State v. Feld

Citations: 745 P.2d 146; 155 Ariz. 88; 1987 Ariz. App. LEXIS 481Docket: 1 CA-CR 9471

Court: Court of Appeals of Arizona; August 4, 1987; Arizona; State Appellate Court

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Defendants Steven Feld and Larry Chabler were charged with conducting an illegal enterprise through racketeering, alongside allegations related to the exhibition of obscene films involving a corporate entity, C.A.T. Inc. They moved to dismiss the racketeering charge (Count I), which the trial court granted, prompting an appeal from the State of Arizona. The trial court's reasoning for the dismissal included the view that Arizona's pre- and post-conviction remedies concerning obscenity constituted impermissible prior restraints on protected expression, and that interpreting these remedies to align with constitutional standards would require an unreasonable interpretation that diverged from legislative intent. Additionally, the court noted that applying civil burdens of proof to obscenity cases exacerbated constitutional issues. The court argued that allowing obscenity as a predicate for racketeering effectively elevated a class 6 felony to a class 3 felony, which was not the legislature's intent. The appellate court vacated the dismissal order and reinstated Count I, concluding that the trial court erred in ruling Arizona's organized crime and fraud statutes unconstitutional as applied to obscenity cases. The definition of "racketeering" under Arizona law includes acts for financial gain involving obscenity as defined by specific criteria related to community standards and artistic value.

The state contends that the remedies outlined in A.R.S. 13-2314 are constitutionally valid and, if they are not, should be interpreted to align with constitutional standards. It argues that even if certain remedies are found unconstitutional, the trial court erred in ruling that obscenity cannot serve as a predicate offense under RICO statutes. Conversely, defendants claim that most RICO remedies related to obscenity are unconstitutional and question the viability of salvaging any provisions once the unconstitutional parts are removed. They also assert that the crime of conducting an enterprise through obscenity is unconstitutionally vague. 

While obscenity lacks constitutional protection, the methods for determining obscenity raise First Amendment concerns due to the chilling effect of potential criminal prosecution on free expression. The distinction between protected and unprotected speech is delicate and necessitates careful legal interpretation. The legislature's classification of obscenity as a predicate offense under RICO raises constitutional concerns regarding the applicability of RICO remedies, which may be excessively broad when addressing obscenity in contrast to protected speech. Courts generally aim to uphold statutes by interpreting them in a constitutional manner, even if they are poorly drafted. 

The addition of obscenity as a predicate offense in A.R.S. 13-2301 indicates the legislature's intent to address obscenity within the context of racketeering statutes rather than solely through obscenity or nuisance statutes. The court's responsibility is to interpret these statutes to uphold this legislative intent as long as it remains constitutionally viable. 

Regarding standing, the state claims it will not seek to seize items or shut down businesses pre-trial, suggesting that defendants may lack standing to challenge potential state actions. Despite the state's argument that addressing the constitutionality of the statute may be premature, it contends that defendants cannot challenge the statute's facial validity since their activities are evidently obscene.

Defendants maintain their activities are primarily protected, arguing that even if certain items are deemed obscene, the RICO remedies might infringe upon their constitutional rights. They assert the necessity of a facial analysis of A.R.S. 13-2314's constitutionality before proceeding with prosecution, citing potential chilling effects on protected activities and referencing multiple legal precedents. 

The court addresses the vagueness challenge to A.R.S. 13-2312(B), which criminalizes conducting an enterprise through racketeering, including obscenity. It dismisses the defendants' claims of vagueness, stating that the statute is defined in clear terms understandable to average individuals, thus meeting constitutional standards. The court emphasizes that the statute's intent is to penalize those who assist in ongoing illegal activities without infringing on constitutionally protected conduct. The essential elements required to prove the offense are outlined, and the court concludes that the statute is not void for vagueness, affirming that the requirements for guilty knowledge and the nature of racketeering provide adequate notice of prohibited conduct, thereby preventing arbitrary enforcement.

The court in Tocco differentiated Ohio's organized crime statute, previously invalidated in State v. Young, asserting that the Arizona statutes do not penalize legal activities, thus avoiding vagueness issues. Under Section 13-2312(B), criminal liability in a RICO obscenity prosecution arises only when an underlying felony obscenity crime is committed. The case of 4447 Corp. v. Goldsmith is highlighted as the sole opinion addressing the constitutionality of RICO remedies in obscenity cases. Although the Indiana Supreme Court vacated the appellate decision, the intermediate court's reasoning is deemed more persuasive. Indiana law allows the trial court, upon finding a RICO violation, to impose several remedies, including divestiture of business interests and property forfeiture. In 4447 Corp., the appellate court invalidated the statutes as applied to obscenity, citing impermissible prior restraint, lack of procedural safeguards, and failure to use less restrictive means for regulating protected materials. The court found the state's pre-conviction actions, such as padlocking bookstores and seizing materials, were unconstitutional as they preemptively restricted access to presumptively protected speech. The court determined that the broad reach of the RICO statute created an overbroad and chilling effect on First Amendment rights, rendering the injunctive and forfeiture remedies facially unconstitutional in obscenity cases.

