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I have to say that while I don't think it's wrong what they were doing inside the building (as long as it was consentual), that they were wrong for violating the zoning laws. It may have been a private club but the club still resides inside the city and the jurisdiction of the laws that are in effect. If they want to have a place where people can assemble like that they need to take the precautions to make sure that the legal side is taken care of also. They are hoping they can cast a cloud over the law by claiming to be private and using the sexual freedom card.
On a side note, isn't there a restaurant in New York called Fetish? You can get spanked and whipped or whatever you like before/after dinner.
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