Tuesday, September 30, 2014

DOJ Argues No Such Thing as "Unregulated" Sports Betting Since Casinos & Racetracks Still Subject to Licensing Requirements; Backtracks on Prior Statements that NJ Free to Repeal Ban

Late last night, the United States Department of Justice filed its memorandum in opposition to New Jersey's motion to clarify and/or modify the federal court injunction prohibiting it from authorizing or regulating sports wagering at casinos and racetracks.

The DOJ's opposition brief largely mirrors the Leagues' brief filed earlier in the day, but it is noteworthy in two significant respects. First, as expected, the DOJ argues that any "repeal" of the state-law prohibition on sports wagering which is limited solely to casinos and racetracks would still run afoul of PASPA because New Jersey's casinos and racetracks remain subject to an extensive licensing and regulatory scheme by the State. Thus, as the DOJ points out, "even under an attempted reformulation of the Sports Wagering Act, it would still be impossible to operate a sports wagering pool without first having a State-issued license." The DOJ argues that "[a]s long as the only entities that may engage in sports wagering must be licensed by New Jersey, New Jersey is in effect licensing sports wagering, which is squarely within PASPA's licensing prohibition."

Second, the DOJ backtracks from its prior statements that New Jersey is free to repeal its state-law prohibition against sports wagering "in whole or in part" without violating PASPA. As I detailed in an earlier post, the DOJ (through U.S. Attorney Paul Fishman and U.S. Solicitor General Donald Verrilli, Jr.) made these unequivocal statements throughout the prior judicial proceedings, including in appellate briefing before the Third Circuit, at oral argument, and in a filing made with the U.S. Supreme Court. In his Third Circuit brief, Mr. Fishman wrote that "nothing in [PASPA] requires New Jersey to maintain or enforce its sports wagering prohibitions." Later, when asked at the June 26, 2013 oral argument whether New Jersey could "repeal" its ban against sports wagering, Mr. Fishman responded "[a]s a matter of law, it could." When further pressed by the Third Circuit panel if such a repeal would violate PASPA, Mr. Fishman responded by saying "no." The U.S. Solicitor General reaffirmed this position ten months later in a filing with the Supreme Court when he stated that "PASPA does not even obligate New Jersey to leave in place state-law prohibitions against sports gambling that it had chosen to adopt prior to PASPA's enactment. To the contrary, New Jersey is free to repeal those prohibitions in whole or in part." (United States Brief to the Supreme Court in Opposition to Petitions for Writ of Certiorari (Nos. 13-967, 13-979 & 13-980), dated May 14, 2014, at p. 11)

How does the DOJ retreat from such unequivocal statements? Easy. By ignoring two of them, and pointing to less damaging statements that are susceptible to differing interpretations. On page 17 of its opposition brief, the DOJ identifies three "selectively quoted" statements that New Jersey cites as evidencing the DOJ's acknowledgement that a partial repeal of the state-law prohibition on sports betting would not violate PASPA:
On page 28 of the appellate brief for the United States; "Nothing in the statute requires New Jersey to maintain or enforce its sports wagering prohibitions." 
"On page 30 of the appellate brief for the United States: "[T]he bare repeal or non-enforcement of New Jersey's sports wagering prohibitions would not constitute such an 'authorization' because there would be no State statute or compact granting anyone authorization. to conduct sports wagering."
 At pages 68 and 69 of the appellate oral argument transcript; "[I]f New Jersey wants to tinker with its gambling statute in a reasonable exercise of state law and enforcement power, it's perfectly free to do that."
(DOJ Brief, p. 17)

While accusing New Jersey of using "selectively quoted" statements, isn't the DOJ guilty of the same thing here? There is no mention of Mr. Fishman's acknowledgment at oral argument that New Jersey was free to repeal its sports betting ban and that doing so would not violate PASPA. Nor is there any reference to the U.S. Solicitor General's statement that New Jersey is free to repeal its state-law prohibitions "in whole or in part." It's as if the DOJ used hydrofluoric acid to make those prior statements disappear.

