The Atlanta Gleaner.

Starship Enterprises of Atlanta, Inc. v. Gwinnett Cnty., No. S24A0361, 2024 WL 2925278 (Ga. June 11, 2024)
#county ordinance vs adult toy store #sovereign immunity #res judicata #100 sex toys limit per establishment #… it’s called “Starship” for a reason!

Background:
Adult toy store owner brought action against county seeking declaratory and injunctive relief against enforcement of an adult establishment ordinance that allegedly violated due process and equal protection, after the affirmance of the grant of a permanent injunction for county on its counterclaim in owner's prior action that owner voluntarily dismissed. The Superior Court, Gwinnett County granted county's motion to dismiss. Owner appealed.

Holdings:
The Supreme Court held that as matter of first impression, constitutional waiver of sovereign immunity for suits seeking declaratory and injunctive relief against prospective acts applied, but res judicata barred the suit. Affirmed.

Opinion:
In October 2022, Starship Enterprises of Atlanta, Inc. filed its second lawsuit against Gwinnett County challenging a 2015 Gwinnett County ordinance regulating “Adult Establishments.” It filed that suit under Article I, Section II, Paragraph V of Georgia's Constitution (“Paragraph V”), which was added by amendment in 2020 and waives sovereign immunity for certain lawsuits, including lawsuits against a county for declaratory judgment and related injunctive relief. In March 2023, the trial court dismissed Starship's lawsuit, holding that it was barred by sovereign immunity and by res judicata.

Starship filed an appeal in the Court of Appeals, which transferred the case to this Court on the ground that the case involves the novel constitutional question of what counts as a “past, current, or prospective act occurring after January 1, 2021” as used in Paragraph V. For the reasons explained below, we conclude that although the constitutional waiver of sovereign immunity contained in Paragraph V applies to Starship's lawsuit, the suit is barred by res judicata. We therefore affirm the trial court's order dismissing it. [1]

1. In January 2017, Starship, which owns two stores in Gwinnett County, filed a lawsuit against Gwinnett County for declaratory judgment and an injunction, asking the trial court to declare certain parts of Gwinnett County Ordinance 2015-1082 (“the Ordinance”) unconstitutional. The Ordinance “amend[ed] Chapter 18 of the Gwinnett County Code of Ordinances by repealing” ordinances regarding “Adult Entertainment Establishments” and enacted a new article entitled “Adult Establishments.” As enacted by the Ordinance, Section 18-292 of the Gwinnett County Code of Ordinances defines “Adult Establishment” as including a “Sex Paraphernalia Store,” and defines “Sex Paraphernalia Store” as:

a commercial establishment where more than 100 sexual devices are regularly made available for sale or rental. This definition shall not be construed to include any establishment located within an enclosed regional shopping mall or any pharmacy or establishment primarily dedicated to providing medical products.

Section 18-293 (a) says that “[i]t shall be unlawful for any person to operate an adult establishment in the County without a valid adult establishment license.”

As alleged in Starship's complaint, the Gwinnett County Department of Planning and Development refused to renew Starship's occupational tax certificate in February 2016, reasoning that under the Ordinance, “Starship's business was unlawful.” As a result, Starship limited the number of “sexual devices” in each of its stores to 100. Gwinnett County sent inspectors to Starship's stores twice, and in July 2016, the County was satisfied that Starship had complied with the Ordinance and renewed the occupational tax certificates for both stores.

In its 2017 complaint, Starship alleged that the Ordinance violates due process because several terms contained in the Ordinance, including “regularly made available for sale or rental,” are unconstitutionally vague; violates due-process privacy rights under the Georgia Constitution by restricting the number of “sexual devices” available for sale; violates Georgia constitutional due-process property and liberty rights by exempting certain merchants from the regulation; and violates Georgia equal-protection rights because the exemptions to the definition of “sex paraphernalia store” have no rational relationship to the purpose of the Ordinance. Gwinnett County filed a counterclaim for injunctive relief, alleging that Starship had repeatedly violated County ordinances by operating “sex paraphernalia stores” without an adult establishment license and in areas where “sex paraphernalia stores” are not permitted by the County zoning ordinances. The County requested “a temporary restraining order, an interlocutory injunction, and a permanent injunction” ordering Starship not to regularly make “more than 100 sexual devices ... available for sale or rental.”

