The FSC, the DOJ and the 2257 Decision: Now What?

Unless you have been stranded on some desert island and unaware of the news involved in the adult entertainment industry, then you are aware of the recent decision entered by the Honorable Walker D. Miller, U.S.D.J. in the case of Free Speech Coalition v. Gonzalez, Court Action No. 05-CV-01126-WDH-BNB (U.S.D.C.D. Colo) (hereinafter referred to as “FSC”). The FSC case involves claims made by various plaintiffs opposing recently enacted regulations promulgated by the United States Department of Justice (DOJ) governing the provisions of 18 U.S.C. §2257 (28 CFR §75 et. Seq.) that had been adopted on May 24, 2005, effective June 23, 2005. The plaintiffs in the FSC matter had entered an application for a preliminary injunction asking the court to protect themselves from any enforcement of the new regulations. After several short “cooling off” periods, Judge Miller’s December 28, 2005 decision addressed the application. This article will address not only the FSC decision, but the actions the DOJ took during the initial litigation period and where the issue goes from here.As the court noted in its decision, the June 23, 2005 regulations amended regulations previously promulgated on April 24, 1992, and were purportedly done to account for the applicable changes in technology, particularly the internet, and to implement the PROTECT Act. Said 2005 regulations: (1) expanded the “secondary producer” definition to include any person “who inserts on a computer site or service a digital image of, or otherwise manages the sexually explicit content of a computer site or service that contains a visual depiction of an actual human being engaged in actual sexually explicit conduct, including any person who enters into a contract, agreement or conspiracy to do any of the following; (2) expanded the record-keeping obligations of producers by requiring them to keep: (a) a copy of all visual depictions; and, (b) “where the depiction is published on an internet computer site or service, a copy of any URL associated with the depiction or, if no URL is associated with the depiction, another uniquely identifying reference associated with the location of the depiction on the internet; (4) required that the street address at which the records are kept be included in the compliance statement, required to be displayed on media containing the depictions; (5) required that producers keep a copy of a performer identification card for depictions made after July 3, 1995; and, (6) required that producers make their records available for inspections, including by making their records available for at least twenty (20) hours per week (FSC at pages 3-4).

Between the time of the filing of the FSC complaint and Judge Miller’s decision, the DOJ determined that certain of the initially promulgated changes were, in fact, not valid in the first place. Thus, in addition to Judge Miller’s very positive actions as to these regulations and the previous exemptions under 28 C.F.R. § 75.7, the DOJ has indicated related to the overall implementation of these rules the following:

1. the words “located outside the United states” 28 C.F.R. § 75.1(b) also encompasses individuals or entities whose places of residence and/or places of business are in the United States, but who travel to foreign locations to create material depicting actual sexually explicit conduct. Such individuals or entities would, of course, apply to be “located outside the United States” for all purposes, but only with respect to the material that is created abroad. In addition, domestic producers who travel outside of the United States to record images of actual sexually explicit conduct may also rely on foreign government issued passports. Therefore, domestic content can be shot overseas and foreign content can be shot relying on foreign government issued passports.
2. as to whether the new regulations apply to only materials created in the first instance after June 23, 2005, or materials originally created before the date the regulations went into effect produced thereafter, the DOJ held that any material to be covered by the new regulations had to actually be created in the first instance after June 23, 2005. Thus, if even the material was assembled, manufactured, published, distributed, copied, duplicated, digitized, reissued and/or disseminated after June 23, 2005, if it was not originally created after June 23, 2005, then the old regulations applied.
3. date of production in the new regulations (June 23, 2005) means original creation of the work, not the last date the film was duplicated, etc.
4. in video compilations, a § 2257 notice is not required after scene, but merely a single label incorporating the compilation’s date of production at the conclusion of the end credits or within one (1) minute of the beginning of a film which has no end credits.
5. if records were kept between July 3, 1995 and June 23, 2005 and they do not include a government issued picture ID card for every performer, but rather, for example, a college picture ID or some other previously valid picture ID, those picture IDs will be sufficient to comply with ID requirements under the new regulations. Additionally, any material that was compliant with the regulations prior to June 23, 2005, but which may not be or will not be compliant with the new regulations may still lawfully be sold.
6. art directors and other designers who design/ create sexually explicit video boxes and video technicians who are on sets do not fall within the requirements of 18 U.S.C. §2257 (h)(4) involving the “assisting another person to engage in actual sexually explicit conduct”; there must be direct physical conduct of an actual sexually explicit nature.
7. the lack of definition of “actual sexually explicit conduct in 18 U.S.C. §2257 does not mean there is not a definition; it simply means that the provisions of 18 U.S.C. § 2256(2)(A)(i-iv) apply. However, mere nudity and/or other aspects of 18 U.S.C. 2256(2)(A(v) does not apply.
   finally, a website that contains no depictions of actual sexually explicit conduct, but only provides hyperlinks to a third party website that contains depictions of actual sexually explicit conduct, does not have to comply with the record keeping requirements.

