Sports Law Blog
All things legal relating
to the sports world...
Sunday, November 23, 2014
 
Antitrust professors amicus in O'Bannon

A group of antitrust professors has filed an amicus brief in the Ninth Circuit appeal in O'Bannon v. NCAA (media coverage here). I know nothing about antitrust. But the gist of the argument appears to be that once the district court found the NCAA had some rational basis for its limits, the antitrust Rule of Reason was satisfied and it was beyond the court's power to order the NCAA to change those limits.

 
Slava Voynov’s Immigration Wrinkle to his Domestic Violence Charges

As the NFL continues to make headlines with its continued domestic violence issues, the NHL proved last month that domestic violence problems are not just limited to pro football. In October, Los Angeles Kings star defenseman Slava Voynov was arrested following a domestic dispute with his wife that required her to receive medical attention at the hospital. He has been suspended by the Kings since the arrest, and this week he was officially charged by the Los Angeles District Attorney’s office with a felony count of corporal injury to a spouse with serious bodily injury. While Mr. Voynov must face the criminal justice system much like the more publicized NFL cases, he has many additional issues relating to his immigration status.

Slava Voynov is a native, and presumable still a citizen, of Russia. Thus, he is probably in the United States under nonimmigrant status as an athlete, or possible as a legal permanent resident if the Kings petitioned for a green card for him. Since he is not a citizen, he will have to worry about two different issues relating to United States immigration.

First, if he is convicted of the charged offense, he would become immediately deportable under current immigration laws. Further, the charge is considered a crime of moral turpitude, such that Mr. Voynov would be inadmissible to return to the United States should he ever leave the U.S. with that charge on his record. The distinction between being deportable and being inadmissible my seem small, but could have serious ramifications for Mr. Voynov. It is conceivable that he may accept a plea on the case such that he is not deportable, but is inadmissible. This would mean that he could remain in the United States, but should he ever leave (like say for a game in Vancouver), he would not be allowed to return.

A final immigration issue that Mr. Voynov must face is with Canada. Even if he were to somehow avoid immigration issues in the United States by taking a plea to a lower charge, he would be inadmissible into Canada with a criminal conviction for domestic violence in the United States. This means that even if he is somehow able to lower the charges and remain in the United States, he may not be allowed to travel to any of the Canadian games, where the Kings currently play about 15% of their schedule, not including the playoffs. If this occurs, even if the Kings keep Mr. Voynov on their roster, they’d certainly have something to say about paying out the full 100% of his six-year, $25 million contract, of which five and a half years still remain.

While the charge is still pending and nothing may result from this, it should be obvious that, although less publicized than the NFL cases, Mr. Voynov’s domestic violence charge has MUCH more serious consequences for him.

Friday, November 21, 2014
 
Dr. Paul Withers proposal to address issue of NCAA athletes signing autographs

Dr. Paul Withers, an astronomy professor at Boston University, recently emailed me an idea he has to address the issue of NCAA athletes--like Todd Gurley and Johnny Manziel before him--getting in trouble for signing autographs.

I've posted Dr. Withers' proposal in its entirety below.

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Not sure if this is enough of a legal issue to fit in your usual portfolio of topics, but here's a way to solve the NCAA autograph problem. Seems extendable to other areas as well.

1. Current athletes sign $0 contract with company to sell their autographs. Since current athletes get $0, NCAA is happy. Or perhaps the current athletes pay the company $1 to sell their autographs and thereby improve and extend their personal brand and reputation.

2. Current athletes graduate into former athletes, then sign short-term $$$ contract with company to recruit next crop of current athletes. NCAA has no jurisdiction over former athletes. Current athletes, if they have any sense, will pay close attention to short-term $$$ contract received by former athletes.

3. There's room for multiple companies in this business, so no monopoly problem. Autographs can be immediately distributed into every possible avenue for sales with authentication, instead of needing to pass through an inefficient black market stage along the way, which will increase sales and profits.


4. All parties have incentive to honor the unwritten arrangements: companies need next year's athletes, who will recoil from any company that doesn't briefly employ well-paid former athletes, and current athletes can get surely get more money this way than via current shady and risky arrangements.

5. Worried that current athletes will lack information on which company to go with? Competition should ensure third-party verification of sales and obvious correlations between sales and post-university payments. Also, there's a market void for someone to set up a clearing house that buys information on post-university payments from former athletes (another income source for them), collates it all, and sells it to current athletes (worthwhile as a source of investment advice, plus likely to recoup some fraction of payment once they become a former athlete).

