Wednesday, October 29, 2014

Publications

Quoted, Florida State's Jameis Winston Hearing Could Face Many Legal Hurdles, Sports Illustrated, October 16, 2014 (article authored by Michael McCann)

Quoted, Jameis Winston's Best Legal Move May Be To Drop Out of Florida State, Sports Illustrated, October 12, 2014 (article authored by Michael McCann)

Quoted, In Wake of Levenson Scandal, Sterling Answers NBA's Counterclaims, Sports Illustrated, September 10, 2014 (article authored by Michael McCann)

Quoted, Donald Sterling Gives Up Battle for Clippers, Allows Deadline to Pass, Sports Illustrated, August 27, 2014 (article authored by Michael McCann)

Quoted, Ballmer Officially New Clippers Owner, But What's Next for Sterling, NBA? Sports Illustrated, August 12, 2014 (article authored by Michael McCann)

Quoted, Next Steps in O'Bannon Case: Both NCAA and the Plaintiffs Could Appeal, Sports Illustrated August 11, 2014 (article authored by Michael McCann)

Quoted, Still Hope for Donald Sterling After Judge Vacates Order Allowing Sale, Sports Illustrated, August 8, 2014 (article authored by Michael McCann)

Quoted, Judge Rules Against Donald Sterling, OK's Sale of Clippers to Steve Ballmer, Sports Illustrated, July 28, 2014 (article authored by Michael McCann)

Quoted, One Sterling Trial Resumes, Another is Just Beginning in Clippers Fight, Sports Illustrated, July 22, 2014 (article authored by Michael McCann)

Quoted, How Does Sterling Trial's Inability to Finish on Time Impact Ballmer Deal, Sports Illustrated, July 11, 2014 (article authored by Michael McCann)


Transcript Provides More Insights Into Judge Shipp's Reasoning for Granting TRO to Leagues

[This is an update of my prior post for the sole purpose of incorporating the latest developments in the case, such as the issuance of a scheduling order and the release of the transcript from last Friday's hearing]

Less than 48 hours before Monmouth Park Racetrack was scheduled to open the first legal sports book in New Jersey (and with crowds expected to top 10,000 people for this historic event), a federal court judge put a temporary halt to those plans. On Friday, U.S. District Judge Michael A. Shipp entered a temporary restraining order prohibiting the New Jersey Thoroughbred Horsemen’s Association (the operator of Monmouth Park) and the New Jersey Sports and Exposition Authority (the owner of the land) “from conducting sports wagering at Monmouth Park.” Additionally, the order temporarily enjoins the New Jersey defendants (including Governor Christie and the New Jersey Legislature) from “sponsoring, operating, advertising, promoting, licensing or authorizing” sports wagering schemes or “implementing, enforcing, or taking any action pursuant to New Jersey Senate Bill 2460 (the law partially repealing the state law ban against sports wagering). The order further states that these restraints “shall remain in effect until this Court resolves [the pending] application for a preliminary injunction.”

The Judge’s Preliminary Findings

Although the written order does not contain any specific findings of fact or conclusions of law, the official transcript of last Friday’s court proceedings lays out the judge’s rationale for issuing the TRO. After evaluating the four factors which govern the TRO analysis (discussed below in greater detail), Judge Shipp concluded that the leagues “were entitled to a temporary restraining order to maintain the status quo pending full consideration of their application for a preliminary injunction.” The transcript is replete with statements by the judge to the effect that there was insufficient time to fully consider the merits of the motion since there were numerous briefs filed, with the last brief filed just one day earlier and sports betting due to begin at Monmouth Park that weekend.

Nonetheless, Judge Shipp said plenty on the record that should give proponents of expanded sports betting cause for concern. As to the first factor – “likelihood of success on the merits,” Judge Shipp acknowledged that the core issue was whether New Jersey’s “partial repeal” (exempting only state-licensed casinos and state-licensed racetracks from the state-law ban on sports betting) followed the path set out by the Third Circuit in the prior case involving the same parties. In National Collegiate Athletic Ass'n v. Governor of New Jersey, 730 F.3d 208 (3d Cir. 2013) (“Christie I”), New Jersey had argued that the Professional and Amateur Sports Protection Act (“PASPA”), which prohibits “state-sponsored” sports betting, violated the Tenth Amendment because it "commandeered" New Jersey's legislative authority by effectively requiring it to maintain unwanted state-law prohibitions on sports betting.

In rejecting that argument, the Third Circuit stated “we do not read PASPA to prohibit New Jersey from repealing its ban on sports wagering." The court explained that a “repeal” of state-law prohibitions against sports betting would not violate PASPA, explaining:

[PASPA] . . . leave[s] much room for states to make their own policy. Thus, under PASPA, on the one hand, a state may repeal its sports wagering ban, a move that will result in the expenditure of no resources or effort by any state 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.”

Id. at 233 (emphasis added). In the current case, New Jersey is arguing that its new law, Senate Bill 2460 (the “2014 Law”) fits within the parameters of the Third Circuit majority opinion because it merely “repeals” state-law prohibitions and does not "authorize" or "sponsor" sports betting (which would be a violation of PASPA).

Judge Shipp did not appear to be persuaded by this argument. While acknowledging that the 2014 Law “is styled as a ‘repeal,’ and at first blush, it appears to be an attempt to comply with the Third Circuit’s interpretation of PASPA in Christie I,” Judge Shipp pointed out that the new law “repeals prohibitions on sports wagering in the state only so much, so that the state may keep some restrictions over the activity.” He noted that the 2014 Law contains “several exclusions,” most notably, an exemption for “Atlantic City casinos or current or former horse racetracks.” This statement reveals that Judge Shipp may have been troubled by the fact that the partial repeal was limited to state-licensed casinos and state-licensed racetracks. While not saying it in so many words, Judge Shipp seemed concerned that New Jersey would be able to “regulate” sports betting (forbidden by PASPA) through its extensive regulatory oversight over casinos and racetracks generally. He may have been skeptical that a “Chinese Wall” could realistically be constructed between a casino’s regular gaming operations and its sports book (which, by law, would have to be housed in the same facility). But, as New Jersey countered in its court filing, the same “background regulation” over casinos and racetracks would exist even under a complete repeal of the law.

As to the second factor – whether the leagues would suffer “irreparable harm” – Judge Shipp focused specified three distinct types of harm. First, he noted that since it appeared that New Jersey is violating a federal law (PASPA), irreparable harm is presumed because “[c]onstitutional and statutory violations often cannot be adequately remedied through damages and therefore generally constitute irreparable harm.”

The second type of irreparable harm that Judge Shipp found (at least preliminarily) was “reputational harm” to the leagues. The leagues had argued that they would sustain irreparable harm to their “reputation” because sports betting on their own games “will result in a negative effect on the perception of their games and relationship with their fans.” Calling this “a very real harm,” Judge Shipp observed that “the Third Circuit, and this Court, have already found ‘a link between legalizing sports betting and a harm to the integrity of [plaintiffs’] games,’ and a resulting increase in a negative perception or reputation associated with the plaintiffs.”

Judge Shipp also found irreparable harm to exist at this early stage based on the increased incentive for “game-rigging” due to expanded sports betting. Quoting from the Third Circuit’s opinion, Judge Shipp stated that “[m]ore legal gambling leads to more total gambling, which in turns leads to an increased incentive to fix plaintiffs’ matches.” Thus, he reasoned, this spread of sports betting “would engender the very ills that PASPA sought to combat.” He agreed with the leagues that the 2014 Law’s “carve-out” for collegiate games occurring in the state or involving New Jersey colleges “belies any argument that plaintiffs are not injured by gambling on their games.”

On the “balancing of the harms” – the third factor in a TRO analysis – Judge Shipp held that any potential harm to the New Jersey defendants was “self-inflicted” because New Jersey “should have anticipated potential hurdles towards implementing sports betting at casinos and racetracks.” Rather than spend significant sums in money in preparation for sports betting, Judge Shipp reasoned that the owners of the Monmouth Park Racetrack “could have easily waited this Court’s decision on the validity of the 2014 Law prior to taking such steps.”

As to the final factor – whether issuance of the TRO “would serve the public interest” – Judge Shipp alluded to the fact that the case had been filed only a few days earlier and that the briefing on the motion – which raised questions of “utmost public importance” -- had concluded only the day before. In view of this limited time-frame, Judge Shipp held that “the public interest is [best] served by preserving the status quo until the merits of a serious controversy can be fully considered by the court.”

