

aimed at secondary effects, overly broad, not narrowly tailored, and unsupported by

evidence. The plaintiff also argues that its Fourth Amendment claim will likely

succeed because SOBs are not closely regulated and the SOBF’s inspection scheme is

unreasonable. The plaintiff asserts that First Amendment violations always

constitute irreparable injury, and this injury outweighs any harm that an injunction

inflicts upon the State. Finally, the plaintiff insists that an injunction will serve the

public interest.

The Comptroller retorts that the SOBF is not content-based. He argues that it

is focused on mitigating the secondary effects of the plaintiff’s expression, rather than

the expression itself. The Comptroller urges the Court to defer to the Supreme Court

of Texas’ interpretation that the SOBF is content-neutral and passes intermediate

scrutiny. He insists that the requirement that alcohol must be consumed on the

premises disarms any argument that the statute targets nude dancing. The

Comptroller further argues that the plaintiff’s Fourth Amendment claims fail

because the recordkeeping and inspection requirements are not Fourth Amendment

searches, and the “closely regulated industry” exception applies to the SOBF. Finally,

he insists that the public interest demands continued enforcement of the SOBF.

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IV. STANDARD OF REVIEW

A preliminary injunction is an “extraordinary remedy.” Byrum v Landreth, 566

F.3d 442, 445 (5th Cir. 2009). A federal court may grant a preliminary injunction only

if the movant shows: (i) a substantial likelihood of success on the merits; (ii) a

substantial threat of irreparable harm; (iii) that the movant’s substantial injury

outweighs the threatened harm to the defendant; and (iv) an injunction is in the

public interest. Tex. Med. Providers Performing Abortion Servs. v. Lakey, 667 F.3d

570, 574 (5th Cir. 2012).

The plaintiff challenges the SOBF both facially and as-applied. Facial

challenges are generally disfavored. Voting for Am., Inc. v. Steen, 732 F.3d 382, 386

(5th Cir. 2013). But the standard for facial challenges in First Amendment cases is

unique: “A law implicating the right to expression may be invalidated on a facial

challenge if ‘a substantial number of its applications are unconstitutional, judged in

relation to the statute’s plainly legitimate sweep.’” Id. at 387 (quoting United States

v. Stevens, 559 U.S. 460 (2010)). Because the parties generally agree as to where and

when the statute applies,3 there is no allegation that some applications are

constitutional while others are not. Despite the plaintiff’s assertion that it also brings

an as-applied challenge, its motion addresses a simple question: whether the SOB fee

is constitutional, regardless of the SOB’s particular circumstances.

3 This excepts the plaintiff’s overbreadth claim, which this analysis does not address for reasons

explained below.

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V. ANALYSIS & DISCUSSION

Before proceeding to the four elements in the preliminary injunction analysis,

the Court must address two issues raised by the Comptroller. At oral argument, the

Comptroller alluded to res judicata barring the plaintiff’s claims. The Comptroller did

not mention res judicata in his motion to dismiss, which he filed in lieu of an answer

(DE 13). The Comptroller may have been inspired by the Fifth Circuit’s

acknowledgment in Texas Ent. Ass’n, Inc. v. Hegar that any claim attacking the SOBF

itself was barred by res judicata. Texas Ent. Ass’n, Inc. v. Hegar, 10 F.4th 495, 508

(5th Cir. 2021), cert. denied (2022). The plaintiff did not actually attack the SOBF

itself in that case, because it had previously attempted just that in Combs v. Texas

Ent. Ass’n, Inc., 347 S.W.3d 277 (Tex. 2011). In Combs, the Supreme Court of Texas

held that the SOBF was aimed at secondary effects rather than the plaintiff’s

expression. The statute was therefore entitled to intermediate scrutiny, which it

passed. But Combs does not preclude the plaintiff from bringing this lawsuit. The

plaintiff before this Court is neither the Texas Entertainment Association nor a

member of that association. Furthermore, the Comptroller has not persuasively

argued that the plaintiff’s interests were adequately represented by the Texas

Entertainment Association in Combs. Accordingly, to the extent the Comptroller

argues that res judicata bars the plaintiff’s claim, the argument fails.

