May 2002 Update


By: Lawrence G. Walters, Esq.

So many legal developments have occurred this month, it is difficult to know where to start. No sooner did the ink dry on the Supreme Court’s decision invalidating the virtual child pornography law, than did Attorney General John Ashcroft, along with Crime Sub-committee Chairman Lamar Smith (R-Texas) propose a new bill entitled the “Child Obscenity and Pornography Prevention Act of 2002,” (COPPA) designed to close the legal “loopholes” identified by the Court’s recent decision. Justice Department officials claim that the new law is completely constitutional.

Under the new, supposedly improved bill, digitally generated images of prepubescent children would be completely banned. However, images depicting older minors still would be outlawed, although the bill creates a legal safe-harbor for photographers who can demonstrate that real children were not used to create the images. Time will tell what the Supreme Court thinks of this sequel to the CPPA. Some lawmakers have their doubts: “The Supreme Court went to great lengths to say ‘unless it’s a real minor, it’s not illegal,’” according to Representative Robert Scott (D-Virginia).1

General Ashcroft also responded to the virtual child pornography decision by easing rules relating to initiation of federal child pornography charges. Previously, investigators and assistant prosecutors were required to obtain the approval of the local U.S. Attorney to pursue such criminal charges.2 Mr. Ashcroft and the Justice Department also ordered prosecutors to examine any currently pending cases to determine whether the defendants could now be charged under obscenity statutes instead of the law struck down by the Court.3

This month also saw a 1-2-punch from the United States Supreme Court, which rendered rulings on the COPA4 law and decided a constitutional challenge against a local adult entertainment law in City of Los Angeles v. Alameda Books.5 Both cases resulted in “plurality” decisions, since a majority of the Justices could not agree on any one basis for the result. Interestingly, both cases also reversed the Appellate Courts’ decisions, and sent the cases back down to the lower courts for additional proceedings. In the COPA case, the Third Circuit Court of Appeal will now consider whether some of the other constitutional deficiencies alleged by the parties are sufficient to invalidate the law, even if application of community standards to the Internet, alone, did not justify declaring the law unconstitutional.

In the Alameda Books case, handled by the author’s firm, the High Court reversed the Ninth Circuit Court of Appeals’ ruling that an ordinance preventing multiple classifications of adult entertainment businesses from operating in the same structure was unconstitutional, since it was unsupported by sufficient evidence of “adverse secondary effects” allegedly caused by adult businesses. Although some industry leaders feared that the Supreme Court would simply uphold the ordinance, many were pleasantly surprised when the Court essentially determined that a final decision on the issue was premature, and that additional evidence relating to adverse secondary effects was necessary before any constitutional decision could be rendered. While the Court again rendered a split decision, it appears that litigants challenging local adult entertainment ordinances will have more ammunition. They now will be allowed to present their own evidence relating to the lack of negative impacts by adult businesses, and that the courts will be required to consider both that evidence, any evidence adduced by the local governments in support of their ordinances, and evidence of the extent to which the ordinance stifles speech. This is a positive development for brick-and-mortar adult businesses. This interesting decision opens up a whole new round of challenges by adult entertainment facilities against local ordinances which may not be adequately supported by competent evidence of adverse secondary effects.

Things have gone from bad to worse for James Steven Grady, whose bail has been increased from $1 million to $1.5 million after prosecutors filed additional charges of second degree sexual assault, attempted first degree sexual assault and contributing to the delinquency of a minor.6 Grady was initially arrested in connection with his teen modeling Web site, The new charges resulted from a new alleged victim coming forward who claimed that Grady tried to force her to perform sex acts, touched her inappropriately and provided her with alcohol.7 Authorities are investigating whether as many as 50 other girls were allegedly victimized by Grady as well.8

Cases such as Grady’s likely prompted another new Bill in Congress, called the “Child Modeling Exploitation Prevention Act,” (“CMEPA”), sponsored by Representative Mark Foley (R-Florida). The Bill seeks to ban all Web sites featuring controversial images of preteen children. “These Web sites are nothing more than a fix for pedophiles,” according to Foley.9 Some experts have concluded that the law would prohibit all commercial photography of children since the Bill does not verify how to distinguish between legitimate modeling and “exploitative modeling.”10