New Jersey Nearly Secured the Right to Offer Wagering on Other Sports

Despite ruling against New Jersey at this stage, Judge Shipp nearly opened the door for legal sports betting on soccer, tennis, golf, boxing, and mixed martial arts. Towards the end of the hearing, Ronald Riccio, the lawyer representing the New Jersey Thoroughbred Horsemen’s Association (the operator of Monmouth Park Racetrack), asked for clarification on whether the scope of the TRO was “limited to the plaintiffs’ games and not other sporting contests that the plaintiffs have no interest in.” Judge Shipp responded by saying “right now – the scope is limited to the application  that’s been put before the Court which is limited to the plaintiffs’ games.” That statement provided some hope (at least temporarily) for Monmouth Park, which was poised to offer sports wagering on everything but NBA, NFL, MLB, NHL and NCAA contests. This would have been a huge victory for New Jersey, as it would have opened the door to limited sports betting. And once that door opens, it would be hard to close.

Within a couple of hours, Judge Shipp had a change of heart.  Late in the day Friday, he issued a written order stating that the New Jersey Thoroughbred Horsemen’s Association and the New Jersey Sports and Exposition Authority “are restrained from conducting sports wagering at Monmouth Park.” The words “sports wagering” are not specific to a particular league or sport – it encompasses all sporting events. Judge Shipp explained his action in an addendum to the transcript, stating that:

Upon further consideration of the question posed by counsel . . . . as to the scope of the temporary restraining order, this court finds that the temporary restraining order restrains the implementation, enforcing, or taking any action pursuant to [the 2014 Law], and would apply to any lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly, on one or more competitive games in which amateur or professional athletes compete, or are intended to participate, or on one or more performances of such athletes in such games.

To avoid any confusion, Judge Shipp then clarified that “[t]he scope of [the] restraints is NOT limited to the games sponsored by the plaintiffs’ leagues."

This aspect of the ruling appears problematic in several respects. First, the sports federations governing soccer, golf, tennis, boxing and mixed martial arts are not parties in this case, and certainly did not ask for such relief. Second, and more fundamentally, how can the four major professional sports leagues and the NCAA claim that their leagues and games would be irreparably harmed if a small New Jersey racetrack accepted wagers on tennis matches? The answer is they can’t. While PASPA is certainly broad enough to encompass all professional sporting events, it may have been premature for the judge to enjoin betting on other sporting events, especially at the TRO stage (where a showing of irreparable harm must be made).

The Leagues Will Likely Prevail at the Preliminary Injunction Hearing

Friday’s court order decided only the motion for a temporary restraining order filed by the four professional sports leagues and the NCAA on Tuesday.  Left unresolved – for now – was the leagues’ request for a preliminary injunction (included within the same set of motion papers). A temporary restraining order preserves the status quo (e.g., no sports betting) only until a hearing on the motion for preliminary injunction can be held. By contrast, a preliminary injunction preserves the status quo for the balance of the case (through and including the trial and any possible appeals).

The TRO remains in place until November 21. It was originally set to expire on November 7 under Federal Rule of Civil Procedure 65(b)(2), but Judge Shipp extended the TRO “for good cause and by the consent of the parties” in order to afford the parties an opportunity for supplemental briefing in advance of oral argument on the leagues’ pending application for a preliminary injunction.

Judge Shipp has scheduled oral argument on the leagues’ application for a preliminary injunction for November 20th. Can we expect a different outcome?  Don’t bet on it. The leagues are undefeated before Judge Shipp, having prevailed in three consecutive significant motions: the motion to dismiss and the motion for summary judgment in Christie I, and the motion for a temporary restraining order in Christie II (the current case). Further, by virtue of granting the motion for temporary restraining order, Judge Shipp has already telegraphed how he will likely rule on the motion for preliminary injunction since they are governed by the same standard.  While many believe that the TRO was just a “place-holder” until he could resolve the motion following a hearing (and Judge Shipp did hint at this in his oral ruling), the fact remains that a TRO does not issue unless the moving party can demonstrate a reasonable probability of success on the merits, irreparable harm, greater harm than the other side, and a showing that a TRO will serve the public interest. Having already satisfied each of these elements for purposes of the TRO, the leagues remain the odds-on favorite to obtain a preliminary injunction that is governed by the exact same legal standard in front of a federal judge before whom they have never lost.

Friday’s Ruling Was Foreshadowed by Judge Shipp’s Prior Decision

Judge Shipp’s prior rulings also shed light on why he granted the temporary restraining order. In his February 28, 2013 Order granting summary judgment to the leagues in Christie I, Judge Shipp made plain that a repeal or amendment of PASPA was the only pathway for legal sports betting in New Jersey. He wrote that “[t]o the extent that the people of New Jersey disagree with PASPA, their remedy is not through passage of a state law, but through the repeal or amendment of PASPA in Congress.” (italics added). Taken literally, these words would seem to be the death knell for any state legislative “work-around" (which arguably is what New Jersey has done here, although it does appear to satisfy the Third Circuit language.).

In his earlier order, Judge Shipp also made a specific finding of “irreparable harm” to justify the granting of a permanent injunction in that case. On that point, he wrote that the spread of state-sponsored sports betting "would engender the very ills that PASPA sought to combat.” This foreshadowed his statement on Friday, in ruling from the bench, that the leagues would be irreparably harmed by a partial repeal of the law because “[m]ore legal gambling leads to more total gambling, which in turns leads to an increased incentive to fix plaintiffs’ matches.”  Judge Shipp is unlikely to do a 180-degree on the issue of irreparable harm in just a few short weeks. He has already made his position (read: ruling) on this issue clear in his TRO ruling.

Irreparable Harm May Still Be In Play

Although Judge Shipp siding with the leagues following a preliminary injunction hearing appears to be a fait accompli, New Jersey still needs to make a record for its eventual appeal to the Third Circuit.  In countering the leagues’ claim of irreparable harm, New Jersey will highlight events occurring subsequent to Christie I. They will point to NBA Commissioner Adam Silver’s recent statement that expanded legal sports betting is "inevitable" and that the NBA is open to "participating" in it (suggesting that the NBA’s acquiescence on sports betting is available for "the right price"). New Jersey will also emphasize the leagues' recent embrace of daily fantasy sports leagues (which many have characterized as akin to sports betting), as evidenced by lucrative team sponsorship deals with FanDuel and Draft Kings (the two largest daily fantasy sports operators). These recent events post-date Christie I and may be key to New Jersey's efforts to rebut irreparable harm. Although raised previously without much success, New Jersey will again note that the leagues host games in jurisdictions (e.g., Las Vegas, London, and Canada) where sports betting is legal, and that extensive gambling has occurred on sporting events for many years without injuring the leagues or their reputations. Additionally, New Jersey could point to the astronomical growth of the leagues while sports wagering (both legal and illegal) has increased ten-fold (from $50 billion to approximately $500 billion) since the early 1990’s. While this is not likely to sway Judge Shipp, it may persuade the Third Circuit (which has not previously considered the issue of irreparable harm in this context). 

New Jersey’s lawyers will also attempt to show that any harm to the leagues through expanded sports betting is greatly “outweighed” by the real, tangible harm that would be suffered by Monmouth Park Racetrack (and other New Jersey casinos and racetracks) if a preliminary injunction were entered. This is a critical element on a motion for a preliminary injunction. “Irreparable harm” by itself is not enough; the leagues also need to show that the harm they would suffer from sports betting occurring is worse than the losses that would be sustained by New Jersey without sports betting. While the leagues would point to a “reputational injury” through the "negative perceptions" on the part of fans that the leagues' games might be fixed, the fact remains that the leagues have thrived financially while sports betting has increased exponentially. By contrast, the harm suffered by New Jersey would appear to be more real and tangible: casinos closing their doors, the loss of thousands of jobs, adverse economic impact (e.g., decline in tourism), and lost tax revenue (due to shuttered casinos and racetracks). Sports wagering is widely seen as a lifeline for New Jersey’s struggling casinos and racetracks, and an injunction could sound the death knell for these businesses. The “balancing of the harms” would thus appear to heavily favor New Jersey and militate against the granting of a preliminary injunction. But not according to Judge Shipp, who summarily dispatched with this inquiry by saying that "much of this harm is self-inflicted" because Monmouth Park spent "great sums of money" without waiting for a court ruling. Such a statement, lifted directly from the leagues' reply brief, ignores all of the prospective or future harm that would likely be sustained by Monmouth Park if it were prevented from offering sports betting. Expect this to be a key issue in any Third Circuit appeal.

