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SHOW-WORLD CTR., INC. v. WALSH

June 28, 1977

SHOW-WORLD CENTER, INC., Plaintiff,
v.
Jeremiah T. WALSH, Individually and as Commissioner of Buildings of the City of New York, Cornelius F. Dennis, Individually and as Borough Superintendent of the Department of Buildings of the City of New York, Sidney Baumgarten, Individually and as Assistant to the Mayor of the City of New York, and Abraham Beame, Individually and as Mayor of the City of New York, Defendants



The opinion of the court was delivered by: MOTLEY

FINDINGS OF FACT AND CONCLUSIONS OF LAW

 MOTLEY, District Judge.

 Plaintiff, Show-World Center, Inc., (Show-World) is a commercial establishment occupying the basement, the street level, and a small portion of the second floor of a 12-story office building located on the corner of Eighth Avenue and 42nd Street. This is in the heart of New York City's Times Square area. Show-World's business is sex. It specializes in the sale of sexually oriented books and films. It also provides peep shows and live entertainment. Defendants are all New York City officials, including the Mayor, Abraham Beame. Show-World sues defendants complaining that on March 25, 1977 Show-World was vacated from its premises pursuant to an administrative order on the ground that there is " imminent danger to the safety and life of the occupants " of the entire building (Peremptory Vacate Order issued by Manhattan Borough Superintendent of Buildings, emphasis in original). The gravamen of Show-World's complaint is that the Peremptory Vacate Order (Vacate Order) is a subterfuge for banning its constitutionally protected free speech activity, *fn1" and is part of a campaign initiated by defendants and financed by local and federal funds to ban all such activity from the Times Square area. Pending a final determination of its lengthy complaint, Show-World now seeks a preliminary injunction restraining defendants from enforcing the Vacate Order. A temporary restraining order was issued by this court on April 15, 1977 restraining enforcement of the Vacate Order pending determination of the instant motion.

 Defendants deny that they are seeking to interfere with plaintiff's First Amendment Rights. Defendants expressly reject the suggestion that they seek to put plaintiff out of business because they believe plaintiff is engaged in 1) obscenity, or 2) the sale of constitutionally protected sexually oriented materials which defendants find distasteful, or 3) the conduct of an establishment which is contributing to the decline of the Times Square area as an entertainment center. There is no action pending in the state court charging this plaintiff with obscenity or any other law violation. Defendants claim they are proceeding only against Show-World's landlord under their authority to prevent danger to life and limb emanating from conditions determined by them to be dangerous building conditions or fire hazards.

 However, after a hearing on plaintiff's motion, it remains undisputed that the only tenant of the building against whom the Vacate Order was enforced on March 25 was Show-World, thus lending strong support to Show-World's claim that the Vacate Order is a stratagem for scuttling the exercise of free speech. For the reasons set forth below, the motion for preliminary injunction is granted.

 Statement of Facts

 Many of the other relevant facts are not disputed. As noted above, Show-World occupies the lower floors of a twelve story office building at 303 West 42nd Street. The corporate landlord is 303 West 42nd Street Corporation (303 Corp.). Show-World operates a live theatre in the basement of the premises, *fn2" sells magazines, offers peep shows on the first floor, and has offices on a small portion of the second floor. The entire space occupied by Show-World is interconnected. There are two exits to the street on the first floor: one on Eighth Avenue and the other on 42nd Street.

 The remaining portion of the second floor and the entirety of floors three through twelve are occupied by 117 other and diverse tenants. Show-World is the only tenant involved in sexually oriented activities. Each floor has but a single exit to the street via a fire tower which finally exits through Show-World's 42nd Street exit. It is conceded that this means of egress was acceptable to the City when the building was constructed in 1928. However, this single exit for floors two through twelve does not satisfy the two-exit requirement of the 1938 and 1968 New York City building codes. It is also conceded, however, that Show-World's two exits are legal under today's City building code.