6. Why would a current athlete be the first to attempt this, without the benefit of clear precedent from prior years? First mover advantage. This individual would be the only current athlete whose autographs are available in vast quantities for sale via every legitimate channel imaginable, so sales would be higher than otherwise. Once they are a former athlete, the company can give this one individual a huge payment in order to ensure recruitment of dozens of next year's students and solidify its own first mover advantage.

Paul Withers

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Paul Withers                            Astronomy Department
Office  +1 617 353 1531                 Boston University
Fax     +1 617 353 6463                 725 Commonwealth Avenue
Email   withers@bu.edu                  Boston MA 02215, USA
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Wednesday, November 19, 2014
 
Does Adrian Peterson have a good legal case against the NFL?

I attempt to answer this question in a new Sports Illustrated column. Here's an excerpt:

In order to obtain a temporary restraining order, Peterson would need to convince a judge that unless he is allowed to play again this season, he would suffer irreparable harm. Peterson arguing that his NFL suspension will cost him money in lost salary would not be a winning argument for purposes of irreparable harm. Courts are generally skeptical of irreparable harm arguments when monetary damages can later repair the harm. As a result, Peterson would need to establish harm beyond merely lost salary. He would likely insist that not playing again this season would cause lasting and permanent damage to his NFL career and image. More specifically, he might insist that his football skills and physical abilities would atrophy if he doesn’t play again. Similarly, Peterson might assert that the Vikings and other teams would be less interested in his services if he misses nearly an entire season. 

The NFL would reject these so-called "harms" as speculative at best. The league would also stress that Peterson’s predicament is a result of his own misconduct as a parent.

To read the rest, click here.

Sunday, November 16, 2014
 
Game-Changer or Trojan Horse? Making Sense of Adam Silver's Sports Betting Comments

NBA Commissioner Adam Silver caused a stir last week when he penned a New York Times op-ed piece that called for the legalization (and federal regulation) of sports betting. (For a great analysis of Commissioner Silver’s op-ed, I highly recommend Ryan Rodenberg’s SI.com article, co-authored with Jon Wertheim, as well as John Brennan’s fine work in the Bergen Record and Meadowlands Matters). Despite his clarion call for legalization, Mr. Silver’s comments (his most expansive to date on the subject) will likely have no impact on the current federal court case in which the four major professional sports leagues and the NCAA are suing to block New Jersey from implementing its latest sports betting law. As SLB stalwart Michael McCann told John Brennan of the Bergen Record:
I don’t think Commissioner Silver’s op-ed harms the NBA’s legal argument against New Jersey’s efforts to legalize sports betting, because Silver has merely encouraged Congress to consider new federal laws that would give states flexibility in legalizing it. The NBA’s case is built on the contention that New Jersey’s proposed sports betting law would violate existing federal law, specifically the Professional and Amateur Sports and Protection Act. Moreover, Judge Shipp, and any appellate judges who hear this case, would also evaluate the legal arguments based on the laws implicated in the case, not on hypothetical laws that don’t yet exist.
But what struck me about the op-ed more than anything else was its timing. Why now? Was it just an organic evolution of Commissioner Silver's progressive views on the subject, which are entirely consistent with his prior statements made at last year's Sloan Conference and this year's Bloomberg Sports Business Summit? Or was there some strategic reason to drop this bombshell now--just days away from the oral argument on the leagues' motion for a preliminary injunction? Call me a cynic, but I believe the timing of its publication was partly strategic: to diminish the New Jersey law and, more importantly, to influence the court prior to an important hearing. After all, this is the same brilliant lawyer who outmaneuvered the hyper-litigious Donald Sterling at every turn and whose successful legal strategy paved the way for the quick transfer of ownership of the LA Clippers to Steve Ballmer. Remember, throughout the Donald Sterling probate court trial, a number of "NBA-aligned" individuals made statements that were viewed (at least by me) as an attempt to influence then-ongoing court proceedings. Doc Rivers threatened to quit as head coach of the Clippers if Donald Sterling remained as the team owner; and Chris Paul said that a league-wide player boycott was a real possibility if Donald Sterling were still the Clippers owner when the regular season began. These statements were made during the midst of the probate court trial. So, maybe, this tactic is part of the NBA's playbook.

This strategy appears to have succeeded, as Commissioner’s Silver’s emphasis on the need for a “comprehensive federal solution” has already gained traction in the “court” of public opinion and made New Jersey’s law appear to be the problem (e.g., unregulated sports betting) rather than the solution (e.g., regulated sports betting). By offering up the olive branch of a federal solution in the not-too-distant future, Commissioner Silver has shifted the debate away from the current case, which no doubt was his intent.

