Green Valley Investments, LLC v. Winnebago County , Wisconsin

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-2473
GREEN VALLEY I NVESTMENTS, LLC,
Plaintiff-Appellant,
v.
WINNEBAGO C OUNTY , WISCONSIN ,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 13-C-402—William C. Griesbach, Chief Judge.
____________________
A RGUED F EBRUARY 13, 2015 — DECIDED J ULY 27, 2015
____________________
Before WOOD, Chief Judge, and BAUER and R IPPLE, Circuit
Judges.
WOOD, Chief Judge. Stars Cabaret is a nude dancing es-
tablishment in Neenah, Wisconsin, which lies in Winnebago
County. When Stars opened in 2006, the County had a zon-
ing ordinance governing Adult Entertainment Overlay Dis-
tricts. In order to operate legally, Stars’s owner, Green Valley
Investments, had to locate its cabaret within an area author-
ized by the zoning law. But the process was stalled at the

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2 No. 14-2473
outset because, as all parties agree, the 2006 ordinance vio-
lated the First Amendment. In an effort to reap a permanent
benefit from that fact, Green Valley later sued in federal
court for a declaration that its operation of Stars has been le-
gal from the outset. Green Valley reasoned that anything is
legal that is not forbidden, and its cabaret was banned only
by an unconstitutional ordinance: ergo, it said, the cabaret
was permitted in 2006 and now has become a legal noncon-
forming use that cannot be barred by a later ordinance. To
drive the point home, Green Valley also brought a supple-
mental claim seeking a declaration under state law that the
Stars Cabaret was a valid nonconforming use under state
law.
The district court found this a little too much to buy, and
so it granted summary judgment to the County. It did so on
the understanding that it was possible to use the severance
clause in the ordinance to strike its unconstitutional provi-
sions. After doing so, the court thought, enough of a regula-
tory scheme remained to support a finding that the cabaret
was unlawful in 2006 when it opened, that it is still unlaw-
ful, and thus that it cannot take advantage of grandfathering.
We agree with the district court that the permissive use
scheme laid out in the County’s ordinance is unconstitution-
al. But we have serious reservations about the rest of its
analysis. Once the constitutional problems with the County’s
law are dealt with, the core questions that remain are those
of state law. Their resolution depends on facts that have not
yet been developed, and on the possible existence of a power
not only to sever problematic language but to revise it—a
power we do not have. Under the circumstances, we con-
clude that the district court should have declined to exercise

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No. 14-2473 3
supplemental jurisdiction over the state-law claims; instead,
it should have dismissed them without prejudice so that the
parties may (if they wish) pursue them in state court. We
therefore reverse to that extent.
I
In 2006, when Stars opened for business, Winnebago
County had on its books Town/County Zoning Ordinance
17.13, which required adult entertainment establishments to
locate within “adult entertainment overlay [AEO] dis-
trict[s].” An AEO district could be established only if the
County issued a conditional-use permit to the would-be
adult entertainment operator. The zoning committee respon-
sible for this process would issue such a permit only if it
found that the proposed use complied with several require-
ments, including that it would “not be a detriment to the
public welfare” and “in no way [would] contribute to the de-
terioration of the surrounding neighborhood” or “have a
harmful influence on children residing in or frequenting the
area.” The application also had to demonstrate (among other
things) that no intoxicating beverages would be sold within
the AEO district, and that any “adult use” within the district
would be located at least 1500 feet from any other adult use
and at least 2000 feet from land zoned residential or institu-
tional. (This is the setback provision.)
The 2006 ordinance also stipulated that the proposed
AEO district had to lie within “a B-3 Highway Business Dis-
trict.” Unfortunately, however, at no point did it define what
a “B-3 Highway Business District” is, even though it men-
tioned “Highway Business Uses.” (The copy of the ordi-
nance in the record includes some scribbled text above the
printed text “Highway Business Uses” that we think says

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4 No. 14-2473
“Highway Bus Dist should include.” But the parties have not
given us any reason to believe that these scribbles were in-
corporated into the ordinance.)
Elsewhere in the County’s general zoning law, there is a
severability clause. It states that “[i]f any section, clause,
provision, or portion of this Section is adjudged unconstitu-
tional or invalid by a court of competent jurisdiction, the re-
mainder of the Ordinance shall not be affected thereby.”
Green Valley has never attempted to satisfy the require-
ments of Ordinance 17.13. It has never sought a permit to
establish an AEO district encompassing its location. The
Stars Cabaret openly features nude dancing and serves alco-
holic beverages.
Green Valley sued the County in 2006 for declaratory and
injunctive relief, alleging that Ordinance 17.13 was an un-
constitutional restriction on expression. While that suit was
pending, the County amended the ordinance, and Green
Valley agreed to a dismissal without prejudice. (The legality
of the 2006 ordinance was thus never resolved in that suit.)
In 2008, Green Valley returned to federal court with a new
suit challenging the constitutionality of a 2007 amendment
to the ordinance. At that point, the district court permanent-
ly enjoined the County from enforcing the provisions of the
2007 ordinance relating to conditional use permits, but it
found that the remainder of the ordinance once the unconsti-
tutional parts were severed could operate effectively on a
standalone basis. Green Valley appealed to this court, but
while the appeal was pending, Winnebago County again
changed the ordinance. Believing that this mooted the ap-
peal, Green Valley voluntarily dismissed it on June 1, 2012.