 Show-World's premises were formerly occupied by a bank. In early 1974 plans were drawn to renovate the former bank area to accommodate Show-World. These plans were personally approved in their entirety by defendant Cornelius F. Dennis, who is now the Manhattan Borough Superintendent of the Department of Buildings (and who is answerable to defendant Jeremiah T. Walsh, the New York City Commissioner of Buildings). A building permit for the renovation was issued in July of 1974. The work was completed -- according to the revised plans -- at a cost of approximately $200,000. Due to the major changes in 303 Corp.'s premises, a new Certificate of Occupancy had to be issued for the entire building. A Temporary Certificate of Occupancy, valid for 90 days, was issued on July 23, 1975. A permanent certificate was not issued since the building elevators had not been inspected at that time due to a manpower shortage in the Building Department.

 On September 25, 1975 defendant Walsh applied to the New York City Board of Standards and Appeals (Board) for a change in 303 Corp.'s Certificate of Occupancy which would, in essence, allow Walsh to order the landlord to install a sprinkler system throughout the entire building. The estimated cost of this system is in excess of $100,000. Hearings before the Board were held in January and February of 1976. On March 9, 1976 the Board granted Walsh's request.

 On April 7, 1976, 303 Corp. (not Show-World) filed an Article 78 petition in the State courts in an attempt to overturn the Board's sprinkler ruling. Supreme Court Justice Spiegel dismissed the petition on December 7, 1976. Judgment was entered on January 20, 1977. The dismissal of 303 Corp.'s Article 78 petition is presently on appeal to the Appellate Division. *fn3" At this writing there has been no adjudication of this appeal.

 The above chronology of 303 Corp.'s litigation serves as background to the events which began on March 25, 1977. It was on this date that the Buildings Department, per Superintendent Dennis, issued the Peremptory Vacate Order. On its face, the Order required that the entire twelve story building be vacated " because there is imminent danger to the safety and life of the occupants. . ." (emphasis in original). Pursuant to the Order, Show-World was actually evicted from the premises on March 25, 1977. And it was on this date that Show-World alleges that its cause of action in this litigation arose.

 A slight digression is necessary to identify one of the other defendants, Sidney Baumgarten. The Midtown Task Force (MTF) is in the nature of an ad hoc committee whose task is to coordinate the activities of various City agencies in its investigation of, among other things, sexually-oriented businesses in Times Square. Defendant Sidney Baumgarten, an assistant to Mayor Beame, directed the activities of the MTF during the time in which the events here in question occurred.

 At the hearing on the instant motion substantial evidence was introduced which tended to show that one of the aims of the MTF was to rid Times Square of sexually-oriented establishments, such as Show-World. In any case, it is clear that the Buildings Department's files on Show-World and other establishments were turned over to the MTF for its perusal. In addition, the MTF, in close liaison with the Buildings Department, arranged that no building permits be granted to these establishments until they had been approved by the MTF. Edward Triconi, a Building Department Inspector, was assigned full time to the MTF to assist it in its inspection of potential building violations.

 In light of this background, the precise sequence of events leading up to the issuance of the Vacate Order is important. On March 25, 1977 Sidney Baumgarten called Cornelius Dennis and suggested that a vacate order should be issued against 302 West 42nd Street. Baumgarten explained the reasons why he thought the order should issue, subsequently confirming them in a memorandum to Dennis. *fn4" Despite the fact that, until this phone call, Dennis had no thoughts of issuing a vacate order, he immediately issued the Vacate Order when the phone call terminated. The Vacate Order, which was based on a finding of "imminent danger," was issued without confirming that Baumgarten's reasons were correct and without any subsequent inspection of the 303 premises by a member of Dennis' staff. Moreover, the landlord of 303 West 42nd Street was not then contacted in an attempt to eliminate those conditions which made the building unsafe.