As Michael McCann aptly observed, Commissioner Silver’s comments won’t help New Jersey on Thursday (or in its eventual appeal to the Third Circuit) because they address future legislative reform rather than any present legal issues before Judge Michael A. Shipp (the Trenton-based federal district judge who is assigned to the case). The issue presently before Judge Shipp is whether New Jersey’s "partial repeal" of its state-law ban on sports betting -- the sole beneficiaries of which are state-licensed casinos and state-licensed racetracks -- runs afoul of PASPA's ban against state-regulated sports betting. In Christie I, the Third Circuit declared that "we do not read PASPA to prohibit New Jersey from repealing its ban against sports wagering," adding that "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."

Judge Shipp (and, eventually, the Third Circuit) will have to determine just how far a “repeal” must go in order to fit within the contours of the Third Circuit majority opinion. New Jersey will, of course, zero in on the language in the Third Circuit majority opinion leaving it up to the states to decide "what the exact contours of the prohibition will be.” New Jersey maintains that its “partial repeal” reflects the “exact contours of the prohibition” that it has decided -- as a policy matter -- to enact in conformity with the Third Circuit majority opinion. The leagues, understandably, take a much more narrow view of the Third Circuit language, arguing that only a “complete repeal” will suffice and that what New Jersey has done here is not a true repeal at all, but, rather, a “back-door” authorization of sports betting.

Adam Silver’s op-ed article does not speak to any of these issues. To the contrary, Commissioner Silver’s statements are entirely consistent with the leagues’ present position – that New Jersey’s repeal law violates PASPA. Despite embracing legislative reform (at the federal level), Commissioner Silver continues to stick to the party line -- that “unregulated” sports betting (which is what New Jersey proposes) will negatively affect the integrity of the games and cause irreparable harm to the leagues. Thus, there is no inconsistency between his op-ed and the leagues’ present position on the issues in this case.

While some might argue that Commissioner Silver’s bombshell undermines the leagues’ argument that they will suffer “irreparable harm” (one of the requirements for a preliminary injunction), it is important to remember that the leagues do not need to make a factual showing of irreparable harm in order to prevail on Thursday (or before the Third Circuit). Rather, irreparable harm would be “presumed” based on a violation of the Supremacy Clause (e.g., the New Jersey repeal law contravenes federal law). Both the district court and Third Circuit invoked this presumption in Christie I, and will likely do so again in the current case if they determine that the New Jersey repeal law violates PASPA.

Notably absent from Commissioner’s Silver’s call for the legalization of sports betting is any reference to what the leagues would want in return – monetarily, that is. Previously, Silver was quoted as saying that expanded legal sports betting was “inevitable” and that the leagues would be willing to “participate” in it (presumably, for a price). Commissioner Silver’s op-ed skirts that issue entirely. However, expect the leagues to insist on a royalty or licensing fee (either in the form of a percentage of the total amounts wagered or a flat fee from licensed gaming operators) as a condition to acquiescing to any future federal legislative reform. But it remains to be seen whether the other sports leagues (e.g., the NFL, NHL, MLB and NCAA) share Commissioner Silver’s progressive views on sports gambling.

Nonetheless, Adam Silver’s bombshell is already seen in many corners as a “game-changer” in the sports betting legalization movement (both for New Jersey and other states). I would not be surprised to see something develop on that front by 2016. The biggest impediment to expanded legal sports betting – Senator Harry Reid (Nevada’s protector) – has been removed with the recent election results. With the Republican Party now holding a majority of U.S. Senate seats, Senator Reid may not be able to block new federal legislation to expand single-game sports wagering beyond Nevada. Perhaps, a Republican-controlled Congress would be willing to trade expanded sports betting for a tightening of the Wire Act (to eliminate or heavily restrict online gambling). It may be a bet worth placing.

Wednesday, November 05, 2014
 
Did Jameis Winston's lawyer break the law by tweeting out the name of Winston's accuser?

Did Jameis Winston's lawyer break the law by naming Winston's accuser on Twitter? I have a column tonight for Sports Illustrated on that issue. Hope you can check it out.

 
Can the Yankees void Alex Rodriguez's contract now that he's admitted to using steroids?


 
Adrian Peterson pleads guilty: what's next for his NFL career?

I have a new column for Sports Illustrated on the legal and NFL impact of Adrian Peterson pleading guilty to a misdemeanor charge relating to his disciplining of his four-year-old son.

