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PHE, INC. v. UNITED STATES DOJ

July 23, 1990

PHE, INC., et al., Plaintiffs,
v.
UNITED STATES DEPARTMENT OF JUSTICE, et al., Defendants


Joyce Hens Green, United States District Judge.


The opinion of the court was delivered by: GREEN

JOYCE HENS GREEN, UNITED STATES DISTRICT JUDGE

 Plaintiff PHE, Inc., d/b/a Adam & Eve ("PHE"), a North Carolina corporation which engages in, inter alia, mail order distribution of sexually oriented magazines and videotapes, and its President and principal owner, Philip D. Harvey, bring this action for declaratory and injunctive relief to restrain defendants United States Department of Justice, United States Attorney General Richard Thornburg, the National Obscenity Enforcement Unit ("NOEU") and its Acting Director Patrick Trueman, Assistant United States Attorney for the District of Utah Richard N.W. Lambert, and United States Attorney for the Western District of Kentucky Joseph M. Whittle from continuing to engage in what plaintiffs characterize as unconstitutional and bad faith conduct calculated to coerce plaintiffs to cease distribution of constitutionally protected speech. Specifically, plaintiffs contend that defendants have used or threatened to use their prosecutorial powers, including simultaneous multiple prosecutions and/or multiple consecutive prosecutions for obscenity, seizures of expressive materials, and criminal subpoenas, to coerce plaintiffs into ceasing distribution of certain sexually oriented materials which defendants have acknowledged would not be found to be obscene under current legal standards.

 Presently pending before the Court are plaintiffs' motion for preliminary injunction and defendants' motion to dismiss. The Court heard argument on these motions at a hearing held on April 19, 1990. Upon consideration of the parties' memoranda, argument of counsel, and the entire record, plaintiffs' motion for preliminary injunction shall be granted and defendants' motion to dismiss shall be denied.

 I.

 A. Plaintiffs' Business

 PHE is one of the largest retail distributors of sexually oriented magazines and videotapes in the United States and has been engaged in this business for several years. *fn1" In an effort to ensure that the materials they distribute will not be found to be obscene, plaintiffs have attempted to obtain guidelines from the federal officials entrusted with the enforcement of obscenity laws. These efforts have proved largely unsuccessful. Patrick Trueman, Acting Director of the NOEU, declined to give plaintiffs any guidance whatsoever, asserting that to do so would itself be a First Amendment violation. *fn2" As a result of requests made under the Freedom of Information Act ("FOIA"), plaintiffs obtained the "obscene matter file" in the FBI Library, which consists "only of commercially reproduced pornography relating to the sexual exploitation of children and commercial adult pornography dealing with sadomasochism, bestiality, and coprophilia behavior." II FBI Manual of Investigative Operations and Guidelines § 145-2(2) (August 12, 1986). *fn3" Plaintiffs contend that none of the materials they distribute would violate any of these guidelines.

 Plaintiffs also utilize internal review procedures to guarantee that the materials they distribute do not violate the law. For instance, plaintiffs do not distribute materials depicting rape or sexual violence. *fn4" In addition, plaintiffs employ an external review procedure, by which two independent experts, selected from a group of psychiatrists, clinical psychologists and/or trained and credentialed sex therapists, review all materials to be distributed. If either expert believes that any material fails any one of the three prongs of the Miller test for obscenity, *fn5" that material is immediately rejected and never offered for sale by plaintiffs. *fn6" Plaintiffs sell their materials only on request, only to adults, and only for use in the privacy of the customer's home. *fn7"

 B. Defendants' Actions

 Plaintiffs allege that defendants' initial efforts to put plaintiffs out of business began in 1986. On May 29 of that year, federal prosecutors in Utah and the Eastern District of North Carolina, in coordination with state prosecutors in North Carolina, organized and conducted a search of plaintiffs' premises. *fn8" According to Marguerite Kohus, an employee of PHE, the day long search was extremely intrusive. Federal and state agents from Utah and North Carolina conducted the search jointly, posting armed guards at the doors, closing the switchboard, and ordering all employees into a single area, refusing to allow them to leave until each had submitted to an interview, which they were told they were not free to refuse. The agents refused to allow employees to speak with their attorneys, including a company attorney who had come to the premises for the purpose of advising employees of their legal rights. The agents searched the personal purses and briefcases of the employees without warrant and over their objection, and took their photographs with threats of public embarrassment if they did not consent. As a result of this episode, 11 employees, constituting roughly eight percent of PHE's workforce, terminated their employment. *fn9" Simultaneously, federal agents served plaintiffs' employees with 118 subpoenas. *fn10" The United States District Court for the Eastern District of North Carolina subsequently characterized these subpoenas as government "harassment" of plaintiffs and their employees. *fn11"

