Two Houston strip clubs sue city, claiming 2013 sex business settlement amounts to extortion

A downtown strip club. (from @icrow on Twitter) A downtown strip club. (from @icrow on Twitter) Photo: BRIAN BLANCO, NYT Photo: BRIAN BLANCO, NYT Image 1 of / 1 Caption Close Two Houston strip clubs sue city, claiming 2013 sex business settlement amounts to extortion 1 / 1 Back to Gallery

The legal fight over the striptease business in Houston has heated up again.

Two topless bars are suing the city of Houston over a controversial, years-old legal settlement they say unfairly hampers business at all but a select group of clubs.

In a June 1 filing, lawyers for Chicas Cabaret and Penthouse Houston argued that the 2013 settlement — which allowed sixteen strip clubs to skirt the city’s sexually-oriented business ordinance by making annual payments to fund an anti-human trafficking unit in the Houston Police Department — amounts to a commercial bribery scheme.

The two north Houston clubs argue the settlement is “unlawful, unfair, and anti-competitive in nature,” and impacted their ability to do business.

“Our position is that discriminating against some clubs and showing favoritism toward others is just plain wrong under the Constitution and Texas law,” said Spencer Markle, attorney for Chicas Cabaret and Penthouse Houston. “That’s why we’re taking them to task.”

The strip clubs are seeking a restraining order that would either prevent city officials from allowing the “sweet 16” clubs to avoid the city’s sexually-oriented business ordinance, or allow Chicas and Penthouse to join the agreement under the same terms.

READ MORE: Longtime Houston strip club challenges city's rules on sexually oriented businesses

“We just don’t want to be at a business disadvantage compared to the other clubs that are similarly situated,” Markle said.

City officials said they could not comment on the lawsuit because they had not yet seen it.

The 2013 settlement was meant to resolve a series of similar, costly lawsuits filed against the city by 16 clubs protesting regulations that prevented topless dancers from being closer than three feet to patrons. Under the agreement, the clubs received a waiver from those requirements in exchange for making about $1 million in annual payments to the city’s Human Trafficking Abatement Fund. They were also required to remove their private or VIP rooms, and agreed to report prostitution, indecent exposure and drug use, and the names, ages and immigration status of their employees.

Since 2013, the number of clubs permitted in the agreement has grown to 21, and the city has collected more than $5.4 million from the clubs allowed to participate in the 2013 agreement, according to city records.

RELATED: Experts raise questions about city settlement with topless clubs

When the city announced the agreement, just a few of the 289 clubs, massage parlors and bookstores city officials believed were sexually oriented businesses, agreed to be regulated under the ordinance. Then-City Attorney David Feldman said at the time that the settlement would free up vice officers from spending most of their time at the largest clubs to focus more on “rogue” clubs operating in brazen violation of the law and harboring human trafficking.

“If all we required was that they contribute money, then I would agree with that depiction, but they’re required to do much more than that,” he said at the time. “One of the things we were able to accomplish in this agreement that no one thought we’d ever get them to agree to was to eliminate the private rooms, the private areas and the de facto enclosures. That was the most difficult part of this to negotiate.”

Currently, there are 11 other strip clubs in Houston licensed as “sexually oriented businesses,” according to the city attorney’s office.

Legal experts said the city’s recent settlement with Fantasy Plaza and the new lawsuits raised renewed questions about the city’s sexually-oriented business ordinance and the way it regulates sexually oriented businesses.

SUIT: Controversial Houston strip club reaches settlement with city, can reopen, for now

“Why is the city keeping an the ordinance on the books and basically exempting (businesses) from it?” said Josh Blackman, a professor at the South Texas College of Law Houston. “Normally the point of a statute is to enforce it equally. And if they're just cutting deals with every strip club that asks for it, just repeal the damn statute.”

Markle’s suit echoes the same argument made by lawyers for Fantasy Plaza Cabaret when they sued the city of Houston earlier this year.

The Fantasy Plaza suit began when authorities in Houston and Harris County sued to shut down the strip club claiming it was a “nuisance” business establishment and a den of prostitution and violence.

When Fantasy Plaza countersued in federal court against the city of Houston and Harris County, U.S. District Judge Lynn Hughes accused city officials of engaging in a “concerted and arbitrary” effort to kill the business.

Although the strip club reached a settlement in its federal case — which has since been dismissed — it still has to contend with the nuisance suit. Court records show the case is set for trial in September.

st.john.smith@chron.com

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