More action inside the Beltway: The House Commerce Committee was busy approving a bill that will substantially impact the adult Internet industry. The bill, entitled the “Family Privacy Protection Act of 2002,” would require Web sites containing adult material, hate speech or other material deemed “harmful to minors” to give up their .com Web addresses, and reregister in a new Cyber-Red-Light District using an adults-only Internet domain such as “.prn.” The Bill would also impose prohibitions on email or sexually oriented advertisements directed at minors without certain identifying marks and notices.11 Finally, the Bill would criminalize the act of filming individuals for a “lewd and lascivious purpose” without that person’s consent. Essentially, the Bill seeks to prohibit actual voyeuristic images and content. Currently, videotaping, unlike audio surveillance, is only illegal in a small number of states.12

All of these new bills floating around in Congress have renewed calls for the creation of an adult webmaster trade organization to conduct, amongst other things, lobbying efforts in connection with these proposed new laws. This onslaught of new legislation may prove to be a sufficient motivator for the industry to finally organize, but time will tell. The rumblings in the industry indicate that leaders may be serious this time.

MasterCard gave the adult industry a scare when it proposed to stop third party billing transactions.13 The move would have potentially eliminated transactions by popular third party billing programs such as CCBill, iBill and PayPal. The change was aimed primarily at the adult and gaming industries, which have a higher occurrence of credit card fraud and identity theft.14 MasterCard later backed off on the proposed change to the collective relief of pay sites everywhere.

Celebrity Web sites were dealt a serious blow by United States Federal Court Judge Lourdes Baird, who sent shockwaves through the industry by ruling that billing companies, such as Adult Check, could be held liable for illegal content found on sites which they service.15 Judge Baird found in the recent ruling that Adult Check may have an actual partnership relationship with the sites in its program rendering them jointly liable for illegal celebrity content or copyright violations. This author has counseled Webmasters for years against the use of the term “partnership program” to describe affiliate relationships. The recent Adult Check ruling further reinforced that advice.

Poor Al Goldstein: In one month, he announced that his print newspaper was basically dead, and was later sentenced to jail for a period of sixty days as a result of his aggravated harassment conviction involving his former secretary.16 “Porn in print is finished, there is just too much product out there on video and the Internet,” Goldstein said.17 Penthouse circulation has plunged from five million copies per edition in the 1970s to just around 650,000 copies currently.18 Xavier Hollander sums it up this way: “Goldstein, Guccione and Hefner, they had fun, they made money, they caused the world to change. I think they’ve earned a rest.”19 Goldstein won’t be able to rest quite yet; he plans to appeal his sentence.

On a positive note, another adult video company has been cleared of obscenity charges. Jeff Steward, owner of JM Productions, pled “no contest” to a nothing charge of “creating a public nuisance.”20 In exchange for the plea, all obscenity charges against Steward and his company were dropped, and all property seized by the government was returned. The tapes charged in this case were Liquid Gold 5 and American Bukkake 11. For his part, Steward described the City prosecutors as the “American Taliban” and claimed the police put him through “a year of hell.”21 One obscenity case remains pending in Los Angeles County the charge against Max Hardcore. It does appear, however, that City prosecutors have reevaluated their position on prosecution of adult videotapes.22 The City’s enforcement policy is over 20 years old, and they have finally recognized that much has changed.

The video game industry was dealt a significant blow by District Judge J. Limbaugh, who ruled that violent video games such as DoomTM, Mortal KombatTM, and Fear EffectTM do not constitute protected speech within the meaning of the First Amendment.23 The Judge cited previous Supreme Court precedent and held it is “possible to find some kernel of expression in almost every activity . . . but such a kernel is not sufficient to bring the activity within the protection of the First Amendment.”24 Previous cases have held that video games do constitute speech for purposes of First Amendment analysis.25 Judge Limbaugh’s decision involved a St. Louis County ordinance which required that minors be prohibited from playing violent video games without a parent or guardian’s consent. The law was challenged by the industry’s trade group, the Interactive Digital Software Association, who claimed that the ordinance violated the First Amendment. In a devastating decision for the video game industry, Judge Limbaugh found that the games were not sufficiently expressive to constitute speech, and that even if they were, the County had a sufficient compelling interest in regulating the content of the expression in the manner chosen. Hopefully the District Court’s decision will be appealed.