Comity concerns do not wrest this case from the Court’s jurisdiction, either. At

the core of the Court’s Article III judicial power is “the federal courts’ independent

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responsibility—independent from its coequal branches in the Federal Government,

and independent from the separate authority of the several States—to interpret

federal law.” Williams v. Taylor, 529 U.S. 362, 378–79 (2000). As the Fifth Circuit

stated in Hegar, the “claims alleged by TEA rest wholly on rights guaranteed by the

federal Constitution.” Hegar, 10 F.4th at 508 (5th Cir. 2021). This Court’s jurisdiction

arises from the federal questions at stake. Thus, while the Court respects the

thoughtful decision of the Texas Supreme Court, this federal Court has an

independent duty to examine the plaintiff’s federal constitutional rights for itself.

A. Likelihood of Success on the Merits

A. 1) First Amendment Claim

To show its likelihood of success on the merits, the plaintiff’s evidence in the

preliminary injunction proceeding need only establish a prima facie case. The

plaintiff “is not required to prove its entitlement to summary judgment.” Byrum v.

Landreth, 566 F.3d 442, 446 (5th Cir. 2009).

Nude dancing is expressive conduct protected by the First Amendment. Barnes

v. Glen Theatre, Inc., 501 U.S. 560, 565 (1991). But because it falls only within the

“outer ambit” of that protection, nude dancing is subject to restrictions. City of Erie

v. Pap’s A. M., 529 U.S. 277 (2000). The first step in a First Amendment analysis is

determining whether the challenged restriction is content-based. Texas Ent. Ass’n,

Inc. v. Hegar, 10 F.4th 495, 509 (5th Cir. 2021), cert. denied (2022). If so, it is

presumptively unconstitutional and examined under strict scrutiny. Strict scrutiny

“requires the Government to prove that the restriction furthers a compelling interest

and is narrowly tailored to achieve that interest.” Citizens United v. Fed. Election

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Comm’n, 558 U.S. 310, 340 (2010). If the statute is content-neutral, it enjoys

intermediate scrutiny and carries no presumption of unconstitutionality:

If the governmental purpose in enacting the ordinance is

unrelated to . . . suppression, the ordinance need only satisfy the ‘less

stringent,’ intermediate O’Brien standard . . . If the governmental

interest is related to the expression’s content, however, the ordinance

falls outside O’Brien and must be justified under the more demanding,

strict scrutiny standard.

Pap’s A. M., 529 U.S. at 278. The inquiry into whether a restriction is content-neutral

“requires courts to verify that the ‘predominate concerns’ motivating the ordinance

‘were with the secondary effects of adult [expression], and not with the content of

adult [expression].’” City of Los Angeles v. Alameda Books, Inc., 535 U.S. 425, 440–41

(2002) (quoting City of Renton v. Playtime Theatres, Inc., 475 U.S. 41, 47-54 (1986)).4

The Comptroller argues that the SOBF is aimed only at the secondary effects of nude

dancing. “Thus, to determine whether [the SOBF] is content based or content neutral,

we must look to its purpose as substantiated by the record.” Hegar, 10 F.4th at 510.

A. 1) a) Secondary Effects Do Not Justify Content-Based Fees

Neither the record nor the law supports the Comptroller’s secondary effects

argument. The secondary effects argument suffers from multiple defects, but the

most fundamental is that the fee does not fit into the permissible categories of

4 Although its viability was in some doubt, a recent Fifth Circuit case clarifies that the secondary

effects doctrine remains intact. Ass’n of Club Executives of Dallas, Inc. v. City of Dallas, Texas, 83

F.4th 958, 964-965 (5th Cir. 2023). But see Reagan Nat’l Advert. of Austin, Inc. v. City of Austin, 972

F.3d 696, 703 (5th Cir. 2020), rev’d and remanded sub nom. City of Austin, Texas v. Reagan Nat’l

Advert. of Austin, LLC, 596 U.S. 61 (2022).

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restriction. The First Amendment permits restrictions only on the time, place, or

manner of protected expression in a secondary effects case:

[R]egulations enacted for the purpose of restraining speech on

the basis of its content presumptively violate the First Amendment . . .

On the other hand, so-called ‘content-neutral’ time, place, and manner

regulations are acceptable so long as they are designed to serve a

substantial governmental interest and do not unreasonably limit

alternative avenues of communication.

City of Renton v. Playtime Theatres, Inc., 475 U.S. 41, 47 (1986) (emphasis added).

