Portland, Oregon- Fantasy Adult Video’s three-year legal fight with the city of Beaverton goes before federal appeals judges this morning in Portland.

Attorneys for Oregon Entertainment Corp. will argue in their presentation to the U.S. 9th Circuit Court of Appeals that the city did not have unlimited discretion in 2003 to deny a permit allowing it to operate an adult video rental store on Southwest Beaverton-Hillsdale Highway around the clock.

The company also will ask federal appeals judges to grant it the right to cross-examine witnesses in land-use matters, something that isn’t part of Oregon’s quasi-judicial land-use process.

At the heart of the company’s argument is the claim that the city’s conditional-use permit denial amounted to “prior restraint” because of the adult material the store sold and rented. If that was the case, it would be improper under Oregon’s Constitution, which protects speech and legal activity that some might consider unsavory.

The company also claimed that it was denied its Fourth Amendment due-process rights because it was not allowed to cross-examine witnesses in the case. Company attorneys said the city’s denial blocked its use of the property without the proper legal process.

Attorneys representing Beaverton disputed those claims, saying Oregon Entertainment did not have a “protected property interest” in a conditional-use permit to operate 24 hours a day. The city’s permitting process includes “the exercise of substantial discretion” and shouldn’t be based solely on fulfillment of regulatory criteria.

Judges in the U.S. 9th Circuit Court of Appeals will hear “Oregon Entertainment Corp. v. city of Beaverton” with several other cases beginning at 9:30 a.m. in the Pioneer Courthouse, 700 S.W. Sixth Ave., Portland.

There are five cases on the court’s docket this morning, including the Beaverton case. Appeals judges began hearing arguments on local cases Monday in Portland and will eventually look at more than a dozen cases before they finish today.

Oregon Entertainment Corp. has battled the city over around-the-clock operation since March 1999, when it opened the Fantasy Adult Video store at 10720 S.W. Beaverton-Hillsdale Highway (map). The store is in a Community Service zone that allows operation between 7 a.m. and 10 p.m., but requires a conditional-use permit to operate between 10 p.m. and 7 a.m.

The company applied for a permit in 1999 to keep the Fantasy store open 24 hours a day. The city rejected the request, citing concerns from the store’s business neighbors and worries that the store would attract crime and lower surrounding property values.

The city’s decision was upheld more than a year later by both the state Land Use Board of Appeals and the Oregon Court of Appeals.

Oregon Entertainment Corp. re-applied for a conditional-use permit in March 2003 and presented evidence to the Planning Commission that there was no increase in crime and that the value of several local buildings actually went up during the four years the store had been open.

Commission members approved the conditional-use permit in July 2003. Local civic activist Henry Kane appealed the decision and the City Council took up the issue in September 2003.

After a five-hour hearing, the council upheld the appeal and rejected Oregon Entertainment’s permit request. During the hearing, company attorneys asked to cross-examine anyone who presented testimony to the council. The city denied the request.

In its findings, the council cited the impacts the 24-hour operation would have on surrounding businesses and the effect on neighboring property values.

When Oregon Entertainment sued the city in U.S. District Court in late 2003 it claimed the city had overstepped its authority to deny the permit. The company also complained that the council blocked the store because it didn’t like the adult video store’s merchandise.

In a March 2005 decision granting summary judgment for the city, federal Judge John Jelderks rejected those claims and said Oregon’s land-use system provided plenty of discretion to make decisions on conditional-use permits. He also said Oregon Entertainment had no legal right to cross-examine witnesses in the land-use hearings because the company didn’t have a vested property right in a conditional-use permit.

The 9th Circuit Court of Appeals is one of the last stops in the legal process before going to the U.S. Supreme Court. It could be several months before a decision on Oregon Entertainment’s appeal is published.