In November 2017, after this Court decided Lathrop v. Deal, 301 Ga. 408, 801 S.E.2d 867 (2017), Starship voluntarily dismissed its complaint without prejudice. See OCGA § 9-11-41 (a) (allowing for a plaintiff to dismiss an action without prejudice “without order or permission of court”). [2] Gwinnett County, however, maintained its counterclaim, and moved for summary judgment. In January 2018, the trial court granted Gwinnett County's motion for summary judgment and injunction. The trial court held that Starship had routinely violated the Ordinance and granted the County a permanent injunction restraining Starship from “regularly making more than 100 sexual devices available for sale” at each of Starship's two Gwinnett County locations. [3]

Starship appealed the decision, arguing that Gwinnett County was not entitled to a permanent injunction because the County had other remedies available. In a March 2019 unreported decision, the Court of Appeals affirmed the trial court's grant of a permanent injunction against Starship, holding that “there was sufficient evidence for the trial court to conclude that without enjoining Starship, it would likely continue to habitually violate the law.”

In October 2022, Starship filed another lawsuit against Gwinnett County—which is the subject of this appeal—alleging that the Ordinance is unconstitutional in several respects and asking for a declaratory judgment and injunctive relief. In this suit, Starship invoked Paragraph V's waiver of sovereign immunity. [4] Like the complaint in Starship I, this complaint summarized the same facts about the Ordinance and Starship's efforts to reduce the number of sexual devices for sale in each of its stores to comply with the Ordinance; raised the same arguments as to due process and equal protection; and further alleged that the Ordinance violates Starship's free speech rights by curtailing the sale of sexual devices. [5] In December 2022, Gwinnett County moved to dismiss Starship's complaint on the ground that it was barred by res judicata and sovereign immunity. In response, Starship argued that res judicata did not apply because it dismissed its complaint in Starship I because it was barred by sovereign immunity, and that sovereign immunity did not bar its new lawsuit because Paragraph V applies to “past, current, and prospective acts which occur on or after January 1, 2021,” and the Ordinance would be enforced with prospective acts occurring after that date.

In March 2023, the trial court granted Gwinnett County's motion to dismiss. The court held that Starship's claims were barred by res judicata, explaining:

[T]he claims that Starship alleges here are identical to claims it raised in Starship I, or that it could have put in issue in that case.... Whether Starship's challenges to the Ordinance are characterized as affirmative defenses to, or compulsory counterclaims against, enforcement of the Ordinance, the time for Starship to assert those challenges was in Starship I.

The trial court also held that Starship's claims were barred by sovereign immunity. The trial court explained that Paragraph V did not apply in this case because it applies only “to past, current, and prospective acts which occur on or after January 1, 2021.” Ga. Const. of 1983, Art. I, Sec. II, Par. V (b) (1). The trial court reasoned that “[t]he Ordinance that Starship wants to challenge was adopted in 2015, so Starship's cause of action against the Ordinance arose many years before the waiver amendment passed.” Starship appealed the trial court's dismissal to the Court of Appeals, which transferred the case to this Court because the threshold question of sovereign immunity and the construction of “past, current, and prospective acts” under Article I, Section II, Paragraph V (b) (1) poses a novel constitutional question.

2. Sovereign immunity, unlike res judicata, is a threshold jurisdictional issue, so we address it first.

• See City of College Park v. Clayton County, 306 Ga. 301, 314, 830 S.E.2d 179 (2019) (“The applicability of sovereign immunity ... is a jurisdictional issue.”).

• See also Joyner v. Leaphart, 314 Ga. 1, 6 n.8, 875 S.E.2d 729 (2022) (indicating that res judicata is “an affirmative defense” and not “a jurisdictional matter”).

• “The constitutional doctrine of sovereign immunity bars any suit against the State to which it has not given its consent, ... including suits for injunctive and declaratory relief from the enforcement of allegedly unconstitutional laws.” Lathrop, 301 Ga. at 444, 801 S.E.2d 867. See also Ga. Const. of 1983, Art. I, Sec. II, Par. IX. We have long held that sovereign immunity applies to counties. See Lathrop, 301 Ga. at 421-422, 801 S.E.2d 867.

