Wednesday, July 3, 2013

Takeaways from the Third Circuit Argument on PASPA

The future of legalized sports wagering in New Jersey (and, potentially, in other states) was the main attraction in a Philadelphia federal courthouse on June 26, 2013, when the United States Court of Appeals for the Third Circuit heard oral argument on Governor Chris Christie's appeal of an adverse lower court ruling which held that the Professional and Amateur Sports Protection Act ("PASPA"), a federal statute prohibiting sports wagering in most states, "preempted" New Jersey's newly-enacted sports betting law. New Jersey's plans to legalize sports wagering had been dealt a temporary setback in February, when a lower federal court sided with four professional sports leagues and the NCAA in upholding the constitutionality of PASPA and enjoining New Jersey from implementing its sports wagering law. New Jersey officials (including Governor Christie) appealed the lower court's ruling, and following the submission of briefs by all interested parties (including amicus filings from the States of West Virginia, Georgia, Kansas, and Virginia), the Third Circuit expedited the appeal and heard oral argument last week.

The 30-minute oral argument (which is archived on the Third Circuit's website), showcased some of our nation's most well-known appellate advocates, including former United States Solicitor Generals Ted Olson (representing Governor Christie) and Paul Clement (representing the four professional sports leagues and the NCAA) duking it out.

Here is my quick analysis on how the issues played out before the Third Circuit.

1.  Standing -- The three-judge panel did not appear to be swayed by New Jersey's argument that the four leagues and the NCAA lacked legal standing to challenge New Jersey's sports betting law.  I doubt that the panel would reverse on these grounds anyway, since, as Judge Vanaskie observed at the oral argument, it would be the equivalent of "kicking the can down the road."  Moreover, the United States Department of Justice (which intervened in the case) unquestionably has standing to sue.  Given the DOJ's presence in the case, a reversal on standing grounds appears highly unlikely.

2.  Anti-Commandeering.  As to the merits of the appeal, the first issue addressed by the Third Circuit was whether PASPA compels or "commandeers" New Jersey to take action, in violation of the Tenth Amendment.  Under the "anti-commandeering" doctrine, Congress may not command state legislatures to enact laws or administer them.  At issue in the appeal was whether PASPA, which prohibits most states from legalizing sports wagering, is a violation of the "anti-commandeering" doctrine, even though it does not create any affirmative obligation on the part of the state to do anything (other than to refrain from an enacting a law). One of the three panelists (I'm not sure which one) expressed skepticism that such a negative prohibition could rise to the level of anti-commandeering because "the statute doesn't tell New Jersey to do anything."  In response, Ted Olson (representing New Jersey) argued that PASPA "says" that the state legislature can't exercise its discretion to regulate conduct by its citizens, to which the unnamed judge dismissively asked "how is that commandeering?" pointing specifically to Supreme Court precedent interpreting the "anti-commandeering" principle in the context of the federal government "directing" a State to so some affirmative act. Mr. Olson replied that "if New Jersey is being told you can't change the law, you can't exercise your discretion, you must enforce the law on the books, or you must allow illegal activity to take place or activity that's taking place that harms your citizens, that is 'regulating'." The inquiring judge did not appear to be persuaded by that argument, stating "that might be something else, but I'm not sure that's commandeering." Based on this line of questioning and this particular judge's reaction, New Jersey should not pin its hopes on the "anti-commandeering" doctrine rescuing its preempted sports betting law.

3.  Equal Sovereignty -- This is where New Jersey's best hope lies, thanks, in large part, to a Supreme Court decision issued just one day earlier in a Voting Rights Act case. In Shelby County v. Holder, the Supreme Court applied the "equal sovereignty" doctrine to strike down portions of the Voting Rights Act because it differentiated between the States (by requiring certain States to obtain "pre-clearance" from the federal government before being permitted to change its voting laws). This is significant because the professional sports leagues and the NCAA had successfully argued to the district court below that the "equal sovereignty" doctrine was strictly limited to the entry of new States to the union. The Shelby County decision rejects that argument, explaining that the "historic tradition" of equal sovereignty "remains highly pertinent in assessing subsequent disparate treatment of States."  Thus, the district court's rationale for rejecting New Jersey's "equal sovereignty" argument is directly at odds with the Shelby County decision, which makes clear that the doctrine remains viable.  Shelby County is helpful to New Jersey's equal sovereignty challenge for yet another reason -- it applies a more stringent standard to any federal effort to distinguish between States in enacting legislation.  Rather than applying the "rational basis" test (as urged by the professional sports leagues and the NCAA in the sports betting case), Shelby County states that any departure from the fundamental principle of equal sovereignty "requires a showing that the statute's disparate geographic coverage is sufficiently related to the problem that it targets." One of the Third Circuit panelists appeared to grasp this distinction when he posed the following question to Ronald Riccio, the attorney representing the New Jersey Thoroughbred Horsemen's Association (one of the other appellants): "what standard of review or what test was established by Shelby County," to which Mr. Ricci quickly replied that any disparate treatment of States should be "sufficiently related to the targeted goal." This is where PASPA is especially vulnerable, as the asserted reason for the disparate treatment of Nevada, Oregon, Montana and Delaware (the four states exempted from PASPA) was to protect the "reliance interests" of those states that had legalized sports gaming prior to the enactment of PASPA. But such carve-outs do not appear to be "sufficiently related" to the targeted goals of PASPA, which are to stop the spread of legal sports betting and to protect the integrity of professional and amateur sports. A proper application of the equal sovereignty doctrine would appear to support New Jersey's position in this case.

4.  Could Nevada Lose Sports Gaming?  In an interesting twist, one of the panelists suggested that if there were a violation of the equal sovereignty doctrine, the proper remedy might be simply to "strike" the exemptions granted to Nevada, Oregon, Montana and Delaware, rather than allow other states (such as New Jersey) to join them in offering legalized sports wagering.  This precise point was made by the four professional sports leagues and the NCAA in a filing made the day before oral argument.  This would seem like a real long shot (no pun intended), given the fact that neither the State of Nevada nor any of the sports gaming interests in that State were parties to this action.

5.  Expect a Ruling Before Labor Day.  Given the fact that this was an "expedited" appeal, I would expect the Court to render an opinion on a fairly expedited basis as well, with a decision likely issued sometime before Labor Day. Regardless of how the panel rules, the losing side will likely file a petition seeking a "rehearing" from the entire Third Circuit (a mechanism allowed under the federal rules of appellate procedure).  From there, the next step would be for the losing side to file a petition for writ of certiorari with the United States Supreme Court, seeking further appellate review from our nation's highest court.  The prospect of Supreme Court review will be heightened significantly if New Jersey prevails before the Third Circuit and PASPA is found to be unconstitutional.

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