Diamond S.J. Enterprise, Inc. v. The City of San Jose

Background

Diamond S.J. Enterprise, Inc. operated a nightclub called SJ Live, sometimes called Studio 8. During an event on May 27, 2017, event promoter Daniel Embay allegedly collected advance payments for tables even though he was not supposed to do so. After the club’s owner ended the arrangement and asked Embay to leave, Embay allegedly retrieved a gun from his car, approached a group of people, and fired multiple shots.

After reviewing video of the incident, the San Jose Police Department identified several security violations. The San Jose Police Chief issued a notice of intended action to revoke the club’s entertainment permit. After an administrative hearing, the city suspended the permit for 30 days instead of revoking it, finding that the company had violated San Jose Municipal Code Chapter 6.60 by hiring an unlicensed promoter for whom it was responsible and by creating a public nuisance. The Appeal Hearings Board rejected the unlicensed-promoter finding but upheld the public-nuisance finding and affirmed the 30-day suspension.

Claims and procedural history

Diamond S.J. Enterprise sued the City of San Jose under 42 U.S.C. § 1983, alleging violations of the First Amendment and Fourteenth Amendment, and also asserted a claim under the California Constitution. After earlier rulings, the only surviving claim was the First Amendment claim based on theories that the ordinances were overbroad and vague. The prior-restraint theory had been dismissed with prejudice, and the court had denied reconsideration and leave to amend.

The City moved for summary judgment, which asks whether the evidence shows there is no genuine dispute over a fact important to the case and the moving party is entitled to win under the law. Diamond S.J. Enterprise filed a cross-motion for partial summary judgment. The court granted the City’s request for judicial notice of the state administrative record and adopted the City’s statement of facts for purposes of the motions. It also overruled as moot the City’s objections to some of Diamond S.J. Enterprise’s evidence.

Chapter 6.60

Chapter 6.60 establishes a permitting system for certain public entertainment businesses. The court granted the City’s motion for summary judgment on the challenge to section 6.60.240, which requires security arrangements such as minimum staffing based on the number of patrons. The court relied on its earlier ruling that this provision regulates security at permitted businesses and does not implicate expressive activity.

The court also granted summary judgment for the City on Diamond S.J. Enterprise’s challenge to sections 6.60.290, 6.60.370(L), and 6.60.383(F), called the “Nuisance Provisions.” These provisions restrict businesses from operating in a way that creates a public nuisance and allow permit denial, suspension, or revocation in specified circumstances. The court held that they regulate nonexpressive conduct rather than speech. It rejected the argument that the provisions singled out expressive businesses, noting that the same or similar nuisance conditions applied to many nonexpressive businesses and generally to licenses and permits under the city’s business-regulation code.

The court also granted summary judgment for the City on Diamond S.J. Enterprise’s challenge to Chapter 6.60 as a whole. It held that the chapter regulates business operations, including security, indemnification, insurance, and on-site managers, rather than the messages businesses express. The court stated that the chapter’s permitting requirements are triggered by operating a venue that serves alcohol and accommodates more than 100 patrons, and that the company could avoid the permit requirement by adopting another business model, such as discontinuing alcohol service.

Chapter 6.62

Chapter 6.62 establishes a permitting system for event promoters. The court granted the City’s motion for summary judgment on the First Amendment claim concerning section 6.62.040, which defines “event promoter,” because the definition itself imposes no restriction on protected expression. The court also granted summary judgment for the City concerning section 6.62.360(B), which makes event promoters and others responsible for an event site jointly and individually liable for violations of the chapter, other required permits, and applicable law arising from the event’s promotion. The court held that this provision likewise did not itself restrict protected expression.

Diamond S.J. Enterprise sought partial summary judgment on Chapter 6.62 as a whole, arguing in part that the permitting scheme lacked a reasonably prompt deadline for processing applications. The court denied the company’s motion for summary judgment as to Chapter 6.62 because that timing theory was not properly before the court. The theory had not been adequately pleaded in the operative complaint or identified in the company’s interrogatory responses, and the court treated it as a new theory of liability presented at the summary-judgment stage. The court also stated that the timing arguments were based on the prior-restraint theory that had already been dismissed.

Disposition

The court granted the City of San Jose’s motion for summary judgment. It additionally granted summary judgment for the City on Diamond S.J. Enterprise’s First Amendment theory that Chapter 6.60 violated the First Amendment. The court denied Diamond S.J. Enterprise’s cross-motion for partial summary judgment. Because summary judgment resolved the remaining claims, the court did not reach the City’s alternative arguments based on claim preclusion or the pleading requirements of Federal Rule of Civil Procedure 8. Judge Lucy H. Koh issued the order.