I was also a guest on The Today Show to discuss this story:


Visit NBCNews.com for breaking news, world news, and news about the economy



Tuesday, November 04, 2014
 
Preview of Ray Rice Appeal

I have a new preview for Sports Illustrated on the Ray Rice appeal and what it means for Rice, NFL commissioner Roger Goodell and the league. Hope you have a chance to check it out. I also spoke with NPR's All Things Considered about the hearing.

Saturday, November 01, 2014
 
Analyzing Women's Anti-Turf World Cup Lawsuit against FIFA

I have a new column for Sports Illustrated on women soccer players pursuing a legal claim against the Canadian Soccer Association and FIFA over the 2015 World Cup being played on artificial turf rather than natural grass.

Thursday, October 30, 2014
 
Brotherly Conflict of Interest in New Jersey Sports Betting Case?

Last Friday, U.S. District Judge Michael Shipp granted a petition sought by the NFL and other leagues to temporarily restrain New Jersey from giving effect to new legislation partially repealing its ban against sports betting. Had the legislation gone into effect, New Jersey’s privately-owned (but state-licensed and regulated) casinos and racetracks would have been able to offer sports wagering to their patrons beginning on October 26th. While Judge Shipp’s order is only of interim effect, as a practical matter it sets in motion a likely end to New Jersey Governor Chris Christie’s efforts to bring legalized sports betting to the Garden State.

Judge Shipp, a respected jurist and attorney, is the older brother of former NFL running back and current University of Massachusetts assistant football coach Marcel Shipp. Just over a year ago, Marcel Shipp served as a Bill Walsh NFL Minority Coaching Fellow with the Arizona Cardinals. The Walsh Fellowship is a highly selective coaching program administered by two league entities, the NFL Management Council and NFL Player Engagement. The league-run program assigns talented minority coaches to NFL teams during minicamps and training camp. During this time, they gain coaching experience and better position themselves for full-time coaching jobs with NFL teams. Most NFL coaches who are minorities participated in the Walsh Fellowship. Marcel Shipp’s own Twitter page stresses “straight to the NFL,” implying a desire to return to the NFL.

Despite what you may have read elsewhere, the fact that Marcel Shipp once played in the NFL is of no legal consequence to Judge Shipp presiding over a lawsuit involving the NFL. As a player, Marcel Shipp’s relationship to the NFL is over and done. He’s 36-years-old and last played in the NFL in 2008. There is no logical reason to believe that Judge Shipp’s analysis of legal arguments involving the NFL is clouded by his brother’s previous employment with the Arizona Cardinals and Houston Texans. Positing a relationship between Judge Shipp evaluating NFL legal arguments and his brother playing in the NFL during the last decade is analytically disingenuous and also disrespectful to the judge.

But Marcel Shipp’s work in the NFL last year as a coaching fellow, and his apparent ambition to become an NFL coach, presents a more debatable issue. There is a real possibility that Marcel Shipp will be interviewing for NFL coaching jobs in the near future. Could his aspirations to become an NFL coach raise questions about his brother’s objectivity in evaluating the NFL’s legal arguments? Might Judge Shipp fear that it would be more difficult for his brother to get hired as an NFL coach—a coveted position—if he ruled against the NFL?

The short answer to these questions is Judge Shipp is likely under no legal or ethical obligation to step aside, but it may be wise for him to do so. For starters, the legal standard for disqualification of a federal judge is very high. Federal judges are expected to recuse themselves only when their impartiality might reasonably be questioned. The mere existence of an employment relationship between a party to a lawsuit and a member of the judge’s immediate family does not automatically require a judge’s disqualification. But it could under certain circumstances. The test for disqualification is “whether an objectively reasonable person – the so-called ‘average person on the street’ – with knowledge of all the facts would conclude that the judge’s impartiality might reasonably be questioned.” This language focuses on “appearances’—not on whether the judge actually harbors a subjective bias.

According to the federal statute, judges are also expected to step aside if a close family member “has an interest that could be substantially affected by the outcome of the proceeding.” This language could be construed as relating to Marcel Shipp, given his apparent desire to become an NFL coach and recent efforts in furtherance of that goal (highlighted by his selection as a Walsh Fellow). At the very least, this latest connection between Marcel Shipp and the NFL (which I discovered several days ago) creates the “appearance” of a conflict of interest. Think about it. Marcel Shipp wants to be hired by an NFL team. His brother, the federal judge, is presiding over a case involving a party—one of the lead plaintiffs—which already has Marcel on its radar and is in a position to hire him. And the judge, as he’s deciding this case, is fully aware that his brother wants to be hired by an NFL team.