 On March 25 at 1:00 P.M. Dennis signed the Vacate Order. It was served upon Show-World at approximately 2:00 P.M. by Edward Triconi. He was accompanied by approximately 35 New York City policemen. Although Show-World was physically evicted at this time, the remaining 117 other tenants were not evicted. The City's explanation is that the Building Department day crew works only until 4:00 P.M. and, consequently, there was not time to serve a copy of the Vacate Order on the remaining tenants. *fn5" The Vacate Order was turned over to the Buildings Department's night crew which posted copies of it in the lobby and on all the floors of the building. Since March 25 was a Friday, defendants claim that none of the other 117 tenants occupied the building over the weekend. Show-World was the only tenant affected by this action.

 On Monday, March 28, the President of 303 Corp., Wallace Katz, was approached by a member of the Buildings Department who intended to vacate the remainder of the building. Mr. Katz informed this person that he intended to take legal action against the Vacate Order. At this point, the defendant's contention is that the Buildings Department decided to withhold any further enforcement of the Vacate Order pending the conclusion of these upcoming proceedings.

 On that Monday afternoon, 303 Corp. moved for a stay of the Vacate Order in the Appellate Division of the State Supreme Court. The parties appeared before Justice Capozzoli late Monday afternoon. Justice Capozzoli found that he could not rule on the motion for a stay without a proper record. He referred the matter to Special Term and suggested that the matter would be ripe for his review after a record had been made below.

 Justice Capozzoli did one other thing upon which defendants place great emphasis. He noted that, by late Monday afternoon, only Show-World had been vacated and that the remaining 117 "innocent" *fn6" tenants could probably safely remain in the building until the hearing in Special Term. Justice Capozzoli telephoned Commissioner Walsh who agreed not to vacate the remainder of the building until Special Term ruled on 303 Corp.'s motion for a stay of the Order. 303 Corp. also concurred in Justice Capozzoli's suggestion.

 The parties appeared in Special Term on Wednesday, March 28 before Justice Gellinoff. According to Show-World, it soon became clear that the Buildings Department had abandoned any intention to enforce its Order as to the 117 other tenants and was proceeding only against Show-World. During all of these proceedings (and in the Article 78 proceedings as well) 303 Corp. was represented by Ralph J. Schwarz, Jr. (Schwarz) who is also general counsel to Show-World. When Schwarz perceived that the Buildings Department was acting solely against Show-World, he decided that Show-World should be separately represented and called in outside counsel on its behalf. Mr. Herald Price Fahringer has since represented Show-World.

 On April 7 Justice Gellinoff denied 303 Corp.'s motion for a stay of the Vacate Order. On April 13, 1977 Show-World became a plaintiff -- for the first time in any of these proceedings -- when it filed this action in federal court. After hearings on April 14 and 15 this court granted a temporary order restraining defendants from taking any steps to enforce the Vacate Order. Hearings on the preliminary injunction were held on April 20, 21, 22, 25, 26, 27, 28, 29 and May 3, 1977.

 Privity of Show-World and 303 Corp.

 A threshold issue of critical importance to disposition of the preliminary questions in this case (i.e. abstention and res judicata) is the nature of the relationship between Show-World, the plaintiff in this action, and 303 Corp., the plaintiff in the two State court proceedings. The only clear, undisputed facts on this issue are that Show-World was a tenant of 303 Corp., and that both corporations have had dealings with one attorney, Ralph Schwarz. Mr. Schwarz has been General Counsel to Show-World since 1974, when he handled that entity's incorporation and negotiated its lease with 303 Corp. During the lease negotiation, 303 Corp. was represented in the main by its President and sole shareholder, Wallace Katz, who looked to another lawyer for legal advice on that occasion. Mr. Katz owns no part of Show-World and 303 Corp. owns no part of Show-World.

 During the State court proceedings, Mr. Schwarz represented only 303 Corp. although, on two occasions in the State court, he did identify himself as being also the attorney for Show-World, allegedly to provide support for his assertion of personal knowledge of some of the facts there in issue. He admitted at the hearing in the instant case that he kept his client, Show-World, informed as to the course of the proceedings before the Board of Standards and ...


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