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No. 14-2473 5
Just before it dismissed the appeal, Green Valley asked
Winnebago County’s corporation counsel, John Bodnar, to
confirm that Stars would be able to continue operating as a
nonconforming use. Bodnar did not respond until December
21, 2012, when he rejected that position on the theory that
Stars had never been lawful and thus was subject to the or-
dinance as redrawn by the district court. Thus rebuffed,
Green Valley brought a third action against the County in
2013. This time, it began with the proposition that the 2006
version of the ordinance violated the First Amendment.
Since Stars had operated for some time before this invalid
ordinance was modified, it argued that this use was lawful.
Hence, it concluded, under state law it had achieved the sta-
tus of a valid nonconforming use for purposes of the ordi-
nance the county was then using (the 2006 ordinance as
amended in 2007 and again in 2011). It sought a declaratory
judgment that the 2006 ordinance violated the First Amend-
ment in a variety of ways, and it raised a supplemental claim
under state law for a declaration that under the new ordi-
nance Green Valley’s “use of the land as an adult cabaret was
lawful in 2006 and is a valid nonconforming use now.”
The County again moved for summary judgment, and
the district court ruled in its favor. The court first concluded
that it had subject-matter jurisdiction over the case—a topic
it had to reach because it found it unclear whether Green
Valley was seeking only a ruling on its state-law zoning
question or whether it was raising a federal question about
the constitutionality of the county’s 2006 ordinance. It con-
cluded that resolution of the federal constitutional question
was required before the state-law issue could be reached.
The court then decided that parts of the 2006 ordinance were
unconstitutional but that they could be severed, leaving a

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6 No. 14-2473
constitutionally permissible law that, from the time before
Stars opened, has regulated alcohol sales at adult establish-
ments and established setback limitations on the location of
such businesses. Since Stars has never complied with those
requirements, its operation (the court reasoned) has never
been lawful. This appeal followed.
II
Although “[b]eing ‘in a state of nudity’ is not an inherent-
ly expressive condition,” erotic nude dancing as practiced at
Stars “is expressive conduct” located “within the outer ambit
of the First Amendment’s protection.” City of Erie v. Pap’s
A.M., 529 U.S. 277, 289 (2000). Prior restraints of ordinary
expression “come[] to [the] Court bearing a heavy presump-
tion against [their] constitutional validity.” Bantam Books, Inc.
v. Sullivan, 372 U.S. 58, 70 (1963). The Court may take a
somewhat more lenient approach to nude-entertainment ex-
pression, see Barnes v. Glen Theatre, Inc., 501 U.S. 560 (1991)
(upholding the enforcement of a public indecency law that
required pasties and G-strings), but it still looks carefully for
a valid justification for laws restricting these activities. In
Barnes, for instance, the Court upheld the challenged ordi-
nance only after finding that it served a valid governmental
interest, that it was narrowly tailored, that it had only a min-
imal restraint on expression, and that (as the Court put it,
perhaps punning) “the bare minimum necessary to achieve
the State’s purpose.” Id. at 572. We conclude that the permit-
ting system in the 2006 version of Ordinance 17.13 does not
meet this test: it is a prior restraint prohibited by the First
Amendment.
In Cantwell v. Connecticut, 310 U.S. 296 (1940), the Su-
preme Court summarized the reasons why the law before it

