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November 18, 2002


The opinion of the court was delivered by: David H. Coar, United States District Judge


Before this Court is the motion of the plaintiff, Second Hand Tunes, for a preliminary injunction. A hearing was held in this matter on November 6, 2002, at which time the Court denied the motion for a preliminary injunction and reserved the right to issue a written opinion within ten days.

Factual and Procedural Background

Second Hand Tunes operates two retail establishments within the City of Chicago ("the City") which sell to and purchase from their customers a broad selection of new (5% of sales) and previously owned (95% of sales) music, books, and motion pictures, in various formats including pre-recorded digital audio discs ("CDs") and digital video discs ("DVDs"). Chapter 4-264 of the Municipal Code of the City of Chicago, also known as the Secondhand Dealers Ordinance (the "Ordinance"), regulates businesses that engage in the resale of items such as audio-video equipment, cameras, children's products, computer hardware, jewelry made of precious metal, precious stone or gem, sporting or athletic gear or equipment, including a bicycle, watch, or currency. Under the Ordinance, a regulated business must obtain a Secondhand Dealers License before engaging in the business of reselling. One of the requirements for receiving the license is "whether the applicant is of good character and repute." Under the Ordinance, secondhand dealers are required to keep a record book which contains the time of the transaction, a description of every piece of secondhand property received, purchased, sold or exchanged, the date of the transaction, and the purchaser or seller. The description of each person who sells an item includes the person's name, address, birth date, social security number, weight, height and gender. In addition, every licensee must require that two forms of identification be shown to him or her by each person selling secondhand property to the licensee. If the customer does not have a photographic identification, the licensee is required to photograph the customer and record the customer's personal information on the reverse side of the photograph. The records must be open to inspection by the mayor or any member of the police force during the licensee's business hours. Further, the licensee must deliver a copy of the records for the preceding day by 12:00 noon every day. Effective June 19, 2002 the City amended the definition of audio-video equipment to include DVDs and CDs. Prior to the June 19, 2002 amendment, Second Hand Tunes was not covered by the Ordinance.

In late August, Second Hand Tunes was visited by members of the Chicago Police Department. They informed Derek Erdman, a Second Hand Tunes store manager, that Second Hand Tunes needed a Secondhand Dealer's License to continue to buy or sell previously owned CDs or DVDs due to a recent amendment of the City's Secondhand Dealers Ordinance. The police officers gave Derek Erdman a copy of the amendment and he made a photo copy and returned the original to the officers. In mid-September, the police again visited Second hand Tunes seeking to enforce the Ordinance. The police informed Second Hand Tunes that it was required to comply with the license application requirements for secondhand dealers. Second Hand Tunes was visited repeatedly by the police in October. On October 28, 2002, Second Hand Tunes filed a complaint in this Court seeking declaratory and injunctive relief. Second Hand Tunes sought to enjoin the defendant from enforcing the amendment because it allegedly infringes on Second Hand Tunes' constitutional rights by regulating CDs and DVDs, which are mediums of expression protected by the First Amendment. Second Hand Tunes also filed a motion for a Temporary Restraining Order ("TRO"), which this Court granted on October 30, 2002. The TRO expired on November 6, 2002, the date of the preliminary injunction hearing in this matter. At the November 6, 2002 hearing, this Court denied plaintiff's motion for a preliminary injunction and reserved the right to issue a written opinion.


"A preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) (quotation omitted); see also Ind. Civil Liberties Union v. O'Bannon, 259 F.3d 766, 770 (7th Cir. 2001) ("A preliminary injunction is an extraordinary remedy[.]"), reh'g en banc denied. A party seeking a preliminary injunction must demonstrate some likelihood of success on the merits, an inadequate remedy at law, and irreparable harm if the preliminary injunction is denied. See O'Bannon, 259 F.3d at 770. If the moving party demonstrates these elements, then the court must balance the harm to the nonmovant if an injunction is granted, the harm to the movant if the injunction is denied, and the public interest. See id. Courts in the Seventh Circuit use what has been described as the sliding scale approach: "the more likely the plaintiff will succeed on the merits, the less the balance of irreparable harms need favor the plaintiff's position." Ty, Inc. v. Jones Group, Inc., 237 F.3d 891, 895 (7th Cir. 2001).