(Gleaned from answers to interrogatories and admissions made as part of discovery in the injunctive relief portion of the FSC matter.)

On top of all this, the court went further to narrow, at least initially, the parties’ issues by which the June 23, 2005 regulations could be enforced. Judge Miller’s decision is a model of judicial compromise; it gives the adult industry a significant victory on a large segment of the adult community, while not totally wiping out all of the provisions of 18 U.S.C. §2257 as some had hoped. The Miller decision, especially under the narrow constraints given to a judge under a preliminary injunction request, is another step forward for the industry and another step backwards for the DOJ on this issue. It appears, at least for the foreseeable future, that the overall aspects of 18 U.S.C. § 2257 will remain in effect, but only time will tell how much and how narrow that will be.

As the court noted in its decision, preliminary injunctions are extraordinary remedies and can only be granted if the wrong party can establish: substantial likelihood to prevail on the merits; irreparable harm; threatened injury outweighs the harm a preliminary injunction would cause; and, injunction will not adversely affect the public interest (FSC decision at pg. 5). Based on these standards, Judge Miller granted injunctive relief on three (3) separate issues:

1. In Sundance Associates v. Reno, 139 F3d 804 (10th Cer. 1998) the higher court had previously held that the category of secondary producer did not exist. Under an analysis similar to the Third Circuit’s ruling in Extreme Associates when it overruled Judge Lancaster, Judge Miller found that until either the Tenth Circuit or the US Supreme Court overruled Sundance, the distinction of “secondary producer” was invalid. (FSC decision at pages 8-11) Therefore, the court determined that mere distributors and others not involved in the hiring, contracting for, managing or otherwise arranging for the participation of the performers depicted was not a producer under 28 C.F.R. §75.1(C)(2) (FSC opinions at pages 8-11; Sundance at 808).
2. The court held that the FSC could not meet the substantial likelihood test that producers other than secondary are being overly burdened as to the requirement to store copies of each depiction with two (2) major exceptions:
   • The internet chat room (a performer on the internet who engages in printed or telephonic dialogue with a customer while a simultaneous video image of the performer is transmitted). The court found that the need to retain extraordinary computer capacity of between terabytes and petabytes with at least $15,000,000 annually to store was overly burdensome (28 C.F.R. § 75.2 (a)(1)(e)).
   • Where producers are required to maintain records or URL’s or other identifying information from websites outside the producer’s control, such regulation (28 C.F.R. §75.2 (a)(1)(ii)) is overly burdensome as well. (FSC opinion at pages 19 through 22)

Otherwise, Judge Miller found that, for the purposes of granting the extraordinary remedy of a preliminary injunction, the FSC had failed to meet its burden. His Honor generally concluded that : (1) the regulations do not effectively ban sexually explicit expression (FSC opinion at page 12); (2) at least now, the FSC has failed to show that the statutes and regulations do not advance the government’s interest in preventing child pornography (The court cited the American Library Association and Connection Distribution cases to hold that a universal requirement of age disclosure is critical….to ensure no minors are depicted in actual sexual conduct) (FSC opinion at pages 15-16); (3) FSC’s own witnesses provided evidence that website operators generally keep a copy of each depiction they post on their website as a matter of costs for business purposes and that large numbers of depictions can be electronically stored by purchasing hard drives at insubstantial prices (FSC opinion at page 18); (4) privacy concerns as to IDs for primary and related producers can be addressed. (The court contended that, and the DOJ concurred, the picture ID cards can be redacted to protect the performer’s confidential information, including actual address, actual day of birth, social security number and related information) (FSC opinion at page 24).