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No. 14-2473 7
was an impermissible prior restraint:
It will be noted, however, that the Act requires
an application to the secretary of the public
welfare council of the State; that he is empow-
ered to determine whether the cause is a reli-
gious one, and that the issue of a certificate de-
pends upon his affirmative action. If he finds
that the cause is not that of religion, to solicit
for it becomes a crime. He is not to issue a cer-
tificate as a matter of course. His decision to is-
sue or refuse it involves appraisal of facts, the
exercise of judgment, and the formation of an
opinion.
Id. at 305, quoted with approval in Southeastern Promotions,
Ltd. v. Conrad, 420 U.S. 546, 554 (1975); see Samuelson v.
LaPorte Cmty. Sch. Corp., 526 F.3d 1046, 1051 (7th Cir. 2008)
(applying these factors). We have noted that “the case law on
prior restraints is replete with decisions invalidating zoning
ordinances, licensing schemes, permit regulations and other
official acts that limit expressive activity.” Wernsing v.
Thompson, 423 F.3d 732, 747–48 (7th Cir. 2005).
In this case, the 2006 law is a zoning ordinance and per-
mitting scheme rolled up into one. But whatever the label, it
unquestionably imposes a prior restraint. It requires appli-
cants such as Green Valley to apply to the County for per-
mission to undertake their selected mode of expression—
nude dancing. The County’s committee decides whether ap-
plicants receive permission to make their proposed commu-
nication based on the content of that communication. This
requires the committee to review such amorphous points as
whether the proposed use is “a detriment to the public wel-

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8 No. 14-2473
fare,” or “will in no way contribute to the deterioration of
the surrounding neighborhood,” or “will not have a harmful
influence on children” in the area. The ordinance leaves it to
the County’s discretion to decide yes or no on each of these
criteria. Finally, the County must affirmatively grant permis-
sion for the use to occur. This is a quintessential prior re-
straint.
The question remains whether this prior restraint can es-
cape condemnation by fitting into one of the narrow excep-
tions the Supreme Court has identified to the rule barring
prior restraints. See Stokes v. City of Madison, 930 F.2d 1163,
1169 (7th Cir. 1991). One possible exception is the presence of
“a powerful overriding interest” such as national security,
obscenity, or incitement to violence and overthrow of the
government, id., but these have nothing to do with our case.
Another is whether the prior restraint “takes place under
procedural safeguards designed to obviate the dangers of a
censorship system.” Southeastern Promotions, 420 U.S. at 559
(quotations omitted). The safeguards the Court has recog-
nized include the imposition on the censor of the burden of
instituting judicial proceedings; the limitation of the restraint
to a brief period for the purpose of preserving the status quo
pending judicial review; and the assurance of a prompt judi-
cial determination. FW/PBS, Inc. v. City of Dallas, 493 U.S.
215, 227 (1990) (opinion of O’Connor, J.). The County’s ordi-
nance includes none of these safeguards. Nor can the ordi-
nance be sandwiched into the exception for valid time, place,
and manner restrictions, given the fact that a proposed adult
use cannot occur at all under the ordinance without permis-
sion from the County to establish an AEO district for it.
In short, the permitting scheme set up in the 2006 ordi-

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No. 14-2473 9
nance creates an unconstitutional prior restraint and cannot
be enforced.
III
The district court acknowledged the County’s concession
that the permitting system is an unconstitutional prior re-
straint. But it agreed with the County that the severability
clause applicable to the 2006 ordinance made it possible to
strike the unconstitutional provisions from the ordinance
and let a slightly amended version of the remainder stand on
its own as a working law. In order to be left with something
that makes sense, however, the district judge had to modify
the language in some respects. After these changes (includ-
ing changing the term “Adult Entertainment District” to
“Adult Entertainment Establishments” in the alcohol provi-
sion), the judge was satisfied that two parts of the truncated
ordinance could function without the permitting scheme: the
clause establishing setbacks for the locations of adult estab-
lishments relative to other land uses, and the provision ban-
ning the use of alcohol within AEO districts.
From a legislative standpoint, these may have been sen-
sible changes. But there is a preliminary state-law issue that
must be faced: it is not clear as a matter of Wisconsin law
that the power to sever includes the power to modify, nor is
it clear whether what remains of an ordinance after sever-
ance can serve as a standalone law if modifications or addi-
tions are necessary. See Leavitt v. Jane L., 518 U.S. 137, 139
(1996) (“Severability is of course a matter of state law.”). We
do not know in this case whether, after severance, the Wis-
consin courts would regard the remaining parts of the ordi-
nance as a valid freestanding zoning provision. The parties
have devoted most of their attention to this issue. We were