The Court need not infer a corollary that restrictions beyond time, place, and manner

violate the First Amendment. Justice Kennedy, writing as the controlling opinion in

City of Los Angeles v. Alameda Books, Inc., under the Marks doctrine,5 feared a

“subtle expansion” in the plurality’s upholding a statute that prohibited multiple

adult businesses from operating out of a single building. Alameda Books, 535 U.S. at

440–41. After endorsing time, place, and manner restrictions, Justice Kennedy wrote:

On the other hand, a city may not regulate the secondary effects

of speech by suppressing the speech itself. A city may not, for example,

impose a content-based fee or tax . . . This is true even if the government

purports to justify the fee by reference to secondary effects.

Id. at 445 (Kennedy, J., concurring) (emphasis added). The SOBF fits squarely into

the example of what is not allowed by Justice Kennedy’s controlling opinion. A per-

customer-entry fee is not a time, place, or manner restriction. Indeed, the Comptroller

does not even argue that the SOBF is a time, place, or manner restriction. Nor does he

5 “When a fragmented Court decides a case and no single rationale explaining the result enjoys the

assent of five Justices, ‘the holding of the Court may be viewed as that position taken by those

Members who concurred in the judgments on the narrowest grounds.” Marks v. United States, 430

U.S. 188, 193 (1977).

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cite Supreme Court or Fifth Circuit precedent upholding such fees. For this reason

alone, the SOBF likely violates the First Amendment.

The Comptroller does not address Alameda Books or Renton. In fact, between

his Response Motion and his Motion to Dismiss, the Comptroller spends only one

paragraph arguing that the SOBF is not content-based (DEs 13 & 14). The

Comptroller argues that the SOBF’s application only to live nude entertainment

where alcohol is consumed proves that it is content-neutral; it is not the nude dancing

that is the statute’s focus, but the secondary effects of the combination of nude

dancing and alcohol. But this does not immunize the statute. First, a statute cannot

shield itself from targeting a protected behavior by requiring an additional behavior

for the statute to trigger. Requiring a second attribute that almost always attends

the first attribute changes the number of words in the statute, but it does not change

its constitutionality. Second, the Comptroller offers no explanation as to why the

combination of alcohol and nude dancing creates worse secondary effects than nude

dancing alone. Absent an explanation, the alcohol requirement does little to dispel

the appearance that the statute is targeted at nude dancing.

A. 1) b) Raising Revenue Is Not a Sufficient Government Interest

Alameda Books is not the only Supreme Court precedent the SOBF runs afoul

of. In Minneapolis Star, the Supreme Court held that the State’s interest in raising

revenue cannot justify targeting specific types of businesses:

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The main interest asserted by Minnesota in this case is the raising of

revenue. Of course that interest is critical to any government. Standing

alone, however, it cannot justify the special treatment of [a targeted

business], for an alternative means of achieving the same interest

without raising concerns under the First Amendment is clearly

available: the State could raise the revenue by taxing businesses

generally.

Minneapolis Star & Trib. Co. v. Minnesota Com’r of Revenue, 460 U.S. 575, 586 (1983)

(emphasizing that its holding did not rely on an improper censorial motive). The

Court in that case did not address levels of scrutiny or determine whether the statute

was content-based. Instead, it determined that because the problem arose “directly

under the First Amendment . . . the regulation can survive only if the governmental

interest outweighs the burden and cannot be achieved by means that do not infringe

First Amendment rights as significantly.” Id. at 585 n.7.

Like Alameda Books, the Comptroller’s briefs do not even mention Minneapolis

Star. Regardless, the government’s interest in raising revenue does not outweigh the

plaintiff’s burden. The SOBF’s stated purpose is to dedicate funds to “the sexual

assault program fund, to cover the costs of programs that relate to sexual assault

prevention, intervention and research provided by state, local and nonprofit

agencies.” House Committee on Ways & Means, Committee Report on Committee

Substitute House Bill 1751, 80th Leg., R.S., at 1 (Tex. 2007). By its own terms, the

SOBF’s purpose is to raise money. The fact that the SOBF raises money for a cause

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related to the expression does not alter Minneapolis Star’s prohibition against

targeting specific expression for the purpose of raising money.6

The SOBF as amended by H.B. 3345 fares even worse. Its stated purpose is “to

allow for more predictable revenue” due to factors utterly unrelated to the targeted

expression: Covid, fund depletion, and inflation. House Committee on

Appropriations, Committee Report on House Bill 3345, 88th Leg., R.S. at 1 (Tex.

2023). It neither mentions the secondary effects of the targeted expression nor offers

a justifiable State interest. This is not narrow tailoring.

At first blush, the fact that the stated purposes of the SOBF and H.B. 3345 do

not connect to the expression’s effects might suggest that the SOBF does not target

the expression itself. But this disconnect undermines the secondary effects argument.