The DOJ offers an entirely unconvincing explanation as to the import of those prior statements (at least the ones that the DOJ has deigned to address). The DOJ contends that it meant only to say that New Jersey has "options" when it comes to sports betting:
"These identified quotations reflect the United States' acknowledgment that New Jersey has options regarding sports wagering if it wishes to forego the licensing and the authorizing by law of sports wagering (as well as the other conduct prohibited by PASPA). The presence of those options demonstrates that there is no unconstitutional compulsion as New Jersey incorrectly suggests."
(DOJ Brief, pp. 17-18)

This does not even pass the giggle test. Expect New Jersey to hammer the DOJ on this point in its Reply Brief. But that doesn't necessarily mean that New Jersey will prevail on its motion. Far from it. As I wrote previously, I expect New Jersey's motion to be denied. It's not even a close call, as New Jersey's "implied repeal" and "severability" arguments are rather flimsy. But the real danger here is that Judge Shipp may go even further than just denying New Jersey's motion; he may clarify the injunction in a manner that is detrimental to New Jersey's future legislative efforts. For example, he could broaden the injunction to include language stating that while New Jersey is free to repeal its state-law prohibition against sports betting, it cannot limit such repeal to the State's racetracks and casinos given that they remain subject to an extensive state licensing and regulatory regime. Given the low likelihood of success, maybe New Jersey's best play here is to simply withdraw the motion, and focus on more legally sustainable efforts to bring sports betting to the Garden State. The moral of this story: Be careful what we wish for.

Monday, September 29, 2014

Leagues Push Back on NJ's Latest Sports Betting Gambit: Call Such Efforts a "Blatant Violation" of Federal Court Injunction

In a post two weeks ago, I analyzed Governor Christie's latest strategy for bringing single-game sports betting to the Garden State: by arguing in a federal court motion that the state-law prohibitions against sports wagering have already been repealed through the enactment of the New Jersey Sports Wagering Law, even though that legislation was found by two different federal courts to be preempted by the Professional and Amateur Sports Protection Act. ("PASPA"). Governor Christie had argued, I maintain unconvincingly, that the portion of the legislation allowing casinos and racetracks to "operate sports pools" could be "severed" from the portion of the law authorizing the state to "license" sports betting (the part found to be in express conflict with PASPA).

Earlier today, the four major professional sports leagues and the NCAA filed their joint response in opposition to Governor Christie's motion. The Preliminary Statement wastes no time laying waste to the Governor's main guments. Here are some of the highlights:
  • "This motion reflects defendants' latest unlawful attempt to authorize sports wagering in New Jersey's casinos and racetracks."
  • "Contrary to this Court's decision and defendants' prior position -- as well as to the very words of the Sports Wagering Law itself -- the Governor takes the astounding position that, in providing that casinos and racetracks 'may operate a sports pool," the Sports Wagering Law does not 'authorize' sports wagering, but simply repeals the State's existing prohibition on sports wagering. This despite the fact that throughout the litigation, defendants consistently asserted that the Sports Wagering Law authorized casinos and racetracks to operate sports wagering games."
  • "Moreover, even in their current motion, defendants expressly acknowledge that sports pools operated by racetracks and casinos pursuant to the Sports Wagering Law would be subject to all of the laws and regulations that apply to those venues, including the extensive legislation and licensing and regulatory scheme addressing gambling in New Jersey's Casino Control Act, N.J. Stat. Ann. s 5:12-1 et seq. In other words, this Court's injunction has no practical effect whatsoever on New Jersey's ability to accomplish precisely what PASPA prohibits.
In the main portion of their opposition brief, the Leagues characterize New Jersey's implied repeal argument as both "improper" and "disingenuous," pointing to the plain language of the Sports Wagering Law, the two court rulings, statements made in the defendants' prior court filings, and the recent unsuccessful legislative repeal efforts:
  • "The plain language of the Sports Wagering Law readily refutes defendants' new reading, as the phrase 'may operate' is as clear an authorization as one could imagine. In fact, both this Court and the Third Circuit have recognized that the Sports Wagering Law is an attempt to authorize sports gambling, not to 'repeal' existing prohibitions.
  • "So, too, have defendants, who repeatedly represented--including throughout this litigation--that the Sports Wagering Law does in fact seek to authorize sports gambling.
  • "Immediately after this litigation (seemingly) concluded, the State Legislature attempted to enact legislation that purported to repeal sports wagering prohibitions at casinos and racetracks--legislation that would have been wholly unnecessary had the Sports Wagering Law accomplished that end."
On the related issue of "severability," the Leagues argue that the defendants' attempt to sever only five words ("may operate a sports pool") from the Sports Wagering Law's authorization of sports wagering "utterly misconstrues" the doctrine of severability. As the Leagues explain in their joint response, "[t]he critical inquiry for severability is legislative intent, which 'must be determined on the basis of whether the objectionable feature of the statute can be excised without principal impairment of the principal object of the statute.'" 

