MAJ Entertainment, Inc. v. Zoning Board of Adjustment of the City of Philadelphia, 947 A.2d 841 (Pa. Commw. Ct. 2008).

Allowing patrons to engage in sexual activity was not an accessory use to the operation of a restaurant.
Case Details:

MAJ operated a club that allowed its patrons to engage in sexual activity.  The property is located in a C-2 commercial district and prior to MAJ’s ownership, the property was a restaurant that operated under the provisos of a variance which prohibited live entertainment.  When MAJ took over, they received a use permit to allow live entertainment and dancing.  MAJ operated a club that had buffet dining, music, dancing and an area where patrons could engage in sexual activity.  In 2005, Philadelphia Department of Licenses and Inspections issued an order to cease operating the club because it was not in accordance with the permit.  MAJ appealed to the Board.  The Board held that the provisos ran with the land, and MAJ was prohibited from having live entertainment.  Further, permitting sexual activity was not an accessory use to a restaurant.

MAJ then appealed to the trial court.  The trial court found that the provisos was in effect, and even if it was not, MAJ was not using the club in compliance with the permit.  MAJ appealed to the Commonwealth Court arguing that the sexual activity was an accessory use to the use as a restaurant, that they have a vested right in the permit, and that nothing in the Philadelphia Code prohibits the activity taking place.  First, the Court found that this was not an accessory use.  An accessory use is defined as a use that is subordinate to and customarily incidental to the main use.  MAJ relied on a previous Pennsylvania Supreme Court decision where the Supreme Court found that off-track betting was incidental to the operation of a restaurant.  The Court found that this use was incidental because the betting was a minority of the use of the property and the Race Horse Industry Reform Act requires that off-track betting was only permitted at facilities with high-end restaurants.  Therefore, the Court found that off-track betting was subordinate and incidental to a restaurant.   Here, the Court found that the sexual activity was not subordinate to the use as a restaurant, and was actually more like the primary use.   The Court also found that this was not the type of live entertainment that the Philadelphia Code envisioned as customarily incidental to the use as a restaurant because it has a separate defined use, “cabaret,” that would encompass this type of entertainment.

Next, MAJ argued that they had a vested right in the permit issued to them.  A vested right comes about when a permit was erroneously issued and the court should consider the following factors: (1) whether permit holder used due diligence in attempting to comply with the law; (2) whether permit holder used good faith throughout the proceedings; (3) whether permit holder expended substantial funds; (4) the expiration without appeal of the period during which an appeal could have been taken; and (5) the insufficiency of the evidence to prove that individual property rights or the health, safety or welfare could be adversely affected by the use of the permit. Considering the above factors, the Court found that MAJ did not use due diligence because its use of the property was not in compliance with the permit and it failed to disclose its true intended use of the property on the permit application.

Lastly, MAJ argued that the Philadelphia Code does not prohibit this use.  However, the Court pointed out that the Philadelphia Code lists permitted uses, and therefore implies that uses not listed are prohibited.  Therefore, the Court affirmed the trial court’s decision.

In a concurring opinion, Judge Pellegrini found that MAJ’s permit does not give MAJ the right to allow sexual activity on the property because that use would fall within the definition of “cabaret,” which is not a permitted use in a C-2 commercial district.  Judge Friedman filed a dissenting opinion.  In her opinion, she found that allowing sexual activity at the property was an accessory use because it is “akin to other forms of entertainment provided in restaurants.”  She further argued that engaging in and viewing sexual activities is a form of entertainment, and even considering its adult nature, gambling has been found to be an accessory use.

Next, Judge Friedman argued that MAJ had a vested right in the permit because they inquired of officials with knowledge and that they operated the restaurant in good faith because Licenses and Inspections had previously visited the establishment and allowed the activities to continue.  Considering the rest of the factors, MAJ has spent significant amounts of money, the appeal period has expired, and there would be no detriment to the public because thirty businesses signed a letter that they had no problem with the use of the property.  Finally, Judge Friedman pointed out that there are two separate definitions of cabaret in the zoning ordinance.  First, there is a definition defining it as “a restaurant featuring entertainers performing specified sexual activity,”  the other definition defines it as “a restaurant featuring entertainers performing specified sexual activities for monetary consideration.”  Since the permit only prohibits activity falling within the second definition of cabaret, a cabaret without paid performers is not prohibited.

Date of Decision: 5/2/08

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