Posted by: Patricia Salkin | April 19, 2015

MS Supreme Court Holds Lessor of Adult Business Use Lacked Standing to Challenge Constitutionality of City’s Zoning Ordinance Restricting Locations of Adult Uses

City of Gulfport, Mississippi for the operation of an adult entertainment retailer. Artz already had signed a lease for commercial office space and had generated a business plan. But, the new zoning regulations prevented Hotboxxx from opening its adult business at the location where it had obtained a lease. Hotboxxx brought an action against the city, challenging the constitutionality of the city zoning ordinance, which restricted areas of town in which adult businesses could be located. The City removed the action from the Chancery Court to federal court. The federal District Court dismissed the action for lack of standing. Hotboxxx then filed an amended complaint, contending it had standing to sue because, under the Mississippi standard for standing, it had a colorable interest. The district court dismissed the case for lack of standing without prejudice, finding that, under the federal standing requirements, Hotboxxx’s claim was “speculative and hypothetical” because it was undisputed that the application was not complete.

Hotboxxx filed a new complaint in the Chancery Court, citing the same issues from in the first suit. Gulfport then filed a Motion to Dismiss under the principle of res judicata. Hotboxxx responded to the Motion to Dismiss, claiming that dismissal without prejudice did not preclude a second suit and that standing requirements are different for Mississippi. Additionally, Hotboxxx claimed that Gulfport has a ministerial duty to advise the applicant of any omissions in its application.  The Chancery Court dismissed with prejudice for lack of standing, stating that the application was incomplete. Further, under res judicata, it determined the instant case was different from the one originally filed, but all the material issues that this Court must address have already been addressed by the Federal District Court. Hotboxxx appealed.

The Mississippi Supreme Court affirmed and held that: 1) the lower court did not commit reversible error in finding that privilege license application was incomplete and invalid; and 2) the applicant’s initial status as lessor of commercial property located in area of city affected by ordinance did not create colorable interest required to confer standing.

On the matter of whether the license application was invalid, the court stated that they will not interfere with the findings of a chancellor unless the findings were “manifestly wrong, clearly erroneous, or applied the wrong legal standard.” Bluewater Logistics, LLC v. Williford, 55 So.3d 148, 166 (Miss.2011) The Chancery Court stated in its Final Judgment that it had “considered the testimony of parties and other witnesses as well as documentary proof and evidence and argument of counsel” and, further, that it had “judged and weighed the credibility and veracity of the witnesses and documentary evidence submitted” to conclude that Hotboxxx had not submitted a valid and proper application. This Court upheld the chancery court’s finding that the privilege license application was incomplete and invalid. Further, the application was missing the required signature by Hotboxxx and was not notarized or completed by a member of the General Finance Department. The instructions required the application to be signed in the presence of the General Finance Department or otherwise notarized. Artz testified he did not sign the application in the presence of the department, and it was not notarized. Thus, the application was not complete.

With respect to whether, regardless of the invalid application, Hotboxxx argued that its lease of the commercial building constituted a colorable interest, giving it standing to challenge the zoning ordinance. Hotboxxx stated that its chosen location for the business was in violation of the ordinance, and therefore, experienced an adverse effect from the enactment of the ordinance. The City argued that Hotboxxx did not have an injury because Hotboxxx submitted an improper application; therefore, regardless of the Ordinance, Hotboxxx was not able to engage in the business. The City then argued that the colorable interest claims by Hotboxxx did not prove an injury because they must be supported either with evidence found in the record or presented at trial, and Hotboxxx’s lease states it is void if it is unable to obtain a license.

Hotboxxx did not submit a valid license application, but maintained that it had signed a lease and claims it was fully registered as a business entity with a business plan. Although Hotboxxx may have been registered as a business with a business plan, the signed lease was the only evidence linking Hotboxxx to the zone of the city affected by the ordinance. The Court also has held that “Any property owner or person having an interest in property which is or may be affected by a permit or variance illegally issued or denied is an aggrieved party and may apply to the court for relief.” Belhaven Improvement Ass’n, Inc. v. City of Jackson, 507 So.2d 41, 46 (Miss.1987) The court stated that although Hotboxxx had an interest in land affected by the ordinance, when Hotboxxx failed to submit a valid application and failed to obtain a license, the lease became void, and Hotboxxx no longer had an interest in the land. Here, Hotboxxx’s lease was pendent on obtaining the appropriate licenses. The chancery court held the application for the privilege license to be invalid. Thus, the lease was void, and Hotboxxx had no interest in the land, and therefore, under Mississippi case law, no standing.

Hotboxxx, LLC v City of Gulfport, 154 So 3d 21 (Miss. 1/8/ 2015)

The opinion can be accessed at: http://caselaw.findlaw.com/ms-supreme-court/1689158.html


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