The Leagues argue that the legislative intent behind the Sports Wagering Law was to enact a "licensing regime" that would shift illegal economic activity into legal channels where it could be monitored, regulated and appropriately taxed. They point to the 2010 public hearings during which legislators "expressed a desire to 'stanch the sports-wagering black market flourishing within New Jerseys borders.'" And, as icing on the cake, the leagues quote directly from a Third Circuit brief filed by two New Jersey legislators (Stephen M. Sweeney and Sheila Oliver) in which they stated that unregulated sports betting "would be contrary to the considered judgment of the Legislature and the expressed desire of their constituents." Based on the foregoing, the Leagues conclude that "Defendants--and this Court--cannot, consistent with legislative intent underlying the Sports Wagering Law, sever the law's provision authorizing casinos and racetracks to operate sports gambling from its requirements that any sports gambling in New Jersey (i) be authorized and approved by the [state regulators]; and (ii) conform to the licensing requirements of the Casino Control Act and the regulations promulgated thereunder."

The Leagues also take issue with the notion that there can ever be such a thing as "unregulated" sports betting at New Jersey's casinos and racetracks, since they would still remain subject to an extensive licensing and regulatory regime in New Jersey (whether there is sports betting or not). Indeed, the Leagues stress, "virtually every detail concerning the operation of casinos and racetracks is heavily regulated by both State law and by regulations promulgated by the DGE and Racing Commission." For example, State regulations upon casinos and racetracks include licensing and permitting requirements, specifications on equipment used for gambling, and payment to the State of a portion of revenue derived from casino and racetrack wagering. As the Leagues point out, even the defendants have stated that these requirements "will apply equally to sports wagering if the provision of the Sports Wagering Law providing that casinos and racetracks 'may operate a sports pool' is reinstated. Thus, the Leagues argue that this would leave New Jersey "free to accomplish precisely what the Sports Wagering Law was enacted to achieve: state-regulated sports wagering in casinos and racetracks," adding that "[n]ot only is [such a] result flatly inconsistent with this Court's injection, it is flatly inconsistent with PASPA." 

Finally, the Leagues argue that, under no circumstances, could sports wagering be conducted at Monmouth Park or at the Meadowlands because those two racetracks are owned and operated by the New Jersey Sports and Exposition Authority, a state governmental entity. Based on the state's ownership of those racetracks, the Leagues contend any sports wagering conducted at either the Monmouth Park or at the Meadowlands "would violate the provisions of PASPA that prohibit a State from directly sponsoring, operating, or advertising sports wagering, regardless of whether those facilities purport to offer gambling pursuant to a state authorization or a state repeal."

As of the this writing, the Department of Justice has not yet filed its response brief. But if past practice is any indication, I would expect the DOJ to file a response shortly (i.e., before midnight tonight)

New Jersey is now on the clock, with its Reply Brief due on October 10.

Monday, September 22, 2014

Daniel Wallach Interviewed on Ray Rice Investigation

Becker & Poliakoff sports litigator Daniel Wallach made several radio appearances last week to provide legal commentary and analysis on the Ray Rice controversy. Dan appeared on WTOP 103.5 FM (Washington, DC), SportsNet 590 (Toronto), The Big 920 (Milwaukee, WI), The Big 170 (Madison, WI) and KRXO (Oklahoma City, OK) to discuss Ray Rice's legal options in the wake of his recent suspension by the National Football League. Dan also weighed in on the NFL's investigation of the controversy, Roger Goodell's future as NFL Commissioner, and what to expect from the upcoming independent investigation. You can listen to Dan's interviews here and here.

