CA3: Porn industry is not a “closely regulated industry” for purposes of warrantless record keeping inspections

The pornography industry is not a “closely regulated industry” for purposes of warrantless record keeping inspections. There is neither a longstanding history of regulation nor pervasive regulation. Free Speech Coalition v. Attorney General of the United States, 2016 U.S. App. LEXIS 10356 (3d Cir. June 8, 2016):

This case reaches us for the third time and requires us to consider the import of two recent Supreme Court cases, Reed v. Town of Gilbert, 135 S. Ct. 2218, 192 L. Ed. 2d 236 (2015), and City of Los Angeles v. Patel, 135 S. Ct. 2443, 192 L. Ed. 2d 435 (2015), on the constitutionality of the recordkeeping, labeling, and inspection requirements set forth in 18 U.S.C. §§ 2257 and 2257A (collectively, “the Statutes”) and their accompanying regulations, 28 C.F.R. §§ 75.1-75.9. In light of Reed, we determine that the Statutes are content based, and therefore require strict scrutiny review under the First Amendment. We will remand to the District Court to determine whether the Statutes withstand strict scrutiny. In light of Patel, we conclude that the inspection provisions of the Statutes and 28 C.F.R. § 75.5 are facially unconstitutional under the Fourth Amendment.

. . .

The other recent Supreme Court case that requires us to reconsider our holding in FSC III is City of Los Angeles v. Patel, 135 S. Ct. 2443, 192 L. Ed. 2d 435 (2015). Patel dealt with a city ordinance that created an inspection regime with similarities to the one at issue here. Compare id. at 2448 (“Section 41.49(3)(a) … states … that hotel guest records ‘shall be made available to any officer of the Los Angeles Police Department for inspection,’ provided that ‘[w]henever possible, the inspection shall be conducted at a time and in a manner that minimizes any interference with the operation of the business.'” (quoting L.A. Mun. Code § 41.49(3)(a)), with 18 U.S.C. § 2257 (providing that the records must be available for inspection “at all reasonable times),” id. § 2257A (same), and 28 C.F.R. § 75.5(c)(3) (“The inspections shall be conducted so as not to unreasonably disrupt the operations of the establishment.”).

The Supreme Court, after noting that “facial challenges under the Fourth Amendment are not categorically barred or especially disfavored,” Patel, 135 S. Ct. at 2449, struck down the hotel inspection regulation as facially unconstitutional because it did not provide the hotel operators an opportunity for precompliance review by a neutral arbiter, id. at 2454. In doing so, the Court rejected the argument that the hotel industry was “closely regulated,” such that there was no reasonable expectation of privacy, and held that, even if it was, warrantless searches in this context were unreasonable. Id. at 2454-56.

In light of Patel, we now turn to Plaintiffs’ Fourth Amendment claim that the inspection provisions of the Statutes and § 75.5 are unconstitutional. First, we determine that Plaintiffs have standing. Next, we decide that it is appropriate to consider Plaintiffs’ facial challenge to the inspection provisions. Finally, we hold that the inspection regime is unconstitutional because the administrative search exception to the warrant requirement for closely regulated industries is inapplicable. Even if it were applicable, it does not pass muster under the test for reasonableness.

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In Patel, the Court described two different types of administrative searches. Recognizing that a warrantless administrative search provision would normally be facially unconstitutional if there was no “opportunity for precompliance review,” 135 S. Ct. at 2451, it also noted that if the establishment was part of a “closely regulated” industry, the ordinance could be “facially valid under the more relaxed standard that applies to searches of this category of businesses, id. at 2454. In this case, the constitutionality of the warrantless searches under the Fourth Amendment rises and falls with the administrative search exception to the warrant requirement applicable to closely regulated industries. “Searches conducted absent a warrant are per se unreasonable under the Fourth Amendment, subject to certain exceptions.” United States v. Katzin, 769 F.3d 163, 169 (3d Cir. 2014) (en banc). “[T]he few situations in which a search may be conducted in the absence of a warrant have been carefully delineated and the burden is on those seeking the exemption to show the need for it.” California v. Acevedo, 500 U.S. 565, 589 n.5, 111 S. Ct. 1982, 114 L. Ed. 2d 619 (1991) (quoting United States v. Jeffers, 342 U.S. 48, 51, 72 S. Ct. 93, 96 L. Ed. 59 (1951)).

As we explained in FSC I, “[c]ertain industries have such a history of government oversight that no reasonable expectation of privacy could exist.” 677 F.3d at 544. Under these circumstances, “the warrant and probable-cause requirements, which fulfill the traditional Fourth Amendment standard of reasonableness for a government search, have lessened application.” New York v. Burger, 482 U.S. 691, 702, 107 S. Ct. 2636, 96 L. Ed. 2d 601 (1987) (citation omitted). Thus, “where the privacy interests of the owner are weakened and the government interests in regulating particular businesses are concomitantly heightened, a warrantless inspection of commercial premises may well be reasonable within the meaning of the Fourth Amendment.” Id. Even if a business is part of a closely regulated industry, we must consider whether the warrantless searches themselves are reasonable. This requires examining whether “the following criteria are met: (1) the regulatory scheme furthers a substantial government interest; (2) the warrantless inspections are necessary to further the regulatory scheme; and (3) the inspection program, in terms of certainty and regularity of its application, is a constitutionally adequate substitute for a warrant.” FSC I, 677 F.3d at 544 (citing Burger, 482 U.S. at 702-03).

1.

To determine whether an industry is closely regulated, factors to consider include the “duration of the regulation’s existence, pervasiveness of the regulatory scheme, and regularity of the regulation’s application.” Id. Here, the Government points to the fact that since 1978, Congress has criminalized the commercial use of children in sexually explicit materials. See id. at 525. Since 1988, Congress has imposed recordkeeping requirements similar to those currently embodied in § 2257. Id. Some regulation of sexually explicit images, even those not depicting children, has therefore been in place for some time.

