Indianapolis loses appeal of order to permit Hustler Hollywood store

The city of Indianapolis has lost its appeal in years-long litigation against Hustler Hollywood, which has been trying for more than four years to open a store in the Circle City. The Indiana Court of Appeals on Friday upheld a lower court ruling ordering the city to issue permits to the adult entertainment company.

The appellate court also remanded for further proceedings in the Marion Superior Court in The Department of Business and Neighborhood Services of the Consolidated City of Indianapolis, Indiana, Consolidated City of Indianapolis and Marion County, Indiana, and Metropolitan Board of Zoning Appeals of Marion County Division I v. H-Indy, LLC, and HH-Indianapolis, LLC, 20A-PL-1443.

In July 2016, HH-Indianapolis LLC, an affiliate of Beverly Hills-based Hustler Hollywood, entered into a lease agreement to open a retail store in the 5500 block of East 82nd Street in Castleton. The company applied for structural and sign permits with the city’s Department of Business and Neighborhood Services, but upon determining the store would be an adult bookstore, the city informed HH-Indianapolis that it would need to request a zoning variance.

HH-Indianapolis appealed to the Marion County Board of Zoning Appeals, which affirmed. The company then sued in the Indiana Southern District Court, but its motion for preliminary injunction on claims constitutional claims against the city code failed, and the 7th Circuit Court of Appeals affirmed.

Meanwhile, affiliate company H-Indy formed and launched a new concept store for the site, with adult products comprising no more than 10% of its inventory, thus satisfying zoning requirements that defined an adult bookstore as having at least 25% of its inventory dedicated to adult products. However, the Department of Business and Neighborhood Services informed H-Indy that there was a “litigation hold” on all permit requests for the site due to the HH-Indianapolis lawsuit.

H-Indy filed its own lawsuit, this time in state court, alleging the litigation hold had no basis in law. Meanwhile, the federal case moved to the Marion Superior Court on a claim challenging the BZA’s ruling that HH-Indianapolis would have to get a variance.

The cases were consolidated and all parties moved for summary judgment. In July 2020, the trial court reversed the BZA’s holding, ordered the city to issue the requested permits to HH-Indianapolis and ruled that H-Indy’s constitutional and property rights were violated by the litigation hold.

The city appealed, but the Indiana Court of Appeals affirmed.

Writing for a unanimous appellate panel, Judge Terry Crone wrote Friday that the BZA’s decision against HH-Indianapolis was arbitrary, capricious and unsupported by substantial evidence, pointing to documentation submitted to the city by HH-Indianapolis.

“… (T)he BZA found that there was credible evidence that some merchandise was mischaracterized as non-adult to stay under the 25% threshold of adult products,” Crone wrote. “Our review of the record fails to reveal any such evidence. The City argues that the Cincinnati store and the website evidence cast doubt upon the accuracy of HH-Indianapolis’s information, but that evidence is irrelevant to the Indianapolis store.

“Here, the Indianapolis store is in the C-3 zoning district and must operate within its restrictions or face the consequences for any violations,” Crone continued. “There is no evidence to support the notion that the Site will operate in violation of the Code. To assume as much amounts to pure speculation.”

The COA panel also rejected the argument that HH-Indianapolis’ store could be classified as an adult services establishment, defined as a building that “provides a preponderance of services involving specified sexual activities or display of specific anatomical areas.”

Caselaw divides “specified sexual activity” or “specified anatomical areas” into five categories, three of which were at issue on appeal: the sale or display of written, visual or audio media with an emphasis on specified sexual activities or anatomical areas; the presentation of audio or video media with an emphasis on specified sexual activities or anatomical areas for observation by patrons; and live performances by strippers and similar entertainers with an emphasis on specified sexual activities or anatomical areas.

“There is simply no evidence relevant to the Indianapolis store that shows that its proposed use is to provide services involving specified sexual activity or display of specified anatomical areas in any category other than the first,” Crone wrote. “Accordingly, BZA’s findings related to the definition of an adult services establishment are arbitrary, capricious, and unsupported by substantial evidence.”

As for H-Indy, while the trial court did not grant its request for an order of mandate, it correctly ruled that the company’s constitutional and property rights were violated, the COA held.

“The materials designated by H-Indy in support of its summary judgment motion … constitute prima facie evidence that H-Indy had a property interest in the Site,” Crone wrote. “Further, the harm to H-Indy occurred when BNS indicated that it would not process any permit applications; any attempt by H-Indy to submit permit applications would have been futile.

“We conclude that the City has failed to carry its burden to demonstrate that the trial court erred by concluding that H-Indy’s due process rights were violated by an unauthorized litigation hold. Accordingly, we affirm the judgment granting H-Indy declaratory relief.”

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