City amended law to obstruct loopholes. In 1993, adult establishments had proliferated within the city, growing from only nine in 1965 to 177 in 1993. A 1993 Planning Department study, precipitated by this increase, concluded that adult uses produced secondary negative impacts like increased crime, property value depreciation and a reduction in commercial activity in areas where the uses were heavily concentrated. This study became the basis of a 1995 citywide zoning amendment that prohibited adult establishments within residential districts and within 500 feet of schools and churches.

The 1995 zoning restrictions defined adult uses as a commercial enterprise that used a substantial portion of its business for adult content, but failed to explicitly define “substantial portion.” Buildings interpreted “substantial portion” as a business that devoted at least 40 percent of its floor area to adult uses. Adult use businesses then reconfigured their floor area to circumvent the 60/40 rule.

A string of lawsuits followed. The Court of Appeals upheld the adult zoning law, but ruled that the 60/40 rule could be applied only to floor area and could not, as the City argued, be applied to profits of adult businesses that offered non-adult material as a sham to circumvent the 60/40 split.

The City Council in 2001 enacted amendments to eliminate the 60/40 loophole. Peoples Theatre in Queens, which reconfigured its business in 1998 to show non-adult films in 60 percent of its theater, and Ten’s Cabaret, a topless dance club that restricted adult content to less than 40 percent of its floor area, sued, arguing that the 1993 studies could not be used to show that 60/40 businesses had a negative impact on adjacent uses. The lower court agreed.

On appeal, the First Department reversed, finding that the original 1993 study could be used as a basis for the amendments. The reconfiguration of floor area or addition of other stock did nothing to change the essential nature of the adult uses. Peoples and Tens Cabaret failed to provide a factual basis to put the City’s original 1993 study in doubt.

For the Peoples Theatres of NY v. City of New York, 2005 NY Slip Op 02782, April 12, 2005 (1st Dep’t) (Attorneys: Herald Price Fahringer, Erica T. Dubno, Lipsitz, Green, for People; Mark J. Alonso, Alonso, Andalkar & Kahn, P.C., for Ten’s Cabaret; Michael A. Cardozo, for City.)