The court therefore concluded that the DOJ was enjoined, pending the outcome of these proceedings or further order:

1. from treating any of the Plaintiffs or members of the FSC that are secondary producers as producers under 28 C.F.R. part 75 and enforcing 18 U.S.C. § 2257 against them
2. from enforcing 28 C.F.R. §75.2(a)(1)(i) against plaintiffs or FSC members in their operation of an internet chat room; and,
3. from enforcing 28 C.F.R. §75.2(a)(1)(ii) against plaintiffs or FSC members with regards to a website that is not controlled by that plaintiff or member of the FSC. (FSC opinion at page 28)

However, all other aspects of the regulations that had been put on hold during the “cooling off” period and those individuals who were not covered as Plaintiffs are subject to all of the provisions of the regulations not excluded by the Miller opinion. Furthermore, any non-protected party is subject to all of the provisions of the regulations, irrespective of Judge Miller’s decision. In either of these veins, however, it is highly questionable whether the DOJ wants to run the risk of seeking a further repudiation of the regulations in court and/or additional points that will need to be conceded by the DOJ during the discovery process.

It is more than interesting to note, as per Judge Miller’s opinion on page 19 that: “Defendants note that, giving the Plaintiffs the benefit of the doubt, they have identified only one (1) magazine and perhaps ninety (90) (out of 500,000) websites that will be forced to cease production based on the statute and regulations.” If this truly is the initial review result, where there is a roughly 98% compliance with the statute/regulations, then much of the teeth gnashing may be a bit overdone. This does not mean that there should not be continued vigilance by everyone in the industry. His Honor notes that the law has been in effect for a significant period of time, that the law has not impeded the industry and that its underlying purpose (the prevention of minors engaged in the industry) is a relevant and desirous purpose to have.

The court took its time drafting the decision and I believe both parties will have a hard time convincing His Honor to change his mind as to his initial decision before a full blown trial. The next step will be additional discovery of which some of the points the court believed had not been flushed out by the FSC (privacy of performers, that the regulations do not produce the desired result, the reduction of the quantity of sexually explicit speech due to the statute or regulations, costs of URL maintenance, etc) will have to be addressed to convince the court to amend its initial findings. The industry must also be cognizant of two last items, one in a footnote and one in the body of the decision, that must clearly be overcome to reverse Judge Miller’s initial ruling on the overall validity of the statute/ regulations. The first, footnote 12, discusses the minimal cost for having hard drives available for the maintenance of pictures/videos. The second is the following:
“In particular, although I accept that Plaintiffs themselves would not knowingly engage in child pornography, it only makes sense, given extensive demand for pornography involving young-looking performers, to conclude that there is a substantial risk that performers under the age of eighteen (18) will be used in such materials. This risk necessitates government regulatory efforts, including imposing on producers of pornography mandatory age-checking and record-keeping to provide a shield against child pornography.” (FSC opinion at pages 16-17)

Finally, in light of Sundance, it will probably take an overall appeal of a final judicial decision in this case for the issue of secondary producers to be addressed again. In the interim, with an unknown trial date, the water in the §2257 pool is a bit cleaner and it becomes even more important for content producers/providers, and the industry as a whole, to create compliant videos/pictures and to keep the appropriate records. In an industry where the adult internet component alone has seen a 150% increase in revenues in three (3) years and the entire industry earning revenues in excess of $12.6 billion dollars, a certain amount of compliance, with a recognition by the DOJ and the courts of the burden itself, has gone a long way to debunk the myths. Judge Miller’s decision is a clear positive for the industry and its constituencies and 2006 starts a lot brighter than many had anticipated just a few months ago.