The Absence of the DOJ was a Strategic Decision to Avoid Judicial Estoppel

Conspicuous by its absence from last week’s court filing was the Department of Justice, which has standing to enforce PASPA in federal court. Indeed, the DOJ was an active participant in Christie I. Many have wondered why the DOJ was not added to last week's complaint or motion. While the leagues have publicly stated that nothing should be read into the DOJ’s absence, I suspect that the DOJ’s exclusion from this lawsuit was by design: to distance the leagues from prior statements made by United States Attorney Paul Fishman and United States Solicitor General Donald Verrilli, Jr. that a “repeal” of the state-law prohibition against sports betting would not violate PASPA and to avoid the preclusive effect of such statements. 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 "as 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)

The Third Circuit appeared to adopt Mr. Fishman's concession in its written decision. In rejecting New Jersey's contention that PASPA violated the United States Constitution because it "commandeered" New Jersey's authority by effectively requiring it to maintain unwanted state-law prohibitions on sports betting, the Third Circuit observed 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). Echoing Mr. Fishman's comments at oral argument, the Third Circuit stated that "under PASPA, a state may repeal its sports wagering ban, a move that will result in the expenditure of no resources or effort by any state 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.” Id. at 233.

Under the doctrine of judicial estoppel, parties are precluded from advancing a position in litigation that is inconsistent with one previously asserted in another judicial proceeding. Judicial estoppel generally prevents a party from prevailing in one phase of a case on a particular argument and then relying on a contrary argument to prevail in another phase against the same party. The purpose of the doctrine is to protect the integrity of the judicial process by prohibiting parties from deliberately changing positions according to the exigencies of the moment.

Thus, the DOJ's inclusion in the new lawsuit would be extremely problematic for the leagues. If the DOJ were joined as a co-plaintiff in the new lawsuit, New Jersey would have a much better chance of prevailing on a judicial estoppel argument. Although the leagues made similar statements in Christie I, none approach the explicitness of the DOJ’s concession that a “repeal” (even one that is partial) would not violate PASPA. Thus, it appears that the leagues made a strategic decision to distance themselves from the DOJ’s prior statements by filing the latest lawsuit without the joinder of the DOJ in order to avoid the application of the doctrine of judicial estoppel. That strategy has already borne fruit. In his ruling from the bench on Friday, Judge Shipp dismissed New Jersey's arguments centered on the DOJ's prior statements, observing that since the DOJ is not a party to the lawsuit, "the leagues are not bound to those conclusions." Expect this issue to resurface several ways. First, New Jersey could argue that the leagues made similar concessions in Christie I and were aligned with the DOJ's position in any event. Alternatively, New Jersey could move to dismiss the leagues' latest lawsuit for failure to join an indispensable party (the DOJ), or it could assert a third-party complaint against the DOJ in the same action seeking a declaratory judgment that the 2014 Law does not violate PASPA. In the end, the DOJ’s prior statements likely play a major role in the case.

This Dispute is Headed to the Third Circuit (but not until December)

Judge Shipp will not be the final word on this controversy. Just like its predecessor, this case is ultimately going to be decided by the Third Circuit. If (read: when) Judge Shipp issues a preliminary injunction following the November hearing, New Jersey will appeal that ruling. It is in this for the long haul. Although the filing of a notice of appeal ordinarily divests the district court of jurisdiction, in an appeal from an order granting a preliminary injunction, the district court may nevertheless proceed to determine the action on the merits. Thus, while the appeal of the preliminary injunction is before the Third Circuit, Judge Shipp would retain jurisdiction over the lawsuit and entertain the leagues' expected motion for summary judgment (which he would likely grant). Look for the notice of appeal (on the preliminary injunction) to be filed in December (assuming that Judge Shipp enters his written order before the end of November). New Jersey will then ask the Third Circuit to expedite the appeal based on the harm that would be suffered by its casinos and racetracks through any delay. If the appeal is expedited (as I would expect), all briefing would likely be concluded in March, setting the stage for an oral argument before the Third Circuit in the Spring of 2015. Of course, by that point, Judge Shipp will likely have already granted the leagues' motion for summary judgment, and New Jersey will appeal that ruling as well and ask that it be consolidated with the appeal of the preliminary injunction. That may delay the ruling by the Third Circuit since there would be additional briefing on the appeal of the final summary judgment. At this rate, a decision by the Third Circuit would likely not be made until the late Spring or early Summer, but certainly before the start of the 2015 NFL season. Thus, as a practical matter, you should not expect to see any legal sports betting in New Jersey for at least six more months (maybe longer) and that would depend, of course, on New Jersey ultimately prevailing on its appeal before the Third Circuit.

Sunday, October 26, 2014

Federal Judge Blocks NJ Sports Betting: What's Next?

Less than 48 hours before Monmouth Park Racetrack was scheduled to open the first legal sports book in New Jersey’s history (and with crowds expected to top 10,000 people for this historic event), a federal court judge put a temporary halt to those plans. On Friday, U.S. District Judge Michael A. Shipp entered a temporary restraining order prohibiting the New Jersey Thoroughbred Horsemen’s Association (the operator of Monmouth Park) and the New Jersey Sports and Exposition Authority (the owner of the land) “from conducting sports wagering at Monmouth Park.” Additionally, the order temporarily enjoins the New Jersey defendants (including Governor Christie and the New Jersey Legislature) from “sponsoring, operating, advertising, promoting, licensing or authorizing” sports wagering schemes or “implementing, enforcing, or taking any action pursuant to New Jersey Senate Bill 2460 (the law partially repealing the state law ban against sports wagering). The order further states that these restraints “shall remain in effect until this Court resolves [the pending] application for a preliminary injunction.” As a condition of the temporary restraining order, the court indicated that the leagues would be required to post a monetary bond of $1.7 million (the operators of Monmouth Park had asked for $1.2 million per day based on projected lost profits).

The TRO Cannot be Appealed

Friday’s court order decided only the motion for a temporary restraining order filed by the four professional sports leagues and the NCAA on Tuesday (the DOJ was not a party – more on that later).  Left unresolved – for now – was the leagues’ request for a preliminary injunction (included within the same set of motion papers). As I explained in a prior post, there is a key difference between a temporary restraining order and a preliminary injunction. A temporary restraining order preserves the status quo (e.g., no sports betting in New Jersey casinos or racetracks) only until a hearing on the motion for preliminary injunction can be held. By contrast, a preliminary injunction preserves the status quo for the balance of the case (through and including the trial and any possible appeals).

Although preliminary injunctions are immediately appealable, temporary restraining orders are not. The rationale for distinguishing between a temporary restraining order and a preliminary injunction for purposes of appealability is that temporary restraining orders are of much shorter duration and terminate with a ruling on the preliminary injunction, making an immediate appeal unnecessary to protect the rights of the parties. Once the motion for preliminary injunction is decided, however, either side can take an appeal. Even an order denying a motion for preliminary injunction can be appealed. Expect the losing party to file an appeal of the eventual preliminary injunction ruling.

The Court Will Likely Schedule A November Hearing

Immediately following the issuance of the temporary restraining order, Judge Shipp entered a “Scheduling Order,” in which he ordered the parties to file “joint e-correspondence” by Monday, October 27, at 11:00 a.m. indicating: (1) whether any party seeks discovery prior to the Court’s decision on the leagues’ preliminary injunction application; (2) each party’s position “regarding the necessity of a preliminary injunction hearing”; and (3) whether any party wishes to file a supplemental brief in support of or in opposition to the leagues’ application for a preliminary injunction. The 11:00 a.m. deadline on the filing of the joint e-correspondence suggests that the Court wishes to enter a scheduling order (perhaps setting a hearing date and allowing for limited pre-hearing discovery) later in the day on Monday. Expect New Jersey to ask for a hearing on the preliminary injunction motion and for “pre-hearing” discovery, while the leagues (as the early victors) will insist that neither is necessary. No surprise there.

Although a hearing is not automatically required on a motion for preliminary injunction, courts typically hold one when the nonmoving party requests it. As a general rule, hearings in the preliminary injunction context are required only when there are “material factual disputes" to resolve. This case does not appear to present the garden-variety factual dispute where a court would be tasked with determining what occurred as between two competing versions. The question of whether New Jersey may allow unregulated sports betting at casinos and racetracks (through the enactment of legislation partially repealing the ban on sports betting) is largely a question of law based on how one interprets the language in the Third Circuit’ majority opinion (and the prior statements of the leagues and Department of Justice) acknowledging that legislation “repealing” a state-law ban on sports betting would not violate the Professional and Amateur Sports Protection Act (“PASPA”), with the DOJ going as far as saying that even a “partial repeal” of the ban would not violate PASPSA and the Third Circuit opining that it would be “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.” (emphasis added) The italicized language provides much hope for New Jersey should this case return to the Third Circuit and the DOJ is estopped from disavowing its prior concession.

