As they say in Central City, the cards are on the table.

After a summer of threats and a legal appeal exhausted, a major adult nightclub company filed a federal lawsuit against the mountain gambling municipality on Wednesday, claiming its civil rights were violated when town leaders denied its request to open a strip club and steakhouse on historic Main Street. 

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Residents are worried that this is a David-versus-Goliath situation that could bankrupt the quaint mountain town with the mom-and-pop casinos. The legal battle is a muddy one, involving a string of decisions entangled with small-town politics and personalities. 

In essence, RCI Hospitality Holdings Inc., a Nasdaq-traded company that reported $76.2 million in total revenues for the third quarter of fiscal 2024, is going up against Central City, which is short on resources.

“Nightclubs achieved record revenues, increasing year over year, on a same-store basis, and from last quarter,” RCI President and CEO Eric Langan said in an earnings report news release issued on Thursday.

Central City, with a population just shy of 800, does not have an in-house city attorney. Evin King, a Front Range attorney with Michow Guckenberger McAskin, has stepped in to represent the town, while its current city attorney, with the same firm, is out of town.

She did not return a call from The Denver Gazette asking for comment, but City Manager Daniel Miera, said that the city attorney’s office was “aware of the situation and will be assisting.” 

It’s the town’s insurance company’s lawyers who would be enlisted to fight RCI’s lawsuit, which is shaping up to be a huge legal challenge. 

The lawsuit hit federal court less than 24 hours after city leaders denied RCI Hospitality Holdings Inc.’s last ditch appeal to relax municipal restrictions on sexually oriented businesses (SOB) in historic downtown Central City.

Central City Council’s unanimous vote to deny the appeal was based on a city ordinance that requires a 1,000-foot buffer between any SOB located in the historic downtown and residences or gathering places, such as churches.

The lawsuit contends that Central City violated RCI’s civil rights when it sold a large building at 130 Main Street in historic downtown “for a specific stated economic purpose and then abandoning the process of reforming its regulatory regime to accommodate that stated purpose.” 

RCI, which owns five adult nightclubs in Denver, including Rick’s Cabaret and The Diamond Cabaret, wants to operate a second Colorado Rick’s Cabaret at 130 Main Street in Central City. But it had banked on the idea that the town would amend the 1,000 foot buffer municipal code to 150 feet; thus, allowing him to operate legally. He did that based on a recommendation made by the City Planning Commission to reduce that buffer to the Central City Council. 

The recommendation sat for two years and was never brought up again until May, when RCI decided to pull its gambling permit application because it was taking too long. Without the revenue that a casino could bring in, RCI again turned to making Rick’s a sexually oriented business. 

Langan, the President and CEO, took to the podium microphone at Tuesday night’s bi-monthly meeting and told town leaders that they “went into this business relationship with eyes wide open. You should have known this was the intended use. We’ve always been an adult entertainment company.” 

A unanimous ‘no’ vote

When the three-person panel, diminished by the recusal of two members, voted 3-0 on Tuesday night to deny RCI’s request, Councilmember Jeff Aiken predicted: “We’re going to have some turmoil coming up.” 

Mayor Jeremy Fey and member Kara Tinucci are the two members who have recused themselves from any decisions that involve sexually oriented businesses.

Fey recused himself at the request of some residents, who believe he got too close to Langan. The State Ethics board is investigating at least two complaints against him for an all-expenses-paid trip he took to Houston with Langan, and also because he has had real estate business dealings with the strip club business mogul.

Tinucci’s husband was formerly employed by RCI; thus, she has exempted herself from voting on anything SOB-related, as well. 

The strip club issue has been the talk of the town. Tuesday’s City Council meeting included over an hour of public comment, most from residents who oppose a strip club on Central City’s historic Main Street. 

St. Mary’s Catholic Church and the Elk’s Club are within 1,000 feet of where workers are currently remodeling the planned steakhouse and adult nightclub.

Langan had warned the city that, if the council made things hard for his multi-million dollar business by denying his appeal, he would sue. He previously told The Denver Gazette: “It’s not something I want to do. I have fallen in love with Central City.”

He has also threatened to have the new Rick’s Cabaret and Steakhouse up and running by the end of the year — no matter what town leaders decide.

Rolling the dice

One of the major misunderstandings in this situation appears to be why RCI bought the former Scarlet’s Casino building for $2.4 million in December 2022 on the expectation that City Council would seal the deal. 

It was a roll of the dice.

Three months earlier, on Sept. 7, Central City’s Planning Commission recommended 4-1 to the Central City Council to reduce the 1,000 foot buffer to 150 feet, clearing the way for RCI to operate an SOB.

But Central City Council never moved forward and the recommendation sat. 

According to Central City Councilman Todd Williams, since October 2022, when the City Council voted in favor of selling the building to RCI, and Tuesday night’s appeal denial, there have been only two other decisions involving Rick’s Cabaret and both of those were in favor of awarding it liquor licenses.

“When it was sold (to RCI), we were under the impression it would be turned into a casino. We know what their business is. Has there been talk about it? Yes. But has it ever been in front of City Council? No,” Williams said in an earlier interview.

The lawsuit pointed to promises that Langan believes were made. 

“At the time of the transaction, Defendant (Central City) affirmatively represented to Plaintiffs’ representatives that it would work with Plaintiffs to amend the existing ordinance governing Sexually Oriented Businesses (SOBs) to allow for Plaintiffs’ operations at the Subject Property Defendant sold to Plaintiffs,” the lawsuit stated. “The existing SOB Ordinance allows no locations in the City of Central.”

“I wasn’t surprised about the lawsuit,” said Aiken, the councilmember. “They knew this was sold as a casino restaurant and they knew what the zoning was.”  

Central City citizens expressed worries during public comment that an RCI lawsuit could bankrupt the mountain gambling town.

Even the Colorado Catholic Conference weighed in virtually.

“It’s not ethical to put it (the strip club) next to single family homes and a church,” said Executive Director Brittany Vessely. 

The spire of St. Mary of the Assumption Catholic Church looks down on the Rick’s Cabaret space from a hill on the next block. The Elk’s Club Lodge, which qualifies as a gathering spot, is 201 feet away — much too close for comfort for many residents. 

“I’m reading about lap dances and nude lap dances and something with clear shower curtains and stuff?” said one citizen. “If a guy wants to have a bachelor party, go to Denver.”