A federal judge has rejected claims that Las Vegas nude and topless dancing clubs have participated in a racketeering scheme by paying kickbacks to taxi drivers.
U.S. District Judge Lloyd D. George in Las Vegas last week granted dismissal motions filed by eight adult clubs that were sued in 2009 in what class-action attorneys at the time called a scheme in which taxi companies were accused of extorting commissions from the clubs totaling $40 million over the years in order to deliver customers to them.
Attorneys later dropped the taxi companies from the lawsuit, saying it was the adult clubs that were at fault.
Now, the entire thesis of a racketeering scheme by anyone has been rejected by the judge.
The suit seeking class-action status was filed on behalf of Southern California resident and Las Vegas tourist Theodore Trapp by attorneys led by Jay Edelson of Chicago.
The suit charged Trapp got into a cab at Caesars Palace in January 2009 and asked to be taken to the Play it Again Sam club on West Spring Mountain Road, but instead was diverted to the nearby Spearmint Rhino club by the driver, who said Spearmint Rhino was a better club but did not disclose he would receive a kickback and a higher fare for taking Trapp there.
In his order dismissing the lawsuit against Spearmint Rhino and seven other adult clubs, George wrote that the clubs were also accused of recovering kickbacks to drivers, typically of $100, by charging higher cover charges, by selling low-quality liquor represented to be premium liquor, by watering down drinks and falsely stating amounts owed by customers and using force or intimidation to collect these amounts.
But George ruled that Trapp and his attorneys had failed to allege a single instance of illegal activity to support the racketeering allegation.
"Trapp has not alleged sufficient facts to permit an inference that, in charging an admission fee and paying taxi drivers, any of the defendant adult nightclubs committed a crime. Trapp concedes that it is not illegal for an adult nightclub to either charge an admission fee or to pay a cab driver," George wrote in his ruling.
As for clubs increasing cover charges to cover payments to taxi drivers, George wrote, " It is not a crime to increase the price charged for a service or product, so long as the service or product is delivered."
"Alleging that the adult nightclubs did not disclose that the proceeds of the increased admission fees would be used to pay taxi drivers is insufficient. Trapp has not offered any authority suggesting that adult nightclubs (or any other business) have a duty to disclose their lawful expenses to each customer or to any customer," George wrote in his ruling.
Addressing allegations that taxi drivers unlawfully divert strip club customers to clubs paying the highest kickbacks, George wrote, " That some taxi drivers engage in unlawful conduct to obtain a lawful payment from an adult nightclub does not cause the adult nightclub’s payment to be unlawful."
" Trapp’s own allegations require the conclusion that it is equally plausible that an adult nightclub must pay a satisfactory amount to taxi drivers to ensure that taxi drivers will not have an incentive to divert customers to other adult nightclubs," the judge wrote in his order.
Asked about George’s dismissal of the suit against the strip clubs, Edelson said Wednesday: "We are reviewing the order and are still considering our options."