Despite being presented with a relatively straightforward legal interpretation, I expect Judge Shipp to schedule a hearing on the motion for preliminary injunction for mid-November (or perhaps the same November 21st date that he had set aside for a hearing on New Jersey’s motion for clarification and/or modification of the existing injunction). I am convinced of this for several reasons. First, it has been Judge Shipp’s past practice in this case (or, more accurately, in Christie I) to schedule hearings on important motions, even where they could easily have been decided on the papers. In Christie I, Judge Shipp scheduled hearings on the motion to dismiss for lack of standing, the motion for summary judgment, and the motion for clarification and/or modification of the injunction (which was withdrawn prior to the hearing date, undoubtedly due to the fact that it had little to no chance of being granted). While oral arguments in federal court are becoming increasingly rare as federal judges are handling larger caseloads than ever before, they occur with greater frequency in high-profile cases. I doubt that Judge Shipp would deviate from his past practice of holding hearings especially for such an important motion (often described as an “extraordinary remedy”) with lasting ramifications to the parties. It would not surprise me if Judge Shipp issued a Scheduling Order this week (maybe Monday) setting a hearing date and authorizing limited pre-hearing discovery.

But even apart from Judge Shipp’s habit of setting hearings, there may be legally compelling reasons for doing so. While the determination of whether New Jersey’s "partial repeal" law is permitted by the Third Circuit majority opinion presents a relatively straightforward question of law, it is also bundled up with a number of factual issues, such as: (1) the degree to which New Jersey would be able to “indirectly” regulate the sports betting activities of casinos and racetracks (through its authority to regulate such venues generally) if the new law were to take effect; (2) the "irreparable harm" issue, which may require expert testimony (although Judge Shipp dispatched with this issue by reasoning that more "legal" sports betting will lead to more "total" sports betting, which, in turn, leads to an increased incentive to fix the plaintiffs' matches); (3) the muddled and confusing ownership situation of Monmouth Park Racetrack (the leagues allege that it is a “state-owned” facility, whereas New Jersey claims that the track is operated and leased by a private trade association with the state only owning the land); and (4) the proper amount of an injunction bond (under Federal Rule of Civil Procedure 65, the successful applicant is required to post a bond to protect the non-moving party from losses in the event that future proceedings determine that the injunction was issued wrongfully. Towards this end, the operators of Monmouth Park will seek to adduce additional evidence to increase the bond from $1.2 million to something more closely approximating its projected lost revenues and profits). These factual issues (and several others) will likely necessitate an evidentiary hearing before Judge Shipp.

Additionally, the New Jersey defendants would be eager to take discovery prior to the hearing. Because an evidentiary hearing on a motion for a preliminary injunction is tantamount to a “mini-trial” (but compressed into one day or less), the parties would want to have access to the other sides’ evidence prior to the hearing so that there are no surprises. For instance, the parties might wish to request key documents from the other side and also take the depositions of witnesses (including experts). We could even see Roger Goodell being deposed again (remember, he and David Stern had their depositions taken in Christie I), adding to his already-busy November with the Ray Rice appeal on tap for next week. New Jersey’s attorneys would salivate at the prospect of deposing Goodell, who has been shaky in past courtroom settings. Moreover, counsel for the New Jersey defendants would undoubtedly seek to depose NBA Commissioner Adam Silver, who was recently quoted as saying that expanded legal sports betting is “inevitable” and the NBA would be open to participating in it. That statement (along with many other recent developments) would seem to undermine the leagues’ claim that they would suffer “irreparable harm” from legal sports betting outside of Nevada. At the very least, New Jersey's attorneys would want to ask Silver about that recent statement and extract concessions designed to peck away at the leagues’ claim of irreparable harm.

The Leagues Will Likely Prevail at the Preliminary Injunction Hearing

Assuming that Judge Shipp schedules a hearing (and the smart money says that he will), can we expect a different outcome? Don’t bet on it. The leagues are undefeated before Judge Shipp, having prevailed in three consecutive significant motions: the motion to dismiss and the motion for summary judgment in Christie I and the motion for a temporary restraining order in Christie II (the current case). Further, by virtue of granting the motion for temporary restraining order, Judge Shipp has already telegraphed how he will likely rule on the motion for preliminary injunction. After all, they are governed by the same test. While he has not yet issued a written opinion explaining his reasons for issuing the temporary restraining order, Judge Shipp said Friday (while ruling from the bench) that "at this stage of the proceedings, the court can't read the 3rd Circuit's order so as to render PASPA null." Judge Shipp may have been troubled by the fact that the partial repeal was limited to state-licensed casinos and state-licensed racetracks, the same entities that were the beneficiaries of the 2012 legislation that was held to be a violation of PASPA in Christie I. He could very well have viewed the repeal legislation as a blatant circumvention of PASPA and the permanent injunction that he issued in February 2013. Judge Shipp may have also been troubled by the fact that, under the new repeal law, New Jersey would be able to “regulate” sports betting (forbidden by PASPA) through its extensive regulatory oversight over casinos and racetracks generally. He may have been skeptical that a “Chinese Wall” could realistically be constructed between a casino’s regular gaming operations and its sports book (which, by law, would have to be housed in the same facility). But, as Ted Olson pointed out, the same “background regulation” over casinos and racetracks would exist even under a complete repeal of the law.

While past performance is not necessarily indicative of future results (as they say in the mutual fund business), it does tend to be a reliable indicator in the law, especially as we move from a TRO to a preliminary injunction hearing. To secure a temporary restraining order, the leagues were required to demonstrate a “reasonable probability of success on the merits” (along with a showing of irreparable harm and a demonstration that their harm outweighs whatever harm New Jersey would suffer from the issuance of a TRO). This is the same standard that governs a motion for preliminary injunction. If Judge Shipp already believes that the leagues had met this standard for purposes of a TRO, he is just as likely to believe that they will meet the same standard on a motion for preliminary injunction. What could possibly change in just a few short weeks to turn Judge Shipp around, especially since the leagues are three-for-three before him and the merits of the case turn primarily on issues of law rather than intensive fact-finding? While many believe that the TRO was just a “place-holder” until he could resolve the motion following a hearing (and Judge Shipp did hint at this in his oral ruling), the fact remains that a TRO does not issue unless the moving party can demonstrate a reasonable probability of success on the merits, irreparable harm, greater harm than the other side, and a showing that a TRO will serve the public interest. Having already satisfied each of these elements for purposes of the TRO, the leagues remain the odds-on favorite to obtain a preliminary injunction that is governed by the exact same legal standard in front of a judge before whom they have never lost.

Friday’s Ruling Was Foreshadowed by Judge Shipp’s Prior Decision

Judge Shipp’s prior rulings also shed light on why he granted the temporary restraining order. In his February 28, 2013 Order granting final summary judgment to the leagues in the original case, Judge Shipp made plain that a repeal or amendment of PASPA was the only pathway for legal sports betting in New Jersey. He wrote that “[t]o the extent that the people of New Jersey disagree with PASPA, their remedy is not through passage of a state law, but through the repeal or amendment of PASPA in Congress.” (italics added). Taken literally, these words would seem to be the death knell for any state legislative “work-around" (which arguably is what New Jersey has done here).

In his earlier order, Judge Shipp also made a specific finding of “irreparable harm” to justify the granting of a permanent injunction in that case. On that point, he wrote that the spread of state-sponsored sports betting "would engender the very ills that PASPA sought to combat.” This foreshadowed his statement on Friday, in ruling from the bench, that the leagues would be irreparably harmed because “[m]ore legal gambling leads to more total gambling, which in turns leads to an increased incentive to fix plaintiffs’ matches.” He also stated that expanded sports betting could result in "a negative effect on the perception of [the leagues' ] games," calling this "a very real harm." It appears that Judge Shipp is improperly conflating irreparable harm with the "injury-in-fact" requirement for purposes of Article III standing. Nonetheless, Judge Shipp is unlikely to do a 180-degree on the issue of irreparable harm in just a few short weeks. He has already made his position (read: ruling) on this issue clear in his TRO ruling.