A number of employees have once again lost their jobs for activities associated with the adult Internet. For some reason, this trend continues to be generated out of the State of Arizona, where several employees have lost their jobs due to associations with adult Web sites. A Maricopa County Medical Examiner’s Office employee, April Marshall, was terminated less than a day after her government employer found out about her involvement with an adult Web site. Ms. Marshall appeared as a model on County officials learned of her involvement through an anonymous tip, and took swift action by terminating Ms. Marshall shortly thereafter.26 The County disputes that the adult Web site had anything to do with their sudden firing decision, but blamed the decision on the fact that Ms. Marshall failed to answer the phone quickly enough.27 A number of federal government employees were also terminated for sending sexually explicit messages and other “unacceptable” content using the state email system. The Washington State Department of Labor and Industries fired six employees, and disciplined two others.28

Since it is always appropriate to keep things in perspective, United States Webmasters should once again be thankful they live in a country with a First Amendment. It was recently announced that the country of Kuwait had shut down fifty Internet cafes for offering access to adult Web sites.29 Adult images are strictly forbidden in Kuwait.30 The government is expected to unleash a new set of regulations applicable to Internet cafes soon. Didn’t we free that country just a few years ago?

Lawrence G. Walters, Esquire is a partner with the law firm of Weston, Garrou & DeWitt, with offices in Orlando, Los Angeles and San Diego. Mr. Walters represents clients involved in all aspects of adult media. The firm handles First Amendment cases nationwide, and has been involved in significant Free Speech litigation before the United States Supreme Court. All statements made in the above article are matters of opinion only, and should not be considered legal advice. Please consult your own attorney on specific legal matters. You can reach Lawrence Walters at or

1 Free Speech Xpress (May 17, 2002).

2 T. Bridis, “Feds Ease Rules on Child Porn Charges,” Associated Press, (April 17, 2002).

3 Id.

4 Ashcroft v. ACLU, Case Number: 00-1293 (May 13, 2002).

5 Case Number: 00-799 (May 13, 2002).

6 S. Wheeler, “Sex Assault Charges Planned for Child Porn Suspect,” Denver Post, (April 16, 2002).

7 Id.

8 Id.

9 “Experts Diss Child Model Law,” Free Speech Xpress, (May 17, 2002).

10 Id.

11 Bill at Section 201.

12 “Hidden Sex Cameras May Soon be Banned,” Reuters, (April 17, 2002).

13 A. Backover, “MasterCard to Stop Third Party Transactions,” U.S.A. Today, (April 23, 2002).

14 Id.

15 Randy Doting, “Dirty Sites Jittery After Ruling,” Wired News (May 13, 2002).

16 B. Hunter, “Porn Princes Feeling Pinch,” (April 22, 2002).

17 Id.

18 Id.

19 Id.

20 M. Kerns, “Two Down, One to Go: J.M. Productions’ Steward Cleared of Obscenity Charges,” AVN News, (May 1, 2002).

21 Id.

22 Id.

23 Interactive Digital Software Association v. St. Louis County, Missouri, 2002 W.L. 826822 (E.D. Mo. 2002)

24 Id. citing: City of Dallas v. Stanglin, 490 U.S. 19, 25, 105 S.Ct. 1591, 1595 (1989).

25 American Amusement Machine Association v. Kendrick, 244 F.3d 572 (7th Cir. 2001).

26 B. Whiting, “County employee says she was fired over porn Web site,” The Arizona Republic, (May 9, 2002).

27 B. Whiting, “Web porn performer loses job at Medical Examiner’s Office,” The Arizona Republic, (May 10, 2002).

28 “Six State Workers Fired Over Sexually Explicit E-Mail,” Newsbytes, (April 26, 2002).

29 “Kuwait shuts porn internet cafes,” BBC News, (May 14, 2002).

30 Id.