Wednesday, September 17, 2014

Daniel Wallach Interviewed About Adrian Peterson Controversy

Becker & Poliakoff sports litigator Daniel Wallach was interviewed by KWSN Sports Radio to discuss the legal aspects of the Adrian Peterson child abuse case and what it may mean for his future in the National Football League. Dan analyzed the criminal charges brought against Peterson and offered insights into the unique "parental justification" defense available under Texas law. Dan also explained why Adrian Peterson may have played his last game for the Minnesota Vikings. You can listen to the full interview here.

Monday, September 15, 2014

The Fallacy Behind New Jersey's Sports Betting Strategy

If ever there were a sports law case that had the proverbial "nine lives," it would have to be New Jersey's ongoing quest to legalize sports betting. Following his veto of two bills that would have partially repealed the state-law prohibition against sports betting, which itself was a response to the Supreme Court's refusal to hear New Jersey's constitutional challenge to the Professional and Amateur Sports Protection Act ("PASPA"), New Jersey Governor Chris Christie last week embarked on a bold new legal strategy designed to bring sports betting to the Garden State.

First, the New Jersey Attorney General issued Formal Opinion 1-2014 which concluded that casinos and racetracks would not be committing a criminal offense under New Jersey law if they were to accept wagers on professional and college sporting events (excluding those collegiate games involving New Jersey colleges or taking place in New Jersey). Second, the Attorney General (joined by Governor Christie) filed a motion with U.S. District Judge Michael A. Shipp, the federal judge who permanently enjoined New Jersey from implementing its sports wagering law in February 2013 (that decision was later upheld on appeal by the Third Circuit). The new motion seeks a "clarification" of the injunction to explicitly recognize that New Jersey is not obligated to maintain the criminal prohibitions against sports wagering on its books and, further, that the "surviving portions" of the earlier legislation (which Judge Shipp held was preempted by PASPA) already "effect[ed] a repeal of New Jersey's prohibition of sports wagering in casinos and racetracks" without the need for further action. Alternatively, the motion seeks to "modify" the injunction to reflect the Third Circuit's explicit recognition that a State "may repeal its sports wagering ban" or "keep a complete ban on sports gambling" and "decide what the exact contours of the prohibition will be."

You might be asking yourself the following question: "Didn't New Jersey just lose in federal court?" While New Jersey's efforts to "regulate" sports wagering through a statutory licensing regime were unsuccessful because Judge Shipp and, later, the Third Circuit (by a 2-1 margin), concluded that the statute was preempted by PASPA, New Jersey is zeroing in on language in the Third Circuit opinion which purports to allow it to "repeal" its state-law prohibition against sports betting without violating PASPA. The pertinent language in the Third Circuit opinion reads:
[W]e do not read PASPA to prohibit New Jersey from repealing its ban on sports wagering. . . . [U]nder PASPA, on the one hand, a state may repeal its sports betting ban, a move that will result in the expenditure of no resources or effort by any official. On the other hand, a state may choose to keep a complete ban on sports gambling, but it is left up to each state to decide how much of a law enforcement priority it wants to make of sports gambling, or what the exact contours of the prohibition will be. We agree that these are not easy choices. And it is perhaps true (although there is no textual or other support for the idea) that Congress may have suspected that most states would choose to keep an actual prohibition on sports gambling on the books, rather than permit that activity to go on unregulated. But the fact that Congress gave states a hard or tempting choice does not mean that they were given no choice at all, or that the choices or otherwise unconstitutional.
National Collegiate Athletic Ass'n v. Christie, 730 F.3d 208, 232-33 (3d Cir. 2013)

Seizing upon this language, the New Jersey Senate and State Assembly introduced legislation in June that would have repealed the state-law prohibition against sports wagering, but only for the benefit of casinos and racetracks. Governor Christie vetoed these bills on August 8, 2014, believing them to be a blatant "end-run" around PASPA that would not have survived judicial scrutiny. Governor Christie's motion tries a more creative approach: it argues that the state-law prohibitions against sports wagering have already been repealed by virtue of the 2012 legislation that was found to be preempted by PASPA. You might ask: "How can New Jersey still be relying on a state law that was struck down by the federal courts?" Simple. By arguing that the portion of the law providing that a casino or racetrack "may operate a sports pool" is "severable" from the portion of the law authorizing the state to "license" sports betting (the part found to be in express conflict with PASPA). Pointing to the statute's "severability clause," Governor Christie's motion posits that "the surviving portions of the Sports Wagering Act effect a repeal of New Jersey's prohibition of sports wagering in casinos and racetracks. . . ." (Governor Christie's Motion, at p. 5)