Irreparable Harm is the Key

Although Judge Shipp siding with the leagues following a preliminary injunction hearing appears to be a fait accompliNew Jersey still needs to make a record for its eventual appeal to the Third Circuit. And this starts with the preliminary injunction hearing, where New Jersey will need to present compelling evidence to counter Judge Shipp's "assumption" that the leagues will be irreparably harmed by expanded legal sports betting. In his prior ruling, Judge Shipp did not make any factual finding of "irreparable harm." Rather, he simply assumed "irreparable harm" by virtue of the violation of the Supremacy Clause. If New Jersey could establish that its partial repeal conforms to the Third Circuit language and does not violate PASPA (again, this is all for the benefit of an eventual appeal), the leagues would have to prove irreparable harm. So far, in this proceeding, they have not attempted to do so, relying only on Judge Shipp's prior ruling which had assumed such harm through the violation of federal law. This is a stunning omission because the leagues have also argued that the "partial repeal" legislation violates the New Jersey Constitution, yet they did not submit any "proof" of irreparable harm to support that argument. Perhaps New Jersey's best play here is to not seek a hearing or supplemental briefing and just simply take it up the Third Circuit after Judge Shipp converts the TRO to a preliminary injunction without any evidence of irreparable harm.

Assuming that New Jersey asks for a hearing and supplemental briefing (which I assume they will), New Jersey will seek to introduce new evidence that did not exist in 2013 to counter the leagues' claim of irreparable harm. They will point to NBA Commissioner Adam Silver’s recent statement that expanded legal sports betting is "inevitable" and that the NBA is open to "participating" in it (suggesting that the NBA’s acquiescence on sports betting is available for "the right price") and the leagues' recent embrace of daily fantasy sports leagues (which many have characterized as akin to sports betting), as evidenced by lucrative team sponsorship deals with FanDuel and Draft Kings. These recent events post-date Christie I and may be key to New Jersey's efforts to rebut irreparable harm. Although raised previously without much success, New Jersey will again note that the leagues host games in jurisdictions (e.g., Las Vegas, London, and Canada) where sports betting is legal, and that extensive gambling has occurred on sporting events for many years without injuring the leagues or their reputations. Additionally, New Jersey could point to the astronomical growth of the leagues while sports wagering (both legal and illegal) has increased ten-fold (from $50 billion to approximately $500 billion) since the early 1990’s. While this is not likely to sway Judge Shipp, whose syllogistic reasoning (e.g., more "legal" gambling will lead to more "total" games, which, in turn, will lead to a greater incentive to fix the plaintiffs' games) is entirely derivative of his prior ruling, it may persuade the Third Circuit (which has not previously considered the issue of irreparable harm in this context). 

New Jersey’s lawyers will also attempt to show that any "assumed" harm that would be suffered by the leagues through expanded sports betting is greatly “outweighed” by the real, tangible harm that would be sustained by Monmouth Park Racetrack (and other New Jersey casinos and racetracks) if a preliminary injunction were entered. This is a critical element on a motion for a preliminary injunction. “Irreparable harm” by itself is not enough; the leagues also need to show that the harm they would suffer from sports betting occurring is worse than the losses that would be sustained by New Jersey without sports betting. While the leagues would point to a “reputational injury” through the "negative perceptions" on the part of fans that the leagues' games might be fixed, the fact remains that the leagues have thrived financially while sports betting has increased exponentially. By contrast, the harm suffered by New Jersey would appear to be more real and tangible: casinos closing their doors, the loss of thousands of jobs, adverse economic impact (e.g., decline in tourism), and lost tax revenue (due to shuttered casinos and racetracks). Sports betting is considered a lifeline for New Jersey’s struggling casinos and racetracks, and an injunction could sound the death knell for these businesses. The “balancing of the harms” would thus appear to heavily favor New Jersey and militate against the granting of a preliminary injunction. But not according to Judge Shipp, who summarily dispatched with this inquiry by saying that "much of this harm is self-inflicted" because Monmouth Park spent "great sums of money" without waiting for a court ruling. Such a statement, lifted directly from the leagues' reply brief, ignores all of the prospective or future harm that would likely be sustained by Monmouth Park if it were prevented from offering sports betting. Expect this to be a key issue in any Third Circuit appeal.

The Absence of the DOJ was a Strategic Decision to Avoid Judicial Estoppel

Conspicuous by its absence from last week’s filing was the Department of Justice, which has standing to enforce PASPA in federal court. Indeed, the DOJ was an active participant in Christie I. Many have wondered why the DOJ was not added to last week's complaint or motion. While the leagues have publicly stated that nothing should be read into the DOJ’s absence, I suspect that the DOJ’s exclusion from this lawsuit was by design: to distance the leagues from prior statements made by United States Attorney Paul Fishman and United States Solicitor General Donald Verrilli, Jr. that a “repeal” of the state-law prohibition against sports betting would not violate PASPA and to avoid the preclusive effect of such statements. 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 "as 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)

The Third Circuit appeared to adopt Mr. Fishman's concession in its written decision. In rejecting New Jersey's contention that PASPA violated the United States Constitution because it "commandeered" New Jersey's authority by effectively requiring it to maintain unwanted state-law prohibitions on sports betting, the Third Circuit observed 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). Echoing Mr. Fishman's comments at oral argument, the Third Circuit stated that "under PASPA, a state may repeal its sports wagering ban, a move that will result in the expenditure of no resources or effort by any state 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.” Id. at 233.

Under the doctrine of judicial estoppel, parties are precluded from advancing a position in litigation that is inconsistent with one previously asserted in another judicial proceeding. Judicial estoppel generally prevents a party from prevailing in one phase of a case on a particular argument and then relying on a contrary argument to prevail in another phase against the same party. The purpose of the doctrine is to protect the integrity of the judicial process by prohibiting parties from deliberately changing positions according to the exigencies of the moment.

Thus, the DOJ's inclusion in the new lawsuit would be extremely problematic for the leagues. If the DOJ were joined as a co-plaintiff in the new lawsuit, New Jersey would have a much better chance of prevailing on its judicial estoppel argument. Although the leagues made similar statements in Christie I, none approach the explicitness of the DOJ’s concession that a “repeal” (even one that is partial) would not violate PASPA. Thus, it appears that the leagues made a strategic decision to distance themselves from the DOJ’s prior statements by filing the latest lawsuit without the joinder of the DOJ in order to avoid the application of the doctrine of judicial estoppel. That strategy has already borne fruit. In his ruling from the bench on Friday, Judge Shipp dismissed New Jersey's arguments centered on the DOJ's prior statements, observing that since the DOJ is not a party to the lawsuit, "the leagues are not bound to those conclusions." Expect this issue to resurface several ways. First, New Jersey could move to dismiss the leagues' latest lawsuit for failure to join an indispensable party (the DOJ). Alternatively, the State could argue that the leagues made similar concessions in Christie I and was aligned with the DOJ's position.

This Dispute is Headed to the Third Circuit (but not until December)

Judge Shipp will not be the final word on this controversy. Just like its predecessor, this case is ultimately going to be decided by the Third Circuit. If (read: when) Judge Shipp issues a preliminary injunction following the November hearing, New Jersey will appeal that ruling. It is in this for the long haul. Although the filing of a notice of appeal ordinarily divests the district court of jurisdiction, in an appeal from an order granting a preliminary injunction, the district court may nevertheless proceed to determine the action on the merits. Thus, while the appeal of the preliminary injunction is before the Third Circuit, Judge Shipp would retain jurisdiction over the lawsuit and entertain the leagues' expected motion for summary judgment (which he would likely grant). Look for the notice of appeal (on the preliminary injunction) to be filed in December (assuming that Judge Shipp enters his written order before the end of November). New Jersey will then ask the Third Circuit to expedite the appeal based on the harm that would be suffered by its casinos and racetracks through any delay. If the appeal is expedited (as I would expect), all briefing would likely be concluded in March, setting the stage for an oral argument before the Third Circuit in the Spring of 2015. Of course, by that point, Judge Shipp will likely have already granted the leagues' motion for summary judgment, and New Jersey will appeal that ruling as well and ask that it be consolidated with the appeal of the preliminary injunction. That may delay the ruling by the Third Circuit since there would be additional briefing on the appeal of the final summary judgment. At this rate, a decision by the Third Circuit would likely not be made until the late Spring or early Summer, but certainly before the start of the 2015 NFL season. Thus, as a practical matter, you should not expect to see any legal sports betting in New Jersey for at least six more months (maybe longer) and that would depend, of course, on New Jersey ultimately prevailing on its appeal before the Third Circuit.