1. Likelihood of Success on the Merits (Counts I and II)

Second hand Tunes has declined to pursue its application for a secondhand dealer's license. Accordingly, Second Hand Tunes asserts a facial, as opposed to an as-applied challenge to the Ordinance. Second Hand Tunes argues that there is a substantial likelihood that it will prevail on its First Amendment prior restraint claims (Counts I and II of the complaint) because the licensing scheme in the defendant's Ordinance is utterly devoid of objective criteria, or any guidelines whatsoever, for public officials to follow in making the decision of whether to grant or deny a Secondhand Dealer's License. The Ordinance's licensing scheme provides, inter alia, that "the Superintendent of Police shall cause an investigation to be made to ascertain whether the applicant is of good character and repute." The Ordinance's licensing scheme does not contain any further definition of the phrase "good character and repute" to give assistance to the police officers who must interpret its meaning. Thus, Second Hand Tunes argues given the fact that the licensing scheme provides for unfettered discretion, the fact that the amendment to the Ordinance is directed narrowly and specifically at the circulation of CDs and DVDs — mediums of expression — and the fact that the Ordinance's licensing scheme requires licenses to be renewed annually, the Ordinance presents a "real and substantial threat" of censorship by government officials. See City of Lakewood v. Plain Dealer Publishing Co., 486 U.S. 750, 756, 108 S.Ct. 2138, 2143 n. 6 (1988).

Facial challenges to legislation are generally disfavored, but are permitted in the First Amendment context "where the licensing scheme vests unbridled discretion in the decision maker and where the regulation is challenged as overbroad." FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 223, 110 S.Ct. 596, 107 L.Ed.2d 603 (1990). Unfettered discretion per se is not the problem; rather, the concern is that such unfettered discretion may carry the risks of (a) self-censorship, and (b) censorship being disguised under the vagueness of the standard applicable to the licensing decision. See Lakewood, 486 U.S. at 759. Thus, in this context, a First Amendment facial attack requires that the licensing scheme have "a close enough nexus to expression or expressive conduct to give rise to a substantial threat of undetectable censorship." Id. In order to establish the required nexus, the challenged law must be "directed narrowly and specifically at expression or conduct commonly associated with expression," as opposed to being a "law of general applicability." Id. at 760-61. In illustrating this distinction, the Court in Lakewood noted that:

a law requiring building permits is rarely effective as a means of censorship. To be sure, on rare occasions an opportunity for censorship will exist, such as when an unpopular newspaper seeks to build a new plant. But such laws provide too blunt a censorship instrument to warrant judicial intervention prior to an allegation of actual misuse. And if such charges are made, the general application of the statute to areas unrelated to expression will provide the courts a yardstick with which to measure the licensor's occasional speech-related decision.

Id. at 761 (emphasis added).

The Seventh Circuit further elaborated on Lakewood's expression-directed versus generally-applicable distinction in Graff v. City of Chicago, 9 F.3d 1309 (7th Cir. 1993) (en banc), cert denied, 511 U.S. 1085 (1994). In Graff, the plaintiff sought to bring a facial challenge to municipal laws requiring a permit for building structures on the public way and asserted an entitlement to the same protection for newsstands that was afforded newsracks in Lakewood. The Seventh Circuit distinguished Lakewood, finding that the same threat of prior restraint that exists for newsracks does not exist for newsstands because newsstands are not tied to a particular publication. Graff, 9 F.3d at 1316. In such a situation, it would be highly unlikely that a Chicago official could "target a certain publication by targeting a certain newsstand." Id. A facial challenge is permissible "[o]nly when the ordinance at issue presents an obvious and immediate threat of censorship." Id. at 1317 (emphasis added).

In this case, the Ordinance applicable to secondhand dealers is akin to the structure permit provision in Graff in that it is a generally applicable regulation that happens, in some instances, to regulate businesses that deal in First Amendment-protected materials. Further, the Second Hand Tunes stores, like the newsstand in Graff, deal in a plethora of publications. As such, they are not designated outlets for a single recording artist or cinema director. At the preliminary injunction hearing, plaintiff asserted that there was a risk of self-censorship in the types of music that it sells because it is required under the Ordinance to provide a complete list of the items bought and sold on a daily basis. Thus, it might engage in self-censorship by refusing to sell sexually explicit material or rap music about cop killing for fear that its owners will be found to lack "good character and repute" by the same officers that are inspecting the contents of the list. The purpose of the record ...

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