1.   New Jersey's Novel "Repeal" Theory is Unlikely to Succeed

Despite the optimism expressed on many fronts, New Jersey's gambit is unlikely to succeed. To begin with, New Jersey's sports wagering law (N.J.S.A. 5:12A-1 et seq.) did not expressly repeal the criminal prohibition against sports wagering in that state. The 2012 legislation does not even refer to the state-law prohibitions that would presumably cover illegal sports betting -- N.J.S.A. 2C:37-2 ["Promoting Gambling"] and N.J.S.A. 2A:40-1 ["Gaming Transactions Unlawful"]. Similarly, neither of these criminal statutes exempts sports betting at casinos and racetracks nor contains any reference to the 2012 legislation. It would have required only a modicum of effort to amend one or both of these statutes to read: "Nothing in this Chapter shall be construed to prohibit bets or wagers placed upon the outcome of any professional or collegiate sporting event in accordance with the provisions of N.J.S.A. 5:12A-1 et seq." It is likewise telling that the 2012 legislation does not contain the common introductory phrase -- "notwithstanding any law, rule or regulation to the contrary" -- in the allegedly "surviving" portion of the statute that provides that a casino or racetrack "may operate a sports pool." This is further evidence that the legislature did not intend to repeal either of the state-law prohibitions when it enacted the sports wagering law.

While statutes can be repealed "by implication," the New Jersey Supreme Court has cautioned that "there is a strong presumption in the law against [an] implied repealer and every reasonable construction should be applied to avoid such a finding." New Jersey Ass'n of School Adm'rs v. Schundler, 211 N.J. 535, 555-56, 49 A.3d 860, 872 (2012) (citing In re Comm'r of Ins.'rs Issuance of Orders A-92-189 & A-92-212, 137 N.J. 93, 99, 644 A.2d 576, 579 (1994)). To overcome that strong presumption, a high threshold must be vaulted: "'a repeal by implication requires clear and compelling evidence of legislative intent, and such intent must be free from reasonable doubt.'" Id.

New Jersey will not be able to overcome this presumption. Recent actions taken by New Jersey legislative officials are completely antithetical to any notion that an "implied repeal" has occurred. For example, in the Supreme Court petition filed by New Jersey Senate President Stephen Sweeney and New Jersey General Assembly Speaker Vincent Prieto in February 2014, those legislative officials conceded that "the citizens of New Jersey have not expressed support for allowing unregulated sports wagering." This is an acknowledgement by New Jersey's two highest-ranking legislative officers that, as of February 2014, the criminal prohibition against sports wagering had not been repealed. This directly contradicts the present position advanced by Governor Christie and Attorney General Hoffman in their motion. To be sure, at no point in the nearly two years of federal court litigation did New Jersey take the position that the criminal prohibition against sports wagering had been "repealed" by virtue of the 2012 legislation. There are no such statements in any of New Jersey's federal court filings--until now, that is.

Ironically, New Jersey points to statements made by its adversaries in the federal case to support its novel "implied repeal" argument. In Formal Opinion 1-2014, Attorney General Hoffman maintains that the Third Circuit "accepted" the position of the plaintiffs in the case, which he characterizes as having acknowledged that New Jersey repealed its prohibitions against sports wagering. (AG Opinion, at p. 2 [blending the DOJ's and leagues' briefs to read that "'nothing in [PASPA] requires New Jersey to maintain or enforce its sports wagering prohibitions, and, indeed, that New Jersey's 'repeal of its state-law prohibition on the authorization of sports wagering' itself was 'in compliance with PASPA.'"). But a close reading of the appellate briefs paints a far different picture. In his brief, United States Attorney Paul Fishman actually stated that "nothing in [PASPA] requires to New Jersey to maintain or enforce its sports wagering prohibitions," noting that "the Sports Leagues have not brought suit to enjoin New Jersey from repealing those pre-existing sports-gambling prohibitions," which he describes as a "hypothetical scenario."