Thursday, October 23, 2014

NJ Sports Betting Chances Boosted by Strong Response to TRO Motion; Oral Argument Likely

With an hourly rate of $1,800, Ted Olson may be the most expensive lawyer in the country. But, as his pedigree and track record prove (e.g., Bush v. Gore, Proposition 8, etc.), he is worth every penny. He demonstrated it again last evening with a masterful brief filed in opposition to the leagues' motion for a temporary restraining order and preliminary injunction. His persuasive and well-written brief (filed on behalf of Governor Christie) sets the stage for Judge Shipp to schedule oral argument tomorrow on whether a temporary restraining order should immediately issue against Monmouth Park Racetrack, which has announced plans to offer sports wagering to its patrons beginning this Sunday. Based on the strength of the response briefs (including those filed by the other New Jersey defendants), it also appears likely that Judge Shipp will also schedule a hearing for mid-November on the motion for preliminary injunction, which seeks an injunction of much longer duration than the temporary restraining order.

Here are the highlights of the New Jersey response (drawing mostly from Olson's brief) [to be updated periodically]:
  • Partial Repeal Expressly Permitted by Third Circuit Opinion 
In response to the leagues' argument that New Jersey's new legislation (a partial repeal of the sports betting ban, but limited to casinos and racetracks) is a "de facto authorization" of sports betting because casinos and racetracks remain subject to state licensing and regulation, Olson argues that New Jersey is doing precisely what the Third Circuit opinion allows. He writes that "[t]he 2014 Act's partial repeal of the State's prohibition on sports wagering tracks precisely what the Third Circuit held is permitted by PASPA. As the United States explained, under the Their Circuit's decision, PASPA permits States to repeal their prohibitions on sports wagering 'in whole or in part.' That is exactly what New Jersey has done." Olson adds that the Third Circuit opinion further specified that the New Jersey defendants "were permitted to specify what the exact contours of the prohibition [on sports wagering] will be." 
  •  Leagues & DOJ told Court in 2013 That Repeal Would be Legally Permissible
Olson also highlights prior statements made by United States Attorney Paul Fishman and league counsel Jeffrey Mishkin (at the Third Circuit oral argument) agreeing that a repeal would be permissible under ASPA. "In response to New Jersey's argument that PASPA violated the United States Constitution because it commandeered New Jersey's authority by effectively requiring it to maintain unwanted state-law prohibitions on sports wagering," Olson explained that "to save PASPA from that constitutional attack," the leagues and the DOJ "repeatedly conceded that PASPA does not require New Jersey to maintain its prohibitions on sports wagering." He notes that at oral argument before the Third Circuit, Mr. Fishman acknowledged that New Jersey "could" as a matter of law repeal its ban on sports wagering. Likewise, as Olson pointed out, league attorney Mishkin conceded that "nothing in PASPA requires states to enact, maintain, or enforce any prohibitions on sports gambling." Olson then adds this zinger (perhaps channeling judicial estoppel): "Having repeatedly urged this Court, and the Third Circuit, to adopt the view that PASPA does not prevent a State from repealing prohibitions against sports wagering, Plaintiffs cannot now be heard to complain when the New Jersey Legislature did exactly that."
  •  No "Equivalence" Between "Authorization" and "Repeal"
Addressing the leagues' argument that the partial repeal of the state-law ban on sports betting is a "de facto authorization," Olson points to language in the Third Circuit opinion holding that "there is no 'equivalence' between 'repeal and authorization' and that a repeal of prohibitions on sports wagering would not 'authorize by law' that activity." He adds that "Plaintiffs cannot have it both ways; either PASPA permits States to repeal their prohibitions against sports wagering in whole or in part, as does the 2014 Act, or PASPA unconstitutionally commandeers states authority by forcing States to maintain unwanted prohibitions."
  • Leagues' "All-or-Nothing" Approach Irreconcilable with Third Circuit Ruling
In response to the leagues' argument that the partial repeal is a "half-measure" (see, even Paul Clement quotes Breaking Bad) directed only at "state-authorized gambling venues," Olson writes that the league position is "flatly contradicted" by the Third Circuit's ruling, which explained that "States remain free to define the 'contours of the[ir] prohibition -- a holding that Plaintiffs tellingly fail to acknowledge." Olson maintains that "Plaintiffs' contrary contention that PASPA permits States only the choice of an absolute prohibition on all sports wagering or no prohibitions whatsoever on sports wagering is irreconcilable with the Third Circuit's ruling, the stated position of the United States, and common sense."
  • "Background Regulation" of Casinos & Racetracks Would Occur Under Full Repeal Too
Olson also takes aim at the leagues' argument that the partial repeal is a "de facto authorization"of sports betting because only state-licensed casinos and state-licensed racetracks are benefitted and they would remain subject to extensive state regulation, thereby enabling New Jersey to "regulate"sports betting, even if indirectly. Olson makes  two great points to counter that. First, he observes that this would still be true even under a "complete repeal" of the ban against sports wagering. Olson writes that "[i]f background regulation of other activities at casinos and racetracks constitutes an authorization of sports wagering, then even if a state were to take Plaintiffs' suggestion and repeal all laws against sports wagering, that background regulation, licensure and taxation of businesses still would violate PASPA (under Plaintiffs' interpretation). The choice between prohibiting sports betting and foregoing all regulation and taxation of businesses is not merely a 'hard' choice but is indeed 'no choice at all,' and therefore unconstitutional." Olson also challenges the leagues' assertion that only "state-licensed" venues are involved, pointing to language in the new law that also repeals prohibitions at 'former racetracks' which have been converted to other uses and are not regulated by the State Defendants at all." Those in the know speculate that one of the "former racetracks" that would house unregulated sports betting is Garden State Park, in Cherry Hill, NJ, right outside of Philadelphia).
  • Argument Under New Jersey Constitution Barred by Eleventh Amendment
The leagues had also argued that even if the New Jersey law is the "repeal" that it purports to be, then it would still violate Article IV, Section 7 of the New Jersey Constitution, which states that no gambling may be conducted in the State "unless it has been authorized by law by the Legislature." Olson counters by arguing that the Eleventh Amendment bars the bringing of state law claims against state officials in federal court "when--as here--the relief sought and ordered has impact directly on the State itself," and stating that "if the [leagues] want to advance such a claim, they will have to do so in state court." Alternatively, Olson adds, "nothing in the New Jersey Constitution prohibits the Legislature from repealing prohibitions on sports wagering."
  • No Irreparable Harm Because Only One Racetrack Involved + Daily Betting in Las Vegas
In their TRO motion, the leagues relied heavily on the prior finding of "irreparable harm" in Judge Shipp's 2013 order imposing a permanent injunction. But Olson argues that the prior finding of irreparable harm "does not resolve the irreparable harm question here" because that finding occurred in the context of a "violation of federal law" (PASPA) and the current New Jersey law, by contrast, "does not violate PASPA." (But what if Judge Shipp finds that the new law does violate PASPA? Did New Jersey just concede the irreparable harm issue?). Olson adds that "with no violation of federal law, Plaintiffs are left only with the argument that limited wagering at a single racetrack during the pendency of this litigation is going to cause 'immediate' irreparable harm. This argument fails the straight-face test, particularly given the volume of sports wagering that occurs daily under the auspices of Nevada law." Indeed, as Olson points out, "a judge in this Circuit previously denied a request by the NFL for a TRO on the basis that "extensive gambling in NFL games has existed for many years and [] this fact of common knowledge has not injured plaintiffs or their reputation." Nat'l Football League v. Gov. of Delaware, 435 F. Supp. 1372, 1378 (D. Del. 1977). But I would think that the 1977 decision is superseded by the more recent PASPA case-law, particularly last year's decision by Judge Shipp (as well as the Third Circuit opinion), in which New Jersey advanced the identical argument that legal sports betting in Nevada precluded a finding of irreparable harm, and lost on that issue.

Tuesday, October 21, 2014

Leagues Seek Injunction Against NJ Sports Betting

On Tuesday, the four major professional sports leagues and the NCAA opened up a second front in their latest legal campaign against sports betting in New Jersey. The leagues had filed suit on Monday in response to the enactment of Senate Bill 2460, the new law signed by Governor Christie partially repealing the state-law ban against sports betting (but only for casinos and racetracks). On Tuesday, the leagues filed a motion for a temporary restraining order and preliminary injunction to prevent Monmouth Park Racetrack from proceeding with its previously-announced plans to offer sports wagering beginning this Sunday (in reliance on that new law).