Sovereign immunity can be waived by statute or constitutional amendment, however, and one such waiver was added to our Constitution when the people of Georgia ratified Act 596 (H.R. No. 1023) in November 2020. As explained above, this waiver is codified in Article I, Section II, Paragraph V of Georgia's Constitution and says, in relevant part:

(b) (l) Sovereign immunity is hereby waived for actions in the superior court seeking declaratory relief from acts of the state or any agency, authority, branch, board, bureau, commission, department, office, or public corporation of this state or officer or employee thereof or any county, consolidated government, or municipality of this state or officer or employee thereof outside the scope of lawful authority or in violation of the laws or the Constitution of this state or the Constitution of the United States. Sovereign immunity is further waived so that a court awarding declaratory relief pursuant to this Paragraph may, only after awarding declaratory relief, enjoin such acts to enforce its judgment. Such waiver of sovereign immunity under this Paragraph shall apply to past, current, and prospective acts which occur on or after January 1, 2021.

There is no dispute that Starship's lawsuit is the type of lawsuit that this sovereign immunity waiver could apply to; it is an “action[ ] in the superior court seeking declaratory relief from the acts of ... [a] county” and seeking to “enjoin such acts.” Paragraph V (b) (1). [6]

The trial court held, and the County argues, that Paragraph V does not apply, however, because Starship's lawsuit does not satisfy the final sentence of Paragraph V (b) (1): it does not concern any “past, current, and prospective acts which occur on or after January 1, 2021.” Specifically, the trial court held that Paragraph V did not apply because the Ordinance was adopted in 2015, so “Starship's cause of action against the Ordinance arose many years before the waiver amendment passed.” The County, although agreeing with the trial court's holding, offers a different reason that Paragraph V does not apply to Starship's lawsuit. In this Court, the County conceded that acts of the County other than the passage of the Ordinance could be “acts” under Paragraph V, such as the County's denial of Starship's occupational tax certificate in 2016. The County argues, however, that Starship has not met the requirement of Paragraph V because it has failed to allege any act of the County—including any “prospective act”—that occurred after January 1, 2021 from which Starship seeks relief.

For the reasons discussed below, we disagree with the trial court's holding and with the County's separate argument and conclude that Starship's lawsuit seeks declaratory and injunctive relief from “prospective acts” that will occur after January 1, 2021, and therefore Paragraph V's sovereign immunity waiver applies.

(a) The trial court failed to recognize the breadth of the definition of “act” in Paragraph V.

The trial court's holding that Paragraph V does not apply because the Ordinance was enacted in 2015 appears to be based on the notion that the only relevant “act” about which Starship could complain—at least for purposes of availing itself of the sovereign immunity waiver in Paragraph V—was the County's passage of the Ordinance. Putting aside whether the mere passage of an ordinance is the kind of “act” contemplated by the language of Paragraph V, [7] we conclude that the word “act” as used in Paragraph V is not limited to only such an action.

To be sure, Paragraph V does not define “act” or give examples of what constitutes an “act” under the paragraph. But dictionaries from around the time Paragraph V was enacted reveal that “act” can be defined as “the doing of a thing,” Merriam-Webster's Collegiate Dictionary (Merriam Webster 2020), at 12, and “a thing done; deed,” Webster's New World College Dictionary (Houghton Mifflin Harcourt 2016), at 13. See also State v. SASS Group, LLC, 315 Ga. 893, 898, 900, 885 S.E.2d 761 (2023) (interpreting Paragraph V and explaining that when we interpret constitutional provisions, we “consider the ordinary meaning of the words as they appear in the Constitution” and “consider text in context”) (citation and punctuation omitted). That definition is consistent with the text of Paragraph V, which contemplates lawsuits seeking relief from acts not only of the state or county but also acts of, for example, “officer[s] or employee[s]” of a state “board, ... office, or public corporation.” See also Kuhlman v. State, 317 Ga. 232, 235, 892 S.E.2d 753 (2023) (holding that the appellant's lawsuit for declaratory relief “comes within the constitutional waiver of sovereign immunity” in Paragraph V, where a State board denied the appellant's application for relief from the prohibition on the possession of firearms by convicted felons and the appellant sought declaratory relief that this denial violated the laws of the state). [8]

It follows that the trial court should have considered other “things” the County has “do[ne]” or could “do[ ],” see Merriam-Webster's Collegiate Dictionary (Merriam Webster 2020), at 12, related to the Ordinance from which Starship could seek relief. For example, denying Starship an occupational tax certificate was a “thing” the County did to enforce the Ordinance. See id. Thus, the trial court erred by concluding that because the Ordinance was passed in 2015, Starship's lawsuit did not qualify for a waiver of sovereign immunity under Paragraph V. [9] We now turn to the County's argument that Starship has failed to allege that it seeks relief from an “act” that happened after January 1, 2021.

