Gay Gym Wins Appeal in License Revocation Dispute

Salt Lake City's 14th Street Gym has triumphed in its appeal of a decision by the city to revoke its license due to gay sexual activity going on in its steam room.  In an opinion by Associate Presiding Judge William A. Thorne, Jr., the Utah Court of Appeals held in 14th Street Gym, Inc. v. Salt Lake City Corporation, 2008 WL 961942, 2008 UT 127 (April 10, 2008), that the gym could not be held accountable for activity it did not know about or encourage.

According to Judge Thorne's opinion, the gym, first licensed in 1991, "operates as a social club catering to gay males, and its facilities include workout rooms, two television lounges, a locker room, a hot tub, and a steam room."  The gym operates as a "membership club."  Applicants undergo a background check during a waiting period before membership is granted.  Although the place, as described, is clearly not set up as a "sex club" or "gay bathhouse," the city was concerned about reports that sexual activity was going on in the club, and after it expressed concerns to the ownership, the club agreed to hire additional employee monitors and to guard against "improper conduct." 

Nonetheless, the city sent undercover police officers to become members and then to spy on activities in the club, and they observed such "lewd conduct" as masturbation and oral sex taking place mainly in the steam room between October 2003 and October 2004.  At least twice they issued citations to individual club members for violation of public sex laws in their presence, although no criminal citation was issued to the gym.

The city moved against the club's license and a hearing was held in January 2005.  The hearing officer found based on the testimony of undercover police officers that at least five separate incidents of unlawful sexual activity had occured in the club during the one year period of surveillance, that the activity violated City code provisions governing sexual activities in such facilities, and that an employee of the club had "condoned, encouraged, or turned a blind eye towards the lewd conduct."  The hearing officer also found that the ownership of the club had "an opportunity and a duty to know about the lewd conduct" occurring there.  At the conclusion of the proceeding, the hearing officer issued an order suspending the club's business license for 90 days, and providing that it could open on probation for a period of 270 days after the closure.  The order also stated that if "any problems arise" during that 270 day probationary period, "the license will be revoked after a hearing is held and the hearing examiner determines that a violation has occurred."  The gym did not try to appeal this order, instead closeing down for three months, then re-opening.

In June 2005, during the probationary period, undercover officers infiltrated the club again and observed two men having oral sex in the steam room.  They arrested the men.  Another city detective checked the place out again in January 2006, but observed no sexual activity.  However, based on the June arrests, the city initiated the process of revoking the club's license.  At a March 2006 hearing, the club's owner testified about the steps he had taken to prevent lewd activities from occurring on the premises, but the hearing officer decided that the prior order had been violated and that the gym's license should be revoked, although the officer also provided that the gym could reapply for a new license after it had been shut down for a year.  The gym sought court review, but the district court ruled for the city.

The three-judge appellate panel unanimously reversed, finding the revocation to be an arbitrary and capricious action by the hearing officer.   Although the police officers credibly testified that they observed sexual activity in the steam room in June 2005, wrote Judge Thorne, "The hearing officer made no findings, however, that the Gym or its agents or employees participated in these acts, knew that they were occurring, or permitted them to occur."  The court found a latent ambiguity in the January 2005 order, subjecting it to some contextual interpretation.  "We interpret the 2005 Order as requiring some culpability on the part of the Gym before the provisional license can be revoked," wrote Thorne.  This interpretation is suggested by the language of City ordinance 5.02.250, which allows for revocation of a business license upon a finding of a violation or conviction of any of the various enumerated offenses 'with respect to the licensee or licensee's operator or agent.'"

The court concluded that the city's "own code authorizes business license revocations only when a violation can be attributed in some way to the licensee," but here there was no finding that the operators of the gym knew that sex was again occurring in the steam room.  "The 2005 Order, which referred only to 'problems' and 'violations' did not give fair notice to the Gym that it might otherwise be held to account for the surreptitious criminal actions of third parties," wrote Thorne, who also pointed out that the "actual violations" found by the hearing officer in January 2005 related to the failure of the gym to prevent certain activity, and that was the premise for suspending the license and then putting the gym on probation.  A similar violation would be a necessary predicate for revoking the license.

Thorne commented that it was possible that the sexual activity observed by the police officers in June 2005 could "represent code violations by the Gym of the Gym knew or, should have known of, or condoned the acts," no such finding was made in the hearing officer's June 2006 Order.  In fact, wrote Thorne, the hearing officer had specifically stated that he was not saying that the owner or any of the employees had "precipitated the problem that we're talking about today with the arrest and conviction of these two individuals who now are not members and were not employees, and there's no testimony that they were even volunteers."

Thus, at bottom, the appeals court found that it was arbitrary and capricious to revoke the Gym's business license based on the misconduct of two members of the gym in the steam room, without any proof that the Gym knew what was going on or condoned such activity.  Of course, we suspect that the Gym will be beefing up steam room security in response to this litigation, on the assumption that city officials, having suffered this public rebuff, will be gearing up to send more undercover cops into the steam room.  (We assume these copes are in better shape than most of the cops one sees on the street, or their cover will be blown - pardon the pun - in a gym packed with gay male workout freaks.....)