In short, the leagues are seeking two basic forms of relief: (1) a temporary restraining order to maintain the status quo (e.g., no sports betting anywhere in New Jersey) pending a determination on the merits of the leagues' motion for a preliminary injunction; and (2) following a hearing, the entry of a preliminary injunction enjoining all of the New Jersey defendants (e.g., Governor Christie, the NJ Division of Gaming Enforcement, the NJ Racing Commission, the NJ Thoroughbred Horsemen's Authority, and the NJ Sports and Exposition Authority) from "sponsoring, operating, advertising, promoting, licensing, authorizing, or otherwise permitting" sports wagering in any Atlantic City casino or any New Jersey racetrack during the pendency of the action (in other words, until the case is over).

With apologies (but no royalties) to hockey columnist extraordinaire Elliotte Friedman (whose "30 Thoughts" column is a must-read for NHL fans), here are my "21" preliminary thoughts on today's court filing and how it may play out:
  1. Why ask for both a "temporary restraining order" and a "preliminary injunction"? Aren't they basically the same thing? While they are similar remedies, they serve different purposes. A temporary restraining order preserves the status quo until a preliminary injunction hearing can be held, while a preliminary injunction preserves the status quo pending a full trial on the merits. The main difference is their timing and duration. A temporary restraining order is typically issued first and remains in effect through the preliminary injunction hearing, and then would be replaced by a preliminary injunction for the balance of the case (unless, of course, the motion for preliminary injunction is denied). If the motion for a preliminary injunction is denied, then the temporary restraining order is dissolved.
  2. What must the leagues prove in order to obtain either a temporary restraining order or preliminary injunction? With one not-too-minor exception (discussed in the next point), the requirements are the same for each. The leagues must show that: (a) they have a "reasonable probability of success" on the merits; (b) they will suffer "irreparable harm" if sports betting were to occur in New Jersey; (c) that the harm to the leagues "outweighs" any harm that would be suffered by the New Jersey defendants if an injunction were entered; and (d) that the "public interest" favors such relief.
  3. A party seeking a temporary restraining order must also show an "immediate" irreparable injury. Here, the leagues point to the fact that Monmouth Park Racetrack has stated its intention to start offering sports betting on Sunday, October 26th, only four days from now. That seems pretty immediate to me.
  4. What does a "reasonable probability of success on the merits" mean? For one thing, it does not mean that the leagues have to prove their entire case with certainty. Nor does it require the leagues to demonstrate a mathematical probability of success on the merits, such as greater than 50 percent. Rather, the leagues need only show a "fair chance" of prevailing after discovery and a full trial.  This is a relatively low bar. Of course, the New Jersey defendants will counter that by arguing that a preliminarily injunction is an extraordinary remedy that should sparingly be granted.
  5. So, what are the leagues' arguments "on the merits"? They make three separate arguments, any one of which (if proven) would support an injunction. First, the leagues argue that the new law violates PASPA. Although styled as a "repeal," the leagues assert that this is "just word play." They point to the fact that the repeal is conveniently limited to state-licensed casinos and state-licensed racetracks, which remain subject to extensive regulation by the State. The leagues argue that "[b]y repealing existing prohibitions only at these 'closely' 'State-regulated' venues, New Jersey has accomplished exactly what this Court already has concluded that federal law prohibits it from doing: authorizing sports gambling that is licensed and regulated by the State." In a prior post, I explained the myriad ways that the States could regulate sports books indirectly.
  6. As a second "merits" argument, the leagues invoke the New Jersey Constitution. They argue that even if the new law "is really nothing more than the 'repeal' that it purports to be," then it violates Article IV, Section 7 of the New Jersey Constitution, which states that no gambling may be conducted in the State "unless it has been authorized by law by the Legislature." Thus, the leagues maintain, "under the clear provisions of the New Jersey Constitution, the Legislature and the governor are powerless to permit any form of gambling in Atlantic City casinos unless it is specifically 'authorized by law.'" Under this line of reasoning, a "repeal" of a ban on sports wagering cannot logically be an "authorization" of sports betting. Thus, the leagues are trying to box New Jersey into a corner: if the new law is a de facto authorization of sports betting, it violates PASPA's prohibition against state-authorized sports betting. But, if it is a "repeal" (rather than an authorization), then it violates the New Jersey Constitution.  Look for New Jersey to counter this by arguing that the leagues, none of which are citizens of New Jersey, lack standing to asset the New Jersey Constitution as basis for challenging the validity of the new law.  (Thanks to Tony Batt of Gambling Compliance for tipping me off to that argument. He's been around this case long enough to have earned an honorary degree in constitutional law).
  7. The leagues' third argument on the "merits" focuses on the state's alleged ownership of Monmouth Park Racetrack, where sports betting is slated to begin on October 26th. The leagues argue that Monmouth Park is a "governmental entity' (and thus subject to PASPA) because it is owned and operated by the New Jersey Sports and Exposition Authority ("NJSEA"), which, quoting directly from N.J. Stat. Ann. 5:10-4(a), the leagues characterize as a "legislatively created 'instrumentality of the State exercising public and essential governmental functions" and whose revenues "shall be deemed and held to be applied in support of government." Thus, based on the state's alleged ownership of Monmouth Park, the Leagues argue that any sports wagering conducted at Monmouth Park "would violate the provisions of PASPA that prohibit a State from directly sponsoring, operating, or advertising sports wagering." (emphasis added) 
  8. There seems to be some dispute dispute as to whether Monmouth Park Racetrack is really "state-owned." John Brennan (the sports business reporter for The Bergen Record and the editor of the awesome Meadowlands Matters blog, and who has been covering this case for several years) is under the impression the state may no longer own Monmouth Park Racetrack. In an exclusive interview with Sports Law Blog, Brennan explained that the state owned Monmouth Park "from the mid-1980's until around 2011." He said that "the state thoroughbred horsemen [a private trade association] now manages, maintains, and operates [the track]. The state owns the land, but I’m not clear on what ‘owns’ means in the context of this lawsuit." Brennan further elaborated that "the horsemen, not the sports authority, pay the annual real estate taxes to the borough of Oceanport, for instance. Also, via a referendum, three bills passed by the legislature, and the signing of two of them into law by Governor Christie, it’s clear that the state is eager for Monmouth Park to be able to offer such betting. If the only obstacle toward that wound up being the NJSEA land ownership issue, it’s fair to assume that the state would sell that land to the horsemen in a New York minute.”
  9. On the issue of "irreparable harm," the leagues point to Judge Shipp's February 28, 2013 Order which granted a permanent injunction to the leagues based upon a specific finding of "irreparable harm." In that order, Judge Shipp wrote that the spread of sports gambling "would engender the very ills that PASPA sought to combat." The leagues also cite an earlier order by Judge Shipp concluding that the injury suffered by the leagues is "the negative effect" that state-sanctioned sports betting on their own games "would have upon the perception of [their] games and their relationship with their fans." The leagues also note that the Third Circuit agreed with Judge Shipp on this point, finding that there is a "proven stigmatizing effect of having sporting contests associated with gambling, a link that is confirmed by commonsense and Congress' own conclusions in PASPA." The leagues clearly believe that this essential element of injunctive relief is already in the "win" column based on the prior judicial rulings.
  10. But a lot has changed over the past 18 months. At the recent Bloomberg Sports Business Summit, NBA Commissioner Adam Silver proclaimed that expanded legal sports betting was ‘inevitable” and that the league would “ultimately participate in that.” Around the same time, the NBA lifted its ban against teams selling sponsorships to daily fantasy sports operators, reasoning that such a move would open up new streams of revenue and “increase connectivity to fans." With Commissioner Silver's comments (suggesting that the leagues' acquiescence on sports betting is available for "the right price") and the NBA's recent embrace of daily fantasy sports leagues – which some have characterized as akin to sports betting – can the leagues genuinely say that they would be "irreparably harmed" if legal sports wagering were to take place in New Jersey? It seems like a suspect argument in light of recent events. Expect the New Jersey defendants to seize upon this hypocrisy in tonight's expected response.
  11. There is an expedited briefing schedule. Judge Shipp has ordered the New Jersey defendants to file a response to the leagues' motion by October 22nd (which is today!), and the leagues must file their reply brief one day later. The motion will thus be fully briefed by Thursday. 
  12. Judge Shipp has not yet decided whether he will hear oral argument on the leagues' motion. A docket notation entered on PACER yesterday states that "[f]ollowing review of the papers, the Court will advise as to whether it will hear oral argument on the application. If the Court elects to hear oral argument on the application, it will issue a text order that sets forth the date and time of the oral argument."
  13. I believe that the decision on whether to hold oral argument will be made by Judge Shipp on Thursday (after reviewing New Jersey's response to the motion). Based on his past rulings in this case, I fully expect Judge Shipp to conduct a hearing on the leagues' motion. Virtually every important motion in this case, including the recently-withdrawn motion for clarification and/or modification of the existing injunction (which was not particularly strong), was scheduled for oral argument. This one should be no exception. But the Court is not required to hold oral argument. Hearings are required on motions for preliminary injunctions only when there are disputed factual issues. If the material facts are not in dispute, then a hearing is not required. While the issues involving PASPA and the New Jersey Constitution do not appear to be intensely factual, the same cannot be said about the issue regarding the ownership status of Monmouth Park. It appears as if that argument will present a factual dispute for a hearing.
  14. Look for Judge Shipp to eventually schedule two types of hearings. He will likely schedule oral argument for this Friday on the issue of whether a temporary restraining order should be entered. That order will probably come down on Thursday. Judge Shipp will likely also schedule a second hearing -- probably for mid-November -- on whether a preliminary injunction for the duration of the case should be entered. 
  15. Now the big question? Will there be sports betting at Monmouth Park on Sunday? In a word, no. Judge Shipp will likely issue a temporary restraining order against the New Jersey defendants on Friday (following oral argument) for the purpose of preserving the status quo until the motion for preliminary injunction can be heard in mid-November (or perhaps later). This means there will likely be no sports betting at Monmouth Park Racetrack on Sunday, or at any time thereafter until the court decides the preliminary injunction motion.
  16. If the Court grants a TRO, the leagues will be required to post a bond to protect New Jersey against any losses that would result from the injunction being improvidently issued. Federal Rule of Civil Procedure 65 provides that "[n]o restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained." This bond requirement is designed to protect the enjoined party's interests in the event that future proceedings show the injunction was issued wrongfully. See Edgar v. MITE Corp., 457 U.S. 624, 649 (1982) (Stevens, J., concurring) ("Since a preliminary injunction may be granted on a mere probability of success on the merits, generally the moving party must demonstrate confidence in his legal position by posting a bond in an amount sufficient to protect his advisory from loss in the event that future proceedings provide that the injunction issued wrongfully.")
  17. What would be the amount of an appropriate bond here? Whatever it is, the leagues will surely be able to afford it. But I'm not sure that the State or any of its political leaders would be able to show "losses" resulting from a wrongly-issued injunction. After all, the State would not be deprived of taxes on sports betting revenues, as such activity would presumably be unregulated and untaxed under the new repeal law. Would New Jersey be so bold as to argue that it would suffer a diminution in tax payments on other gaming revenues (e.g., casino games and horse races) if sports betting were enjoined by virtue of the fact that sports books in casinos and racetracks are expected to bolster attendance and increase wagering on casino games, poker, and horse racing. Seems like a dangerous argument to make, as well as speculative (given the lack of a prior track record).
  18. Monmouth Park would be in a much better position to argue for a bond, since it is presumably a "private enterprise" (although the leagues would dispute that). The losses that Monmouth Park would suffer from a wrongly-issued injunction would consist primarily of its lost gaming revenues (from both sports betting and horse racing) multiplied by the number of days that the preliminary injunction would remain in effect (e.g., more than one year). Since early forecasts were that legal sports betting in New Jersey would generate an estimated $1 billion in bets for the first year (and Monmouth Park would be one of only a handful of gaming operators allowed to operate sports books), Monmouth Park could realistically ask for an eight-figure bond.
  19. I love how the leagues refer to sports betting in their legal papers as "sports gambling" in an effort to make it sound more sinister and nefarious. 
  20. Does anyone else find it a little too convenient that the New Jersey Attorney General held a press conference announcing the arrests of three persons on racketeering charges for operating a lucrative sports betting ring on the same day that the leagues filed their motion for temporary restraining order and preliminary injunction? According to a NJ.com article, Acting Attorney General John J. Hoffman said today that "the takedown of a lucrative sports betting operation by the notorious Genovese crime family serves as a prime example of why the state should allow residents to place such wagers legally." Message to Judge Shipp delivered!
  21. I am not very good at math. In an ESPN.com article, I was quoted as saying that Monmouth Park Racetrack has a "zero percent chance" of taking sports bets on Sunday. One of my Twitter followers (up to 413!) advised me to "stay away from options trading [since] nothing is ever 0% or 100% probability in a marketplace."