(b) The County's argument fails to acknowledge that Starship has alleged that it seeks relief from the County's prospective acts of enforcement, which will occur after January 1, 2021.

In arguing that Starship has not alleged that it seeks relief from an act that occurred after January 1, 2021, the County points out that in its complaint, Starship alleges that the County committed several acts, such as passing the Ordinance and denying Starship's occupational tax certificate, and all of these acts occurred before January 1, 2021. The County argues that these past acts are the only ones we should consider when determining if Paragraph V applies because Starship has failed to allege any “prospective” acts—i.e. acts that will happen in the future—from which it seeks relief. We disagree.

In its complaint, Starship alleged that Gwinnett County's actions “have created a bonafide controversy between the parties, and Plaintiffs are in doubt as to their rights, privileges, and immunities with respect to the enforcement of the licensing scheme at issue.” Starship sought “a declaratory judgment declaring its rights, privileges, and immunities and injunctive relief enjoining Defendant from enforcing unconstitutional parts of its Ordinances.” These statements demonstrate that in its lawsuit for declaratory judgment and an injunction, Starship sought relief not only from the passage of the 2015 Ordinance but also from the prospective enforcement of that Ordinance.

Specifically, in the portion of its complaint titled “Standing,” Starship alleges that it has “suffered injury-in-fact” by “having and continuing to suffer a curtailing of its right to sell lawful products.” (Emphasis added.) And the “Facts” portion of the complaint makes clear that Starship has changed its business practices to comply with the Ordinance to be granted an occupational tax certificate. To that end, Starship details how in 2016, after the County denied it an occupational tax certificate, Starship limited the number of sexual devices available for sale in its stores so that it could comply with the Ordinance, and how the County then sent inspectors to Starship's stores on two occasions before eventually concluding that Starship was in compliance with the Ordinance. Starship's complaint asserts: “As a direct result of Defendant's prohibition of having ‘available for sale’ no more than 100 sexual devises displayed or kept in stock,” Starship has “permanently removed” over 800 “products” and over 1800 “items that were for sale prior to the enactment of [the] Ordinance” from each of its two stores. And “[t]he County's actions have deprived, and will continue to deprive, Starship of property rights and liberty interests protected by the Georgia Constitution.” (Emphasis added.)

As described above, Starship's complaint demonstrates its concern about prospective enforcement of the Ordinance: Starship has stopped selling a significant number of sexual devices in response to the County's enforcement of the Ordinance, and Starship alleges that it wants to (and believes it is constitutionally entitled to) resume selling more devices. It is this alleged concern that animates Starship's request for a declaratory judgment and related injunctive relief. And the County's representations at oral argument before this Court validate that concern; the County acknowledged that it plans to continue enforcing the Ordinance. [10]

Because Starship sufficiently alleges in its complaint that Starship seeks to stop future enforcement of the Ordinance—and such an act of enforcement is a “prospective act[ ]” that will occur after January 1, 2021—the County's sovereign immunity is waived under Paragraph V for Starship's lawsuit, and the trial court erred by concluding otherwise.

3. Starship's complaint must still be dismissed, however, because it is barred by res judicata. OCGA § 9-12-40 codifies “Georgia's basic common law rule of res judicata.” Coen v. CDC Software Corp., 304 Ga. 105, 107, 816 S.E.2d 670 (2018). OCGA § 9-12-40 says:

A judgment of a court of competent jurisdiction shall be conclusive between the same parties and their privies as to all matters put in issue or which under the rules of law might have been put in issue in the cause wherein the judgment was rendered until the judgment is reversed or set aside.

For res judicata to apply in Georgia, three requirements must be met:

• “(1) identity of the cause of action,

• (2) identity of the parties or their privies,

• and (3) previous adjudication on the merits by a court of competent jurisdiction.” Coen, 304 Ga. at 105, 816 S.E.2d 670.

There is no dispute that the second requirement is met: in both Starship I and this case, the parties are Starship and Gwinnett County. Thus, we consider whether the first and third requirements have been met, beginning with the third.

