Appeal from the 250th District Court Travis County, Texas
Trial Court Case No. D-1-GN-17-002768
consists of Justices Kelly, Hightower, and Countiss.
dismiss this appeal because, in light of a ruling from the
federal district court for the Western District of Texas,
Austin Division, no ruling from this court can currently
affect the rights of the parties and this appeal is thus
moot. We write to explain the unusual procedural posture of
this case that leads to this conclusion.
2007, the Texas Legislature enacted a statute requiring the
collection of a $5 per patron fee from businesses that offer
live nude entertainment and allow the consumption of alcohol
on their premises. Tex. Bus. & Comm. Code §
102.052(a). Such a business is considered a sexually oriented
business ("SOB"). Id. § 102.051(2).
SOBs are required to self-report and remit the SOB fees.
See Tex. Bus. & Comm. Code § 102.053
(requiring SOBs to remit the fee quarterly along with a
report "containing the information required by the
Legislature delegated to the Comptroller of Public Accounts
responsibility for administration, collection, and
enforcement of the SOB fee. Id. § 102.056;
see also Tex. Tax Code § 111.001
("Comptroller to Collect Taxes"). The Comptroller
is authorized to "adopt rules that do not conflict with
the laws of this state or the constitution of this state or
the United States for the enforcement of the provisions of
this title and the collection of taxes and other revenues
under this title." Tex. Tax Code § 111.002(a).
fee statute became effective January 1, 2008, and it was
immediately challenged in state court. See State of
Texas, 2017 WL 11072005, at *6 (June 2, 2017) (ALJ
Proposal for Decision). The Travis County district court held
that imposition of the SOB fee violated the First Amendment
to the United States Constitution, and it enjoined the
Comptroller from assessing or collecting the fee. Tex.
Entm't Ass'n, Inc. v. Combs, No.
D-1-GN-07-004179, 2008 WL 2307196 (345th District Court,
Travis County, Mar. 28, 2008) (Combs I),
rev'd, 347 S.W.3d. 277 (Tex. 2011). The Austin
Court of Appeals concluded that the SOB fee was a
"content-based tax subject to strict scrutiny," and
it held that the SOB fee was "unconstitutional under the
First Amendment. See Combs v. Tex. Entm't Ass'n,
Inc., 287 S.W.3d 852, 864 (Tex. App.-Austin 2009)
(Combs II), rev'd, 347 S.W.3d 277 (Tex.
Supreme Court of Texas disagreed that the SOB fee statute was
subject to strict scrutiny, concluding that it was "not
aimed at any expressive content of nude dancing but at the
secondary effects of the expression in the presence of
alcohol." See Combs v. Tex. Entm't Ass'n,
Inc., 347 S.W.3d. 277, 286, 287-88 (Tex. 2011)
(Combs III) ("The fee in this case is clearly
directed, not at expression in nude dancing, but at the
secondary effects of nude dancing when alcohol is being
consumed. An adult entertainment business can avoid the fee
altogether simply by not allowing alcohol to be consumed. For
these reasons, we conclude that the fee is not intended to
suppress expression in nude dancing.").
Texas Supreme Court evaluated the statute under the four-part
test of U.S. v. O'Brien, 391 U.S. 367 (1968),
which concerns content-neutral restrictions on symbolic
speech. 391 U.S. at 377. Under O'Brien,
a government regulation is sufficiently justified  if it
is within the constitutional power of the Government;  if
it furthers an important or substantial governmental
interest;  if the governmental interest is unrelated to
the suppression of free expression; and  if the incidental
restriction on alleged First Amendment freedoms is no greater
than is essential to the furtherance of that interest.
Id. The Texas Supreme Court held that the
O'Brien test was satisfied, in part by
concluding that the $5 per patron fee was "a minimal
restriction on the businesses." Combs III, 347
S.W.3d at 288.
the 2011 Supreme Court opinion, the case was remanded for the
court of appeals to consider the arguments relating to the
Texas Constitution, and in 2014, the Austin Court of Appeals
upheld the statute against the state constitutional
challenges. Tex. Entm't Ass'n, Inc. v.
Combs, 431 S.W.3d 790, 801 (Tex. App.- Austin 2014, pet.
denied) (Combs IV). The Comptroller then began
enforcing the SOB fee. See State of Texas, 2017 WL
11072005, at *6 (June 2, 2017) (ALJ Proposal for
Comptroller's enforcement actions sometimes included
businesses that operate as bikini-latex clubs-clubs that
serve alcohol and offer live entertainment by women, who are
partially covered by latex that is applied to their bodies in
a liquid or semiliquid state. The Comptroller contended that
these clubs were sexually oriented businesses under the SOB
fee statute. The clubs contended that they were not SOBs
because their entertainers were covered with clothing or
liquid latex that had dried on their bodies, and therefore
they were not nude. In some cases, the administrative law
judges agreed with the clubs and found that no SOB fees were
2017, the Comptroller adopted a rule regarding the sexually
oriented business fee ("the SOBF
Rule"). 34 Tex. Admin. Code § 3.722. The SOBF
Rule defined "clothing" as "a garment used to
cover the body, or a part of the body, typically consisting
of cloth or a cloth-like material. Paint, latex, wax, gel,
foam, film, coatings, and other substances applied to the
body in a liquid or semi-liquid state are not clothing."
Id. § 3.722(a)(1). After the adoption of this
rule, the administrative law judges ...