This is not like other reported cases involving the employment of a close relative of a federal judge, especially when you consider the unique barriers to entry in the NFL coaching profession. Unlike an accountant or a lawyer with thousands of potential employers and job openings, there is only one major professional football league in the United States, with just 32 teams, and, at best, only a few hundred of these jobs even exist (with even fewer openings). Moreover, there are many candidates competing for a select few positions. For this reason, Marcel’s aspiration to be an NFL coach arguably creates an even greater conflict (or at least the “appearance” of one, which is ultimately what matters) than would a situation involving a family member already employed by a Fortune 500 company who would only benefit indirectly from his employer's courtroom success. By contrast, Marcel could benefit directly – by being hired in a league where jobs are scarce – a result of what happens in the courtroom.

From all appearances, Marcel Shipp may have already directly benefited from the NFL’s courtroom success. Let’s look at the timeline in this case (or, rather, the prior case won by the NFL). On February 28, 2013, Judge Shipp issued an order granting final summary judgment in favor of the NFL and the other sports leagues (thereby ending the case on its merits) and permanently enjoined New Jersey from legalizing sports betting. Less than five months after that decision, Marcel Shipp is in training camp with the Arizona Cardinals serving on then first-year head coach Bruce Arian’s coaching staff as a Walsh Fellow (albeit, just for the summer).

The timing of these events raises a number of questions, such as when exactly did Marcel Shipp apply for a Walsh Fellowship? Did he apply when his brother, the federal judge, was still presiding over the New Jersey sports betting case? And exactly when did the NFL accept Marcel Shipp into the Walsh Fellowship Program? Was it before or after his brother’s summary judgment ruling? Was Judge Shipp even aware of his brother’s apparent desire to be an NFL coach? When did he first learn of his brother’s pursuit of a Walsh Fellowship? Was he aware of it while presiding over the case (and before summary judgment was granted)? Or did he learn of it only after his ruling?

But then again, there are numerous factors that would affect Marcel Shipp landing an NFL coaching job. Many of those factors—such as his experience, skill set and how well he interviews with NFL head coaches and coordinators—are likely more meaningful than legal decisions made by his brother, the judge. Plus, an NFL team, not the NFL itself, would hire Marcel Shipp as a coach. From this lens, Judge Shipp was under no obligation to step aside.

Even if Judge Shipp had every right to hear the case, should he have used discretion to recuse himself? This is a more difficult question. Judge Shipp’s choice to hear the arguments opens the door for critics to question his impartiality. Take, for instance, Judge Shipp’s ruling last Friday. New Jersey had argued in court papers that the leagues were barred from claiming that a “repeal” of the state-law ban on sports betting violated federal law because the Department of Justice had asserted in a prior lawsuit that New Jersey was free to repeal its sports betting ban “in whole or in part” without violating federal law—in other words, the very kind of law Governor Christie recently enacted. Under the doctrine of judicial estoppel, which allows judges to prevent parties from switching arguments in different phases of a case, Judge Shipp could have permitted New Jersey to use the DOJ’s statements against the NFL. Instead, Judge Shipp focused on the DOJ’s absence from this particular petition and denied New Jersey a chance to better argue its case.

Or take Judge Shipp's statement that “the United States is not a party to this matter” in dispatching with New Jersey’s estoppel argument. That statement is only partly true. The leagues’ motion for a temporary restraining order was filed in two different cases – the new one (in which the DOJ is not a party) and the earlier case (in which the DOJ remains a party). The official transcript from Friday’s hearing also bears both case numbers, and an attorney from the DOJ appeared telephonically (as did many of the other lawyers). And the written order granting the temporary restraining order lists both case numbers. Nonetheless, Judge Shipp rejected New Jersey’s effort to bind the leagues to the DOJ’s prior statements, pointing to the “absence” of the DOJ from the new case.

And what about the NFL’s own actions in regard to this apparent conflict? Should the NFL League Office (which employs many lawyers and undoubtedly was aware of this recent connection) have told its outside counsel about Marcel’s participation in the Walsh Fellowship Program? And what do you think the NFL’s reaction was to learning that Judge Shipp was assigned to preside over the latest case. Were they doing “high-fives” in the league office? Assuming that the NFL wins this case, and they are well on their way to doing so (in view of the TRO ruling, which presupposes a reasonable probability of success on the merits), how will it be perceived if