 Beginning after the search of plaintiffs' premises and continuing through 1986, the defendants made clear that PHE, Harvey, and other individuals associated with PHE would be prosecuted in multiple jurisdictions across the United States unless plaintiffs agreed to substantially curtail what they contend are their constitutionally protected expressive activities nationwide, and to go out of business entirely in Utah. *fn12" In one meeting, Brent Ward, then U.S. Attorney for the District of Utah, and defendant Lambert stated that the only way for plaintiffs to avoid multidistrict federal prosecution would be if plaintiffs agreed to cease distribution of all sexually oriented expressive materials nationwide, except for films that had received an "R" or less restrictive rating from the Motion Picture Association of America. *fn13" Among the other materials included in the prohibition were unrated films, magazines, or books containing "mere nudity" as well as Playboy and Penthouse magazines and the book The Joy of Sex.14 When plaintiffs' representatives stated that this demand would require plaintiffs to surrender their First Amendment rights, Ward and Lambert acknowledged that their position would have this effect. *fn15" Although the plaintiffs did not agree to these conditions, they decided to cease distribution of all sexually oriented materials in Utah and, for approximately three years, did not distribute any sexually oriented materials in North Carolina. *fn16"

 In a separate meeting on September 10, 1986, Ward and Lambert stated that as a condition for non-prosecution, plaintiffs would have to discontinue entirely their participation in the business of sexually oriented visual material, without regard to whether the material was protected by the First Amendment. *fn17" Mr. Ward confirmed that this included "soft porn" and other material that would not be prosecutable if distributed by another person. *fn18" The prohibition would not extend to films with an "R" or less restrictive rating but other materials, such as Playboy magazine, could not be distributed. *fn19" Lambert again stated that the prohibition would include "mere nudity" and, in addition, stated that the prosecutors wanted Mr. Harvey "out of the business." *fn20" After the prosecutors rebuffed plaintiffs' protests that these demands would require plaintiffs to surrender their First Amendment rights, then Assistant Attorney General for the Criminal Division, William Weld, endorsed the prosecutors' position as "proper." *fn21"

 In November 1986, plaintiffs' representatives wrote to William Delahoyde, Assistant United States Attorney for the Eastern District of North Carolina, to protest defendants' threats that they would be subjected to multiple prosecutions, pointing to the Department of Justice policy, reflected in the United States Attorney's Manual, which discouraged such action. *fn22" On December 4, 1986, the U.S. Attorney responded to that letter, confirming that plaintiffs would be prosecuted in both that District and in Utah, and referred to the Department of Justice policy as not properly the subject of pre-indictment contention. *fn23" Plaintiffs thereafter wrote to Mr. Weld seeking an assurance that they would not be subject to multiple prosecutions. Those letters were never answered. *fn24"

 Plaintiffs also allege that Robert Showers, then Assistant United States Attorney for the Eastern District of North Carolina, attempted to secure the assistance of the Federal Bureau of Investigation ("FBI") in the effort to suppress plaintiffs' legitimate activities. It is plaintiffs' contention that the FBI informed Showers that the materials distributed by plaintiffs were not within the scope of FBI guidelines for the prosecution or investigation of obscenity and refused to provide assistance. *fn25"

 Plaintiffs further assert that Showers and other federal agents sought to enlist the assistance of state prosecutors in Alamance County, North Carolina, encouraging them to subject plaintiffs to multiple prosecutions so that they would be unable to adequately defend themselves despite the fact the United States Attorney's Manual prohibited multiple obscenity prosecutions unless "the materials are of such an explicit nature that there can be no question as to their obscenity." United States Attorney's Manual § 9-75.120 (Nov. 9, 1984). *fn26" On August 4, 1986, plaintiffs were indicted by a state grand jury on state obscenity charges in Alamance County, North Carolina. Plaintiffs were acquitted on all state obscenity charges on March 26, 1987. *fn27" Despite these acquittals, plaintiffs were advised that they would still be prosecuted on federal obscenity charges in the Eastern District of North Carolina and in Utah for distributing similar expressive materials. *fn28"

 In the meantime, on February 10, 1987, then Attorney General Edwin Meese III created the National Obscenity Enforcement Unit, a special task force within the United States Department of Justice whose mission was to spearhead and coordinate the federal government's efforts in the areas of obscenity and child pornography. Meese selected Showers to lead this task force. In September 1987, the Department of Justice changed its policy on multiple prosecutions. Unlike the previous policy, the new policy " encourage(s)" multiple prosecutions "where the size of the [defendant's] organizational structure suggests that a multiple district prosecution approach . . . will be most effective. United States Attorney's Manual § 9-75.310 (Oct. 1, 1988). *fn29"

 On July 1, 1988, in accordance with this new policy, the Department of Justice announced "Project PostPorn," a series of multidistrict indictments against distributors of sexually oriented materials. *fn30" The project was a cooperative effort between the Department of Justice and the Postal Inspection Service and constituted the first nationwide effort to identify and prosecute violators of federal laws prohibiting the use of the mails to advertise and distribute obscene materials. Although plaintiffs were not among those distributors who were indicted, they were informed by ...


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