Indeed, the Third Circuit opinion itself makes clear that any repeal of New Jersey's state-law prohibition against sports wagering would be prospective in nature. In rejecting New Jersey's argument that PASPA improperly commandeers the States to maintain their criminal prohibitions against sports wagering, the Third Circuit majority stated that "we do not read PASPA to prohibit New Jersey from repealing its ban on sports wagering." National Collegiate Athletic Ass'n v. Christie, 730 F.3d 208, 232 (3d Cir.2013). Note the use of the "future tense" rather than the "past tense". This runs counter to any argument by New Jersey that the repeal had already occurred. Although the New Jersey Attorney General quotes from the federal government's answer brief before the Third Circuit, he overlooks a later Supreme Court filing made by the U.S. Solicitor General which states that PASPA "does not even obligate New Jersey to leave in place the state-law prohibitions against sports gambling that it had chosen to adopt prior to PASPA's enactment. To the contrary, New Jersey is free to repeal those prohibitions in whole or in part."

Likewise, at the June 26, 2013 oral argument before the Third Circuit, Paul Fishman (the United States Attorney for the District of New Jersey) conceded that New Jersey "could" repeal its prohibition against sports betting without violating PASPA, but stated that the reason "it hasn't been done" yet is because "it's a really, really bad idea":
MR. FISHMAN:  Mr. Olson [counsel for Governor Christie] said they can't change the law, they have to enforce the law on the books, they have to keep it illegal. None of that is true. . . . It is up to the State of New Jersey to determine for itself the extent to which it will or will not enforce that law. . . . 
THE COURT:  So New Jersey could repeal its ban on wagering on sporting events?
MR. FISHMAN:  As a matter of law it could. It would be incredibly irresponsible. 
THE COURT:  It would not violate PASPA?   
MR. FISHMAN:  No. But the reason it hasn't been done for 20 years or a hundred years is not because of PASPA. It hasn't been done because it's a really, really, really bad idea. It's irresponsible, it would be bad policy to just allow gambling to go unfettered. . . .
(Transcript, at pp. 66-68)

Moreover, the Attorney General's opinion on this issue cannot be reconciled with the recent New Jersey legislative efforts to partially "repeal" the ban on sports wagering. On June 23, 2014, the New Jersey Senate and State Assembly introduced identical bills (S2250A3476) that sought to "decriminalize" sports wagering at casinos and racetracks. Each bill contained a "Statement of Intent" acknowledging that the intent of the proposed legislation was to conform current law to statements made by the U.S. Solicitor General in a filing with the Supreme Court that "PASPA does not even obligate New Jersey to leave in place the state-law prohibitions against sports gambling that it had chosen to adopt prior to PASPA's enactment. To the contrary, New Jersey is free to repeal those prohibitions in whole or in part." And this week brought the announcement by New Jersey State Senator Ray Lesniak (D-Union) that he will soon introduce a bill that would "repeal" all prohibitions concerning sports wagering "at casinos or gambling houses in Atlantic City and at current running and harness horse racetracks in this State." This begs the question: if the prohibition against sports wagering had already been repealed by the 2012 legislation, then why even bother with the new legislation? These recent actions completely belie New Jersey's present position.

2.   Is the New Jersey Sports Wagering Law "Severable"?

I also question whether any portion of the 2012 legislation "survived" the federal court determination that the New Jersey sports wagering law was preempted by PASPA. This is a key hurdle for New Jersey to clear because it cannot claim that an "implied repeal" occurred without first demonstrating that the portion of the 2012 legislation purporting to repeal the prohibition against sports wagering can be "severed" from the portions of the law that were invalidated. Under the doctrine of "severability," a court can excise the invalid portions of a statute while leaving the remainder intact. This issue does not appear to have been addressed by either the district court or Third Circuit. But nothing in the two judicial opinions suggests that only "portions" of the 2012 legislation were invalidated. To the contrary, both opinions suggest that the entire law was stricken. See National Collegiate Athletic Ass'n v. Christie, 926 F. Supp. 2d 551, 577 (D.N.J. 2013) (determining that "New Jersey's Sports Wagering Law is preempted" and stating that "the enactment of the Sports Wagering Law is in violation of the Supremacy Clause."); National Collegiate Athletic Ass'n v. Christie, 730 F.3d 208, 215 (3d Cir. 2013) ("New Jersey's sports wagering law conflicts with PASPA, and, under our Constitution, must yield. We will affirm the district court's judgment.").