This is the Scylla and Charybdis a legislature must navigate: target an effect caused

by the expression, but not the expression itself. Raising revenue does not clear the

strait successfully because it does not address a secondary effect. The State’s interest

in revenue—even if taken sincerely and not as a pretext for targeting expression—

cannot justify such a targeted fee. Minneapolis Star, 460 U.S. at 586.

A. 1) c) The Theoretical Connection Is Unexplained

Looking past the SOBF’s stated purpose to those offered by the Comptroller

does not save the statute. Putting Minneapolis Star aside, these alternative

purposes—even if they are believed—still suffer the same problem: the connection

6 This assumes, for the sake of argument, that the Fund’s programs are in fact related to the

expression. But as explained below, neither the legislative history nor the Comptroller show that they

are related.

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between the expression, the secondary effect, and the restriction goes unexplained.

For example, the Comptroller argues that the fee pays for programs that mitigate the

secondary effects of the expression—“the dangerous combination of nudity and

alcohol” (DE 13). This may well be a dangerous combination, but the Comptroller does

not explain why it is dangerous. The closest the Comptroller comes to connecting the

expression and the secondary effects is the unadorned conclusion that “[t]he

combination of live nude entertainment and alcohol is a well-documented prescription

for rape, sexual assault, and other crimes and social ills.” (DE 13). But again, the

Comptroller does not say why or how this combination leads to these ills. Nor does he

explain how the Fund’s programs would mitigate them. Simply put, the Comptroller

does not connect the dots.

Instead, the Comptroller cites generally to the legislative record, a review of

which sheds no light. The only other support he offers is the dissent to the reversed

Court of Appeals case in Combs v. Texas Ent. Ass’n, Inc., 287 S.W.3d 852, 875 (Tex.

App. 2009), rev’d, 347 S.W.3d 277 (Tex. 2011). But that dissent simply assumes

connections between the expression and effects, and the remediation of that

exploitation through the fees. The dissent does not cite to anything in the legislative

record suggesting such connections exist or that the legislators considered empirical

evidence when finding these connections. And despite the fact that “[t]he combination

of live nude entertainment and alcohol is a well-documented prescription for rape,

sexual assault, and other crimes and social ills,” the Comptroller provides none of this

abundant documentation.

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A. 1) d) The Comptroller Offers No Evidence

This leads to the second problem with the Comptroller’s alternative purposes.

Even if he articulated a specific connection between the expression and the secondary

effects, he has not adduced supporting evidence. This alone is fatal. The Comptroller

argues that there “is no requirement that a statute passed by a state legislature be

backed by ‘valid empirical information’ or that it be supported by any specific type of

‘data and information.’” (DE 13). This is not the law. “An SOB regulation is ‘designed

to serve a substantial government interest’ when the municipality can ‘provid[e]

evidence that supports a link’ between the regulated business and the targeted

secondary effects.” Ass’n of Club Executives of Dallas, Inc. v. City of Dallas, Texas, 83

F.4th 958, 965–66 (5th Cir. 2023) (quoting Alameda Books, 535 U.S. at 434, 437). “A

municipality may rely on evidence ‘reasonably believed to be relevant,’ . . . but not on

‘shoddy data or reasoning’ that does not ‘fairly support’ the ordinance’s rationale.” Id.

(quoting Alameda Books, 535 U.S. at 438) (citations omitted). The Comptroller has

not produced shoddy data or reasoning; he has not produced any at all. Instead, the

Comptroller relies on vague causal intuitions. Such intuitions do not show that the

regulation is designed to serve a substantial government interest.

The Fifth Circuit observed a similar fatal deficiency regarding a different

aspect of the SOBF. In Texas Ent. Ass’n, Inc. v. Hegar, the Fifth Circuit addressed

the Comptroller’s rule interpreting the SOBF’s definition of nudity.7 The Fifth Circuit

held that “[[t]he Comptroller does not provide any evidence that shows that the

7 The Fifth Circuit explicitly stated that the SOBF itself was not before it. Id.

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Comptroller was ‘predominantly motivated by ... the control or reduction of

deleterious secondary effects.’” Texas Ent. Ass’n, Inc. v. Hegar, 10 F.4th 495, 511 (5th

Cir. 2021), cert. denied, 142 S. Ct. 2852 (2022) (quoting MD II Ent., Inc. v. City of

Dallas, 85 F.3d 624 (5th Cir. 1996)). The Fifth Circuit therefore affirmed the district

court’s determination that “‘[b]ecause the Comptroller enacted the amended

regulation at issue without reference or concern for mitigating any identified

secondary deleterious effects, the [c]ourt is forced to conclude the amendment is

directed at the essential expressive nature of the latex clubs’ business, and thus is a

content[ ]based restriction.’” Id. The Comptroller does not offer evidence that the

legislature was predominately motivated by secondary effects in this case, either. His

argument here suffers the same defect as in Hegar. The same conclusion is compelled.