As to the third requirement, Starship does not argue that the trial court was not a “court of competent jurisdiction,” but it argues that there was no “adjudication on the merits” because Starship voluntarily dismissed its lawsuit in Starship I, and a first voluntary dismissal does not constitute an adjudication on the merits. Starship is correct that there was no adjudication of the merits of its lawsuit against the County in Starship I. See OCGA § 9-11-41 (a) (3) (stating that only a second notice of dismissal under that subsection “operates as an adjudication upon the merits”). [11] However, not every claim in Starship I was dismissed; the County continued to assert its counterclaim, and that lawsuit was adjudicated on the merits. And the preclusive effect of res judicata applies not only to matters that were “put in issue” but also those that “might have been put in issue.” OCGA § 9-12-40 (emphasis added). Because, as we explain further below, Starship could have raised the constitutional matters in this counterclaim that was adjudicated on the merits, the third requirement of res judicata is met. See OCGA § 9-12-42 (“For a former judgment to be a bar to subsequent action, the merits of the case must have been adjudicated.”) (emphasis added).

As to the final requirement of res judicata—“identity of the cause of action”—we have explained that “cause of action” in this context means “the entire set of facts which give rise to an enforceable claim.” Coen, 304 Ga. at 105, 816 S.E.2d 670. “In considering the ‘entire set of facts,’ we focus on the ‘wrong’ that is asserted.” Id.

This Court has explained that the requirement of identity of the cause of action is met “[s]o long as a party pleads but one wrong in respect to the same transaction, ... and it makes no difference that the remedy sought to be applied under different procedures growing out of the same wrong may be different.” McCracken v. City of College Park, 259 Ga. 490, 491, 384 S.E.2d 648 (1989).

• For example, in the first case at issue in McCracken, the city revoked McCracken's liquor license based on her violation of a city ordinance, McCracken filed a writ of certiorari to the superior court to appeal that judgment, and the superior court dismissed the writ and affirmed the judgment. See id. McCracken then filed a separate action for an injunction and damages sustained as a result of the enforcement of the same ordinance. See id. at 490, 384 S.E.2d 648. The trial court granted summary judgment to the city on the ground that McCracken's suit was barred by res judicata, and this Court affirmed, explaining that in both cases “only one wrong is complaint of, namely, the enforcement of an allegedly unconstitutional ordinance,” and “[t]he principal difference between the two actions is the nature of the relief sought,” which we held did not defeat res judicata. Id. at 491, 384 S.E.2d 648. See also Waggaman v. Franklin Life Ins. Co., 265 Ga. 565, 565-566, 458 S.E.2d 826 (1995) (holding that because Waggaman had the opportunity to litigate the ownership of his life insurance policy in an earlier divorce action, res judicata barred him from filing a later action against the insurance company and his ex-wife for a declaratory judgment that he owned the policy). [12]

Here, as in McCracken, the “wrong” at issue for Starship in both cases is the same: the County's enforcement of the allegedly unconstitutional Ordinance. See McCracken, 259 Ga. at 491, 384 S.E.2d 648. And the “entire set of facts” at issue in both the County's counterclaim for an injunction in Starship I and in Starship's current lawsuit are the same: both cases concern the County's enforcement of the Ordinance against Starship and what Starship has done to come into compliance. See Coen, 304 Ga. at 105, 816 S.E.2d 670 (explaining that in determining if the “cause of action” is the same, we look at “the entire set of facts which give rise to an enforceable claim”). And because the “wrong” and “entire set of facts” raised here are the same as those implicated in Starship I, the constitutional matters Starship raises here could have been raised in Starship I: although Starship voluntarily dismissed its claims, it still could have raised the relevant constitutional matters in response to the County's counterclaim, which the County pursued even after Starship dismissed its claims. In other words: in defending against the County's claim that it was entitled to an injunction enforcing the Ordinance against Starship, Starship could have argued that it should not be forced to comply with the Ordinance because the Ordinance was unconstitutional—which would have “put in issue” in Starship I the constitutional matters that are now at issue on appeal after Starship filed this lawsuit based on the same wrong. See OCGA § 9-12-40. [13]

Because the requirements of res judicata are met and the constitutional matters Starship now seeks to raise “might have been put in issue” in Starship I, Starship's lawsuit is barred by res judicata. OCGA § 9-12-40. We therefore affirm the trial court's dismissal of Starship's complaint on the basis of res judicata.

Judgment affirmed.

All the Justices concur, except Bethel and Ellington, JJ., not participating.

All Citations

--- S.E.2d ----, 2024 WL 2925278