For such an important threshold question, New Jersey's motion gives short shrift to the "severability" analysis, relegating it to a footnote. Therefore, I will attempt to explain the legal analysis that Judge Shipp will likely undertake in ascertaining whether the portions of New Jersey sports wagering law providing that a casino or racetrack "may operate a sports pool" (the so-called "implied repeal") can be severed from the "licensing" regime of that law.

When a federal court is called upon to invalidate a state statute, the severability of the constitutional portions of the statute is governed by state law. New Jersey courts employ a "commonsense approach" to severability, holding that an invalid provision is severable if that is in keeping with the legislative intent; legislative intent is ascertained by looking to the broad purpose of the statute, the degree to which the valid and invalid provisions are intertwined with one another, and the extent to which the statute remains comprehensive and logical after the invalid provisions are excised. See New Jersey State Chamber of Commerce v. Hughey, 774 F.2d 587, 597-98 (3d Cir. 1985)

At first glance, each of these factors points decidedly away from severability. The "broad purpose" of the New Jersey sports wagering law was to enact a "licensing regime" that would shift illegal economic activity into legal channels where it could be monitored, regulated, and appropriately taxed. During the public hearings, legislators also expressed a desire "to stanch the sports-related black market flourishing within New Jersey's borders." Christie, 730 F.3d at 217. The provision allowing casinos and racetracks to "operate a sports pool" (the so-called "implied repeal") is inextricably intertwined with the requirement that such activities be licensed and regulated. Indeed, the sentence which states that casinos and racetracks "may operate a sports pool" (contained in N.J.S.A 5:12A-2(a)) also expressly conditions such entitlement "upon the approval" of the New Jersey Division of Gaming Enforcement (for casinos) and the New Jersey Racing Commission (for racetracks) and further requires such activities to be undertaken "in accordance with the provisions of this act and applicable regulations promulgated pursuant to this act." Virtually the entirety of the act addresses issues relating to "licensing" and regulation." The licensing and regulatory aspects of the law are so dominant that once they are excised (since they were held to be in conflict with PASPA), the remainder of the statute would be largely an empty shell devoid of any logical structure.

3.   Assessment and Conclusion

Given these highly inconvenient facts, New Jersey faces an uphill battle to convince Judge Shipp to clarify the existing injunction to align with the Attorney General's view that the state-law prohibition against sports wagering was repealed by the 2012 legislation and that the "surviving" portions of the 2012 legislation exempt casinos and racetracks from civil or criminal liability. The best that New Jersey can realistically hope for is that the injunction will be "modified" to incorporate the Third Circuit's explicit recognition that a State "may repeal its sports wagering ban" or "keep a complete ban on sports gambling" and "decide what the exact contours of the prohibition will be."

But that might be a pyrrhic victory at best. Let's assume that the injunction is modified to incorporate the "wiggle room" afforded by the Third Circuit majority opinion. What would a future "repeal" actually look like? If it's anything like the June legislative measure (which released only casinos and racetracks from the law's clutches), it might not be worth the effort. The selective exclusion of casinos and racetracks might still run afoul of PASPA, which provides in Section 3702(1) that a governmental entity may not authorize or promote a sports-based wagering scheme even "indirectly." The recent proposed legislation -- removing only racetracks and casinos from the criminal prohibition -- certainly appears to be an "indirect" authorization of sports betting, and will likely be challenged by the leagues and the DOJ if and when it is signed into law. The problem with such a partial repeal is that it does not seek to repeal the prohibition against sports betting in toto; rather it releases only New Jersey's casinos and racetracks from the law's clutches (and subjects everyone else to the prohibition). Such a repeal too closely mimics the prior law.