Hegar offers still more guidance. Even though Hegar addressed a rule

interpreting only a part of the SOBF, the Comptroller attempted to justify his rule by

relying on evidence that purportedly justified the SOBF itself. Id. The Fifth Circuit

rejected this argument for the same reason this Court must reject it: “with nothing

in the record to support it, his argument remains only a theory.” Id. at 511–12. In

other words, nothing in the record substantiated the SOBF’s connection to secondary

effects. In this case, the record is equally silent. “With nothing in the record to support

it, his argument [still] remains only a theory.” Id.

Finally, H.B. 3345 suffers from one more flaw that Hegar identifies: “[T]he

Comptroller offered no evidence to show that [the legislature] even considered the

data linking the SOBF with adverse secondary effects produced by nude dancing

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when he promulgated the Clothing Rule.” Id. at 512. The Comptroller has not shown

that the legislature considered this data when doubling the SOBF’s fee, either.

Indeed, he has not shown that relevant data even exists.

To sum up, the SOBF is likely 1) not a permissible time, place, or manner

restriction; 2) not justified by a legitimate State interest; and 3) not adequately

explained by theory or evidence. Compelled by United States Supreme Court and

Fifth Circuit precedent, the Court concludes that the SOBF is not aimed at secondary

effects. It is therefore content-based and subject to strict scrutiny. The Comptroller

has not shown that the SOBF is narrowly tailored to a compelling government

interest, nor has the Comptroller dispelled the presumption of unconstitutionality.

Accordingly, the plaintiff has shown that its First Amendment claim is likely to

succeed on the merits.8

A. 2) Fourth Amendment Claims

The Fourth Amendment protects “[t]he right of the people to be secure in their

persons, houses, papers, and effects, against unreasonable searches and seizures.” It

also states that “no Warrants shall issue, but upon probable cause.” But “[s]earch

regimes where no warrant is ever required may be reasonable where special needs ...

make the warrant and probable-cause requirement impracticable.” City of Los

Angeles, Calif. v. Patel, 576 U.S. 409, 420 (2015) (internal quotations omitted). One

special need arises when the relevant industry is “closely regulated.” Id. The SOBF

8 The plaintiff also argues that the statute is unconstitutionally overbroad. Because the plaintiff has

multiple avenues to success on the merits, the Court need not reach this argument at this time.

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authorizes the Comptroller to inspect SOBs without a warrant or probable cause. Tex.

Bus. & Com. Code §102.052(b) & 34 TAC § 3.722.

The Comptroller first argues that the SOBF’s recordkeeping requirements do

not constitute a search because criminal penalties are not at stake. Criminal

penalties are not the test of a Fourth Amendment search: “the Fourth Amendment

prohibition against unreasonable searches protects against warrantless intrusions

during civil as well as criminal investigations.” Marshall v. Barlow’s, Inc., 436 U.S.

307, 312 (1978). Accordingly, the recordkeeping and reporting components of the

SOBF must fall within an exception to the Fourth Amendment.

The Comptroller argues that SOBs fall within the “closely regulated industry”

exception. They do not. Eight years ago, the Supreme Court wrote that “[o]ver the

past 45 years, the Court has identified only four industries that have such a history

of government oversight that no reasonable expectation of privacy . . . could exist for

. . . such an enterprise.” Patel, 576 U.S. at 424 (refusing to classify hotels as a

regulated industry) (internal quotations omitted). The Court held that “[s]imply

listing” the four closely regulated industries—liquor sales, firearms dealing, mining,

and running an automobile junkyard—“refutes [the] argument that hotels should be

counted among them.” Id. The same act of “simply listing” the closely regulated

industries refutes the argument that SOBs should be included in this quaternity.