Monday, October 20, 2014

Leagues Move to Block NJ Sports Betting; Injunction Likely

As I predicted correctly (for the most part) over the weekend, the four major professional sports leagues and the NCAA responded on Monday to New Jersey's latest effort to bring legal sports betting to the Garden State. On Friday, New Jersey Governor Chris Christie signed legislation partially repealing the state-law prohibition against sports betting (but only for casinos and racetracks), thereby paving the way for deregulated (and legal) sports betting to commence on October 26th at Monmouth Park Racetrack. In a post on Saturday, I predicted that the leagues would fight back. And fight back they did. But, instead of moving for a preliminary injunction in the existing federal court action (which is what I predicted would occur), the leagues opted to file a brand new lawsuit in the same court. I suspect that the leagues went this route because the New Jersey Sports and Exposition Authority (the alleged owner of Monmouth Park Racetrack, where sports betting is slated to start this Sunday) was not a party to the prior lawsuit. Thus, a new lawsuit was needed to properly exercise jurisdiction over Monmouth Park Racetrack.

Accusing New Jersey of acting "in defiance of this Court's February 28, 2013 Order and in clear violation of federal law," the leagues take direct aim at the "label" used by New Jersey in describing the new law. The leagues assert that while the new law is "styled as a repeal," in reality, it "is nothing more than a de facto authorization of sports gambling," pointing to the fact that the repeal is limited to state-licensed casinos and state-licensed racetracks, which remain subject to extensive regulation by the State. Therefore, despite its facial "repeal" language, the leagues argue that the new law "is a blatant attempt to by the State to sponsor, operate, advertise, promote, license, and/or authorize sports gambling in Atlantic City casinos and New Jersey racetracks," in violation of PASPA. Alternatively, the leagues argue that even if the new law "is really nothing more than the 'repeal' that it purports to be," then it violates the New Jersey Constitution, which requires any gambling to be "specifically authorized" by the New Jersey Legislature. By definition, a "repeal" of a ban on sports wagering is not an "authorization" of same.

Even though the Complaint asks for an injunction, the leagues would still need to file a motion for a preliminary injunction in order to prevent Monmouth Park Racetrack from proceeding with its plans to offer sports betting on Sunday. A complaint, by itself, would not accomplish that in the short term. In federal court, defendants are given 21 days to answer a complaint. By the time Governor Christie and the other New Jersey defendants get around to responding to the complaint, sports betting will have already started at Monmouth Park and it may then be too late to put the genie back in the bottle. Therefore, the leagues would need to file a formal request for judicial intervention (which lawyers call a "motion") in order to put an immediate halt to those plans. Specifically, I expect the leagues to file an emergency motion for a temporary restraining order and/or preliminary injunction within the next day or two. The leagues will ask Judge Shipp (to whom both cases are assigned) to enter a temporary restraining order immediately and on an ex parte basis in order to prevent Monmouth Park from commencing its sports betting operation on Sunday. The temporary restraining order would essentially maintain the status quo (e.g., no sports betting in New Jersey) until such time as the court can conduct a hearing on the motion for preliminary injunction (which would probably be in mid-to-late November). I expect Judge Shipp to sign such an order later this week, which would prevent Monmouth Park from offering any sports betting, effective immediately.

The leagues would likely find Judge Shipp to be a very receptive audience since he previously ruled in their favor. Moreover, Judge Shipp made several rulings earlier in the case that are likely to influence any new ruling. For example, in his February 28, 2013 order granting summary judgment in favor of the leagues and permanently enjoining New Jersey from implementing its sports betting law, Judge Shipp held that the leagues would suffer "irreparable harm" in the form of a "reputational injury" through the unwanted association with gambling and from fans' negative perceptions that the outcomes of games may be rigged. In that same ruling, he also held that there was an "inadequate remedy at law" because New Jersey, by operation of the Eleventh Amendment, would not be liable for monetary damages. Judge Shipp also held that the entry of a permanent injunction against New Jersey would serve the "public interest." Each of these prior findings would bear directly on any new motion for preliminary injunction filed by the leagues since the same considerations are at play. Since Judge Shipp has already ruled in the leagues' favor on these issues, I would expect him to do so again. Thus, the leagues' entitlement to a preliminary injunction will likely come down to whether they can establish a "probability of success on the merits," since each of the other elements required for an injunction (e.g., irreparable harm, balancing of the harms, and the public interest) will almost assuredly be decided in the leagues' favor based on Judge Shipp's prior rulings.