The Indiana Supreme Court vacated the court of appeals' ruling, affirming that Indiana's RICO statutes regarding obscenity do not infringe upon the First and Fourteenth Amendments. The court clarified that RICO remedies aim to enforce forfeiture of proceeds from alleged racketeering and do not aim to restrict future distribution of expressive materials. Despite expressing agreement with the court of appeals' reasoning, the dissent criticized the all-or-nothing approach of both opinions, which either invalidated or upheld the entire statute.

In examining Arizona statutes on obscenity, A.R.S. 13-2313 allows the superior court to issue orders during RICO proceedings to prevent and remedy racketeering, ensuring the rights of innocent parties are upheld. The state contends that these pre-conviction remedies are designed to maintain the status quo rather than impose penalties before a conviction, while defendants argue they unconstitutionally limit protected activities. A.R.S. 13-2314(B) grants the court authority to issue appropriate orders after hearings. The court found no issues with this provision, noting that any injunctions must comply with Arizona civil procedure rules.

Regarding A.R.S. 13-2314(C), it outlines permissible orders such as restraining orders, aimed at preserving evidence and preventing the concealment of profits from sales of obscene items. The court emphasizes that these measures are necessary to ensure evidence remains available and profits are not hidden before a determination of liability.

The court has the authority to prevent a defendant from moving inventory but cannot restrict ongoing exhibitions or sales. Any pre-liability order that mandates forfeiting property or closing a business constitutes an impermissible prior restraint. A preliminary order cannot impose restrictions that a post-conviction order cannot execute. Consequently, A.R.S. 13-2314(C) is deemed constitutional. 

Post-judgment remedies under A.R.S. 13-2314(D) include several potential orders following a liability determination: divesting interests in enterprises, imposing restrictions on future activities, ordering dissolution or reorganization of enterprises, mandating payment of treble damages to victims of racketeering, covering prosecution costs, forfeiting property tied to violations of A.R.S. 13-2312, and compensating the state or county for gains from racketeering offenses. 

The state contends that orders under A.R.S. 13-2314(D) are justified due to the defendants' guilt of obscenity crimes. The provisions in subsections (D)(1), (2), and (3) align closely with valid Indiana statutes. However, similar sanctions are interpreted as prior restraints on the sale of protected materials, potentially closing bookstores and theaters and limiting future speech rather than punishing past distribution of unprotected speech. For instance, bookstore owners could be forced to divest interests if their store sold an obscene magazine, impacting businesses not primarily classified as 'adult' bookstores.

The court has the option to dissolve or reorganize a business under subsection (D)(3), but such action would likely be deemed an impermissible prior restraint on protected activities. Subsection (D)(4) is inapplicable to this criminal case due to the absence of an injured party and is intended to establish a private cause of action for restitution, including treble damages for those harmed by obscenity, as supported by State v. Henderson. Awards under this subsection are not considered prior restraints, similar to fines, which have been upheld in Polykoff v. Collins. 

Subsection (D)(5) allows reimbursement of state or county funds for prosecution costs in RICO cases and is valid because it does not target protected interests, functioning as a fine. Selling obscene materials is a crime, allowing for such reimbursements. Subsection (D)(6) permits forfeiture of obscene materials or proceeds from them, justified by case law, although profits from non-obscene materials cannot be seized. Furthermore, an order cannot prevent the sale of items not yet classified as obscene, nor can it authorize the seizure of general business items like bookshelves or cash registers.

Subsection (D)(7) allows for the payment of gains from obscenity offenses to a general fund and is constitutional for the same reasons previously stated. However, A.R.S. 13-2314(F)(3) is unconstitutional as it allows for the seizure of non-contraband property used in a crime. The court also addressed the broader question of whether the unconstitutionality of certain RICO remedies in obscenity cases invalidates the entire RICO framework. Defendants argue that this would undermine legislative intent, but the trial court's acceptance of this view is disputed by the court.

The court has determined that not all remedies under A.R.S. 13-2314 are unconstitutional in obscenity cases. The legislature aimed to include obscenity within RICO statutes as far as permissible under the Constitution. When a statute contains both constitutional and unconstitutional elements, the valid parts may remain enforceable, as established in Spokane Arcade. Making obscenity a predicate offense for RICO creates a distinct crime under A.R.S. 13-2312, where the commission of obscenity is just one element among several in conducting an illegal enterprise. Racketeering can involve obscenity like any other illegal activity, and obscenity itself is not protected by the First Amendment. Thus, engaging in racketeering involving obscenity is a more serious offense than the act of obscenity alone. 

The court concludes that the RICO statutes relating to obscenity prosecutions are constitutional and do not infringe upon protected rights. However, the state's approach to obscenity under RICO is more limited than for other racketeering activities due to First Amendment protections. The court emphasizes that distaste for obscenity does not supersede the obligation to uphold constitutional rights of free speech and press. The trial court's ruling, which stated obscenity could not be a predicate offense for RICO, is vacated, and the case is remanded for further proceedings.

Additionally, the excerpt references relevant legal precedents, noting that the U.S. Supreme Court's decision in Pope v. Illinois does not alter the statute's application, and that the Miller test for obscenity still applies. The court clarifies that the third prong of the obscenity test should be judged by a reasonable person standard. Lastly, it mentions a case where a court found no First Amendment violation regarding the seizure of property from racketeering, reinforcing the notion that racketeering proceeds cannot be retained, even if they consist of books.