The Court declines the Comptroller’s invitation to add a fifth industry to this

“narrow exception.” Id. The Comptroller’s only argument is the conclusion that

“[b]ased on a substantial history of regulation, sexually oriented business are within

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a ‘closely regulated industry’ for Fourth Amendment purposes,” buttressed by a

citation to the nude dancing restrictions that the Supreme Court upheld in City of

Erie v. Pap’s A.M., 529 U.S. 277 (2000) (DE 13). But Pap’s did not even mention the

Fourth Amendment, let alone the closely regulated exception. Such a threadbare and

unrelated argument does not overcome “‘[t]he clear import of our cases . . . that the

closely regulated industry . . . is the exception.’” Patel, 576 U.S. at 424 (quoting

Barlow’s, Inc., 436 U.S., at 313). Accordingly, the exception does not apply.

Even if the closely regulated exception did apply, the statute would still violate

the Fourth Amendment. Under the closely regulated exception, “the statute’s

inspection program, in terms of the certainty and regularity of its application, [must]

provid[e] a constitutionally adequate substitute for a warrant.” Id. 426 (internal

quotations omitted). Neither the statute nor the related Administrative Code

addresses this requirement. Tex. Bus. & Com. Code 102.052(b) & 34 TAC 3.722

authorize the Comptroller to search and inspect an SOB’s private records “upon

request,” without any limits on how often or when he may inspect those records. The

Comptroller does not dispute this. Instead, he argues that the clarity of the statute’s

instructions satisfies this requirement. But clarity of how to comply with the

inspection scheme says nothing about its certainty or regularity. Accordingly, the

plaintiff is likely to succeed on its Fourth Amendment claim.

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B. The Plaintiff Will Suffer Irreparable Harm

“The loss of First Amendment freedoms, for even minimal periods of time,

unquestionably constitutes irreparable injury.” Elrod v. Burns, 427 U.S. 347, 373

(1976). The Comptroller does not dispute this element.

C. Equitable Balancing

Because the plaintiff’s harm is irreparable, the Comptroller “‘would need to

present powerful evidence of harm to its interests to prevent’” the plaintiff from

showing that the threatened injury outweighs any harm to the Comptroller or the

public inflicted by an injunction.9 Denton v. City of El Paso, Texas, 861 F. App’x 836,

841 (5th Cir. 2021) (quoting Opulent Life Church v. City of Holly Springs, 697 F.3d

279, 297 (5th Cir. 2012)). The Comptroller does not present powerful evidence of

harm. His response brief recites vague propositions about the State’s interest in

enforcing its laws. Although this is undoubtedly a critical interest, the Comptroller

does not specify how enjoining the SOBF would harm the State or the public in any

concrete way. Accordingly, the plaintiff also satisfies this prong.

9 The last two injunction elements, “harm to the opposing party and weighing the public interest[,]

merge when the Government is the opposing party.” Nken v. Holder, 556 U.S. 418, 435 (2009)

(discussing the four factors of a stay, but noting the “substantial overlap between these and the factors

governing preliminary injunctions.”). The Court organizes the two elements separately to mirror

Opulent Life Church v. City of Holly Springs, Miss., 697 F.3d 279 (5th Cir. 2012) and Denton v. City of

El Paso, Texas, 861 F. App’x 836 (5th Cir. 2021), two recent cases also addressing First Amendment

preliminary injunctions.

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D. The Public Interest

“When a statute is enjoined, the State necessarily suffers the irreparable harm

of denying the public interest in the enforcement of its laws.” Planned Parenthood of

Greater Texas Surgical Health Servs. v. Abbott, 734 F.3d 406, 419 (5th Cir. 2013). But

the public does not suffer when the enjoined laws are unconstitutional. “[I]njunctions

protecting First Amendment freedoms are always in the public interest.” McDonald

v. Longley, 4 F.4th 229, 255 (5th Cir. 2021), cert. denied sub nom. McDonald v. Firth,

142 S. Ct. 1442 (2022), and cert. denied sub nom. Firth v. McDonald, 142 8. Ct. 1442

(2022). Because the SOBF and H.B. 3345 are likely unconstitutional, the injunction

is in the public interest.

VI. CONCLUSION

Based on the foregoing analysis and discussion, the plaintiff has made the

requisite showing for a preliminary injunction. Consequently, the plaintiff's motion

is GRANTED. The Comptroller is hereby ENJOINED from enforcing House Bill

3345, the Sexually Oriented Business Fee Act itself (Tex. Bus. & Com. Code 8§

102.051-.056), and 34 TAC § 3.722.

It is so ORDERED.

SIGNED on November 9, 2023, at Houston, Texas.

United States District Judge

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