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10 No. 14-2473
treated to a lengthy discussion of the niceties of what consti-
tutes a B-3 Highway Business District in Winnebago County
and the difference between principal and conditional land
uses under Wisconsin’s precedents. This takes us very far
afield from the First Amendment question that launched this
case. “[F]ederal courts, as we have explained time and again,
are not zoning boards of appeal.” CEnergy-Glenmore Wind
Farm No. 1, LLC v. Town of Glenmore, 769 F.3d 485, 487 (7th
Cir. 2014). Yet, with the First Amendment claim out of the
way, that is the role the parties have asked us to undertake.
We are not saying that the zoning issues fall outside the
district court’s supplemental jurisdiction. The federal ques-
tion and these state-law claims spring from a common nu-
cleus of operative fact, as cases discussing 28 U.S.C. § 1367
have put it, see, e.g., Jinks v. Richland Cty., 538 U.S. 456, 463
(2003), quoting United Mine Workers of Am. v. Gibbs, 383 U.S.
718, 725 (1966), and that is enough. But supplemental juris-
diction need not always be exercised, as § 1367(c) recognizes.
A district court may relinquish supplemental jurisdiction for
several reasons: the relation of the state claims to “a novel or
complex issue of State law”; their predominance “over the
claim or claims over which the district court has original ju-
risdiction”; or for “other compelling reasons” in “exceptional
circumstances.” 28 U.S.C. § 1367(c)(1), (2), (4). We review a
district court’s decision to exercise supplemental jurisdiction
for abuse of discretion. Bailey v. City of Chicago, 779 F.3d 689,
696 (7th Cir. 2015).
In assessing that question, we bear in mind the Supreme
Court’s admonition that “zoning laws and their provisions,
long considered essential to effective urban planning, are pe-
culiarly within the province of state and local legislative au-

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No. 14-2473 11
thorities.” Warth v. Seldin, 422 U.S. 490, 508 n.18 (1975); see
also Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 44
(1994). Here, there is no overriding federal-law question,
such as the possibility of an unconstitutional taking, e.g., Lu-
cas v. S.C. Coastal Council, 505 U.S. 1003 (1992), or preemption
by another federal law, e.g., City of Cuyahoga Falls v. Buckeye
Cmty. Hope Found., 538 U.S. 188 (2003) (Fair Housing Act),
that would override that principle.
The ability of a court to do more than excise the unconsti-
tutional portions of the ordinance does not appear to us to
be settled in Wisconsin. The parties have not, for example,
pointed to a Wisconsin case that explicitly establishes a rule
allowing or disallowing such a maneuver. Moreover, in our
view the questions of state law that remain to be decided
“substantially predominate[ ] over the claim or claims over
which the district court has original jurisdiction.” 28 U.S.C.
§ 1367(c)(2). Whether the alcohol and setback parts of the
County’s zoning ordinance can be severed and function on
their own is squarely within the scope of state law. It is also
not clear that Wisconsin would regard a use that did not
conform to a law that was later found to have constitutional
problems as something that can be grandfathered. The an-
swers to these questions are not obvious. They touch on both
the fundamental rules of land-use control and the way in
which the state enforces the separation of powers between
its legislature and judiciary. Furthermore, the resolution of
these issues is hamstrung by a shallow record. The record
sheds no light, for example, on the question whether there is
such a thing in Winnebago County as a “B-3 Highway Busi-
ness District,” despite the fact that the ordinance requires
adult uses to locate within such districts. And as the parties
confirmed at oral argument, neither the district court nor we

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12 No. 14-2473
have a zoning map of Winnebago County to assist us. If this
part of the case is returned to the Wisconsin courts, they will
be able to address it within the broader context of Wiscon-
sin’s land-use law, and they will be able to develop an ap-
propriate record.
The district court did not discuss the pros and cons of ex-
ercising supplemental jurisdiction. It acknowledged that
“the ultimate problem is one of state law” and that the par-
ties were “invoking federal jurisdiction to answer what are
primarily state-law problems.” It commented that it was
“unclear from the complaint” whether Green Valley sought a
ruling on its “state law question” or instead wanted “a dec-
laration as to the federal constitutional question.” It appears
to us that the answer is “both.” In the complaint, Green Val-
ley asserts a “supplemental state claim” establishing that its
“use of the land as an adult cabaret was lawful in 2006 and is
a valid nonconforming use now” and asking for money
damages to reimburse the expenses it incurred in part to set-
tle this point. At the same time, Green Valley’s request for
declaratory relief states it is solely “[f]or the ongoing threat
to its First Amendment rights”; it does not mention the state-
law claim. The district court was also influenced by the view
that the federal-law issues served somehow as a predicate
for the state-law issues. The only federal issue was whether
the 2006 ordinance was unconstitutional in whole or in part.
This was enough to avoid a finding that there was no predi-
cate federal question at all, but this issue was not the focus of
the litigation. The severance issue was. As the district court
conceded, that is a question of Wisconsin law, as is the relat-
ed question whether an ordinance containing solely the al-
cohol prohibition and the setback rules could function co-
herently.

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No. 14-2473 13
We conclude that the district court, after confirming that
the 2006 ordinance violated the federal constitution in some
respects, should have relinquished its jurisdiction over the
supplemental state claims and dismissed them without prej-
udice. We therefore REVERSE and R EMAND for entry of such
an order. Each party will bear its own costs on appeal.

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