But the regulations in this area are not as pervasive as in other industries previously deemed closely regulated. For example, in determining whether the Pennsylvania funeral industry was closely regulated, we looked to the “broad range of standards that funeral directors in Pennsylvania have long been required to comply with,” including licensing requirements, health standards, funeral home services requirements, federal pricing disclosure requirements, and OSHA safety standards. Heffner v. Murphy, 745 F.3d 56, 66 (3d Cir. 2014). Similarly, in finding the New Jersey horseracing industry closely regulated, we looked to the industry’s licensing requirements for all employees in the industry, prohibitions on employing individuals convicted of certain crimes, and the creation of the New Jersey Racing Commission with broad rulemaking authority. Shoemaker v. Handel, 795 F.2d 1136, 1141 (3d Cir. 1986).

In addition, the Supreme Court in Patel noted that in the forty-five years since the administrative search doctrine was created, it “has identified only four industries that ‘have such a history of government oversight that no reasonable expectation of privacy … could exist for a proprietor over the stock of such an enterprise.'” 135 S. Ct. at 2454 (quoting Marshall v. Barlow’s, Inc., 436 U.S. 307, 313, 98 S. Ct. 1816, 56 L. Ed. 2d 305 (1978)). This doctrine is thus “the exception,” not the rule. Barlow’s, 436 U.S. at 313. The pornography industry, like the hotel industry in Patel, is not subjected to a level of regulation even approximating the pervasive regulation aimed at the liquor industry, Colonnade Catering Corp. v. United States, 397 U.S. 72, 90 S. Ct. 774, 25 L. Ed. 2d 60 (1970), firearms dealing, United States v. Biswell, 406 U.S. 311, 311-12, 92 S. Ct. 1593, 32 L. Ed. 2d 87 (1972), mining, Donovan v. Dewey, 452 U.S. 594, 101 S. Ct. 2534, 69 L. Ed. 2d 262 (1981), or independent automobile junkyards, New York v. Burger, 482 U.S. 691, 107 S. Ct. 2636, 96 L. Ed. 2d 601 (1987). In Burger, for example, these regulations were backed by civil and criminal penalties, and some form of regulation had existed for at least 140 years. Id. at 704, 707.

In contrast with the above-mentioned industries, the Government fails to identify any similar requirements for producers of sexually explicit images. Nor are the regulations that the Government does identify sufficient. First, the prohibition of child pornography is a broad proscription of a class of images and does not directly target the industry in which Plaintiffs are engaged. Nor could it; Plaintiffs’ expression is constitutionally protected, while child pornography is not. See Ferber, 458 U.S. at 764. Indeed, enforcement of the ban is not limited to only those engaged in the business of producing sexually explicit images. The ban on child pornography is therefore more appropriately considered a generally applicable criminal law, not the targeted regulation of a legitimate industry. Although the nature of Plaintiffs’ businesses enhances the chance that they might run afoul of these laws, that alone does not justify deeming the entire industry closely regulated.

Second, the other provisions of the Statutes do not justify classifying producers of adult images as closely regulated. To be sure, the Statutes require recordkeeping and labeling. Yet no one is required to obtain a license or register with the Government before producing a sexually explicit image. An artist can pick up a camera and create an image subject to the Statutes without the knowledge of any third party, much less the Government. Nor has the Government identified any regulations governing the manner in which individuals and businesses must produce sexually explicit images. The creation of sexually explicit expression is better characterized by its lack of regulation than by a regime of rules governing such expression.

Third, the Government also cannot rely on the inspection provisions of the Statutes and regulations to themselves establish that the industry is closely regulated. The creation of sexually explicit images is not a “new or emerging industr[y]” to which the Government must respond to ensure public health and safety. See Donovan, 452 U.S. at 606 (noting that some new industries, at the time including the nuclear power industry, can be subject to warrantless searches despite “the recent vintage of regulation”). We are doubtful that the Government can create the reduced expectation of privacy of a closely regulated industry to justify warrantless inspections by simply mandating those inspections, particularly where that industry existed long before the regulation’s enactment. See Patel, 135 S. Ct. at 2455 (“The City wisely refrains from arguing that [the challenged inspection provision] itself renders hotels closely regulated.”); Burger, 482 U.S. at 720 (Brennan, J., dissenting) (“[T]he inspections themselves cannot be cited as proof of pervasive regulation justifying elimination of the warrant requirement; that would be obvious bootstrapping.”). And in any event, as the Government readily acknowledges, no inspections have taken place since 2007. This is hardly the “regularity of the regulation’s application,” FSC I, 677 F.3d at 544, that we would expect of a closely regulated industry. For these reasons, we conclude that producers of sexually explicit images are not currently part of a closely regulated industry, and this exception to the warrant requirement does not apply.

2.

This alone is sufficient to conclude that the warrantless searches authorized by this regime violate the Fourth Amendment. In the interest of completeness, however, we also address why those inspections are unreasonable, even if producers of sexually explicit images were closely regulated. For this inquiry, we consider whether “(1) the regulatory scheme furthers a substantial government interest; (2) the warrantless inspections are necessary to further the regulatory scheme; and (3) the inspection program, in terms of certainty and regularity of its application, is a constitutionally adequate substitute for a warrant.” FSC I, 677 F.3d at 544 (citing Burger, 482 U.S. at 702-03). Having already discussed the substantiality of the Government’s interest in protecting children with this regulatory scheme, id. at 535, we need not dwell on that criterion of this test. And because we find the warrantless inspections here unnecessary, we need not reach whether the inspection program is “a constitutionally adequate substitute for a warrant.”

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