821 F.3d 795
7th Cir.2016Background
- Two Milwaukee LLCs owned by Jon Ferraro (Six Star and Ferol) sought to open adult-entertainment clubs offering nudity; local licensing ordinances required specific permits for nude entertainment (liquor + tavern-amusement for wet clubs, or theater or public‑entertainment licenses for dry clubs).
- Six Star applied for a theater license for “Silk East”; Ferol did not apply but planned a dry club called “Satin.” The Milwaukee Common Council denied or stalled petitioned licenses and the ordinances allowed open‑ended licensing discretion.
- Plaintiffs sued under 42 U.S.C. § 1983, alleging the ordinances operated as unconstitutional prior restraints lacking procedural safeguards and thus chilled First Amendment activity; they sought injunctive relief and damages.
- The city later repealed the challenged ordinances; plaintiffs dropped injunctive relief but pursued damages. The district court held the ordinances were time/place/manner regulations but lacked required procedural safeguards (unfettered discretion) and submitted damages issues to a jury.
- A jury found Ferol would have opened its club but for the ordinances and awarded $435,000 in lost‑profit damages to Ferol; Six Star received nominal damages. The City appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge theater and public‑entertainment ordinances | Ferol had concrete injury: planned, prepared to open a dry club and was chilled by ordinances; affidavit and preparatory steps support standing | City: Ferol lacked injury because it never applied for a license and thus no traceable harm; relied on advice of an unlicensed lawyer | Court: Ferol had standing—either as pre‑enforcement or because the ordinances functioned as prior restraints that chilled speech; evidence met summary judgment standard |
| Causation for damages (lost profits) | Ferraro testified Ferol refrained from opening because of ordinances; preparatory steps and jury found causation | City: Harm was self‑censorship by Ferraro, not traceable to the ordinances; insufficient evidence of causation | Court: Causation established; chilling effect from unconstitutional ordinances supports damages; City waived some sufficiency arguments by not moving under Rule 50(a) |
| Availability of nominal damages to Six Star | Six Star entitled to at least nominal damages for constitutional violation even if monetary loss minimal | City: Six Star suffered de minimis or no monetary harm (space occupied by tenant) so damages inappropriate | Court: Nominal damages appropriate for a proven rights violation; contested lease facts affect only the amount, not entitlement |
| Relevance of facial vs. as‑applied characterization | Plaintiffs sought as‑applied relief (damages) for their concrete injuries | City argued plaintiffs had to bring facial challenge to address unbridled licensing discretion | Court: Distinction is remedial; as‑applied damages claim was permissible and standing/relief not defeated by labeling |
Key Cases Cited
- Bantam Books, Inc. v. Sullivan, 372 U.S. 58 (prior restraints carry heavy presumption against constitutionality)
- City of Lakewood v. Plain Dealer Publ’g Co., 486 U.S. 750 (licensing regimes must avoid unfettered discretion; procedural safeguards required)
- Blue Canary Corp. v. City of Milwaukee, 251 F.3d 1121 (7th Cir.) (local governments may consider secondary effects but must respect First Amendment limits)
- Freedman v. State of Maryland, 380 U.S. 51 (procedural safeguards for censorial licensing; limits on administrative delay and discretion)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing: injury‑in‑fact, traceability, redressability; summary‑judgment proof requirements)
- Virginia v. American Booksellers Ass’n, Inc., 484 U.S. 383 (standing for publishers to challenge statutes that chill speech)
- Carey v. Piphus, 435 U.S. 247 (nominal damages appropriate when constitutional rights are violated)