At the begining of chapter 4 you get a phone call that someone is holding people in the adult bookstore. Go there and investigate to find Dylan holding two people hostage for his sexual pleasure. He was easily killed with the Z.A.R. Gun. One bullet takes off a half of health and he only has 8 health. After you kill him free the two survivors and don't forget to grab the gimp suit upstairs. Oh also grab his cock and balls flamethrower for the weapons locker. Happy Hunting!
Edit: if you have survivors with you, you cannot open the door to Dylan. You MUST be alone (or in co-op).
Credit to: ClaytThaGreat