And that is precisely why Governor Christie vetoed the proposed repeal. In his August 1st letter to the New Jersey Senate, Governor Christie disparaged the June legislative measure as "a novel attempt to circumvent the Third Circuit's ruling" and "an attempt to sidestep federal law." "Ignoring federal law, rather than working to reform federal standards," the Governor added, "is counter to our democratic traditions and inconsistent with the Constitutional values I have sworn to defend and protect." Clearly, Governor Christie was troubled by the "carve out" of casinos and racetracks in the recent legislative measure and believed (wisely) that it would not pass muster with the federal courts. The June measure -- releasing only New Jersey's casinos and racetracks from the criminal prohibition against sports wagering -- struck many observers, including me, as a "back-door" authorization of sports betting.

Previewing last week's court filing, the closing paragraph of the Governor's letter reassures state legislators that he "remain[s] open to legally sound ways to let the State's casinos and racetracks offer sports wagering." It is debatable whether the Governor's latest gambit is "legally sound." Just as the June legislative measure was likely headed for defeat in the federal courts (if it had been signed into law), so too is the Governor's novel but risky legal strategy. Both avenues seek to exempt only casinos and racetracks from the criminal prohibition, a carve-out that may be viewed as an "indirect" authorization of sports betting. Is such a gambit really worth the time, knowing the likely result? Perhaps a more legally sustainable repeal strategy would be to exclude only certain geographic areas (e.g., Atlantic County) from the prohibition. The optics of such a maneuver would certainly be superior to an exemption that specifically and exclusively benefits only two classes -- casinos and racetracks. Perhaps that is elevating form over substance. But without a more reasoned approach to the "repeal" issue (and one that remains faithful to the Third Circuit opinion), we may be a long way from placing that Super Bowl bet in New Jersey.

Wednesday, September 10, 2014

Daniel Wallach Quoted in Sports Illustrated on Donald Sterling Federal Lawsuit

Becker & Poliakoff sports law attorney Daniel Wallach was interviewed by Sports Illustrated's Michael McCann for his latest article on the Donald Sterling controversy. Dan provided legal analysis and commentary on the federal court battle between Sterling and the NBA. As first reported in SI, Mr. Sterling filed his answer and affirmative defenses to the NBA's counterclaims, which seek substantial damages from Sterling based on losses that the NBA claims to have suffered due to Sterling's racist comments (which were secretly recorded by his girlfriend and furnished to TMZ). In the article, Dan examined whether California's privacy law bars the use of the tape recorded comments in the federal court proceeding, with Dan expressing his view that the tape was likely inadmissible because it was made without Sterling's consent. Dan added that the fact that the tape was released by TMZ (rather than by V. Stiviano) did not undo the taint of the original illegal recording since it is well-settled that "a violation of the California privacy law is committed the moment that a confidential recording is secretly recorded regardless of whether it is subsequently disclosed." He opined that "if the original recording is inadmissible under California's privacy law, so too is any rebroadcast of the original recording." 

Thursday, August 28, 2014

Donald Sterling Misses Filing Deadline with California Supreme Court; Was Last Chance to Regain Ownership of LA Clippers

As Sports Illustrated's Michael McCann exclusively reported, Donald Sterling has inexplicably missed the filing deadline for seeking appellate review by the California Supreme Court. The high court represented Sterling's last opportunity to overturn the recently-completed sale of the Los Angeles Clippers to Steve Ballmer, which had been approved by a California probate court on August 12th. Mr. Sterling had requested an emergency stay of that ruling, but was turned down by the California Second District Court of Appeal on August 13th. The California Supreme Court represented Mr. Sterling's last hope of unwinding the court-approved sale. However, the filing deadline passed on August 25, 2014 with no action being taken by Donald Sterling. With that missed deadline, Donald Sterling's chances of regaining control of the Clippers have, in the words of Professor McCann, "fallen from almost 0 to essentially 0." Becker & Poliakoff sports law attorney, Daniel Wallach (also the editor of Koz on Gaming), was interviewed in Professor McCann's SI's article about this stunning "game-over" development and also offered his take on Donald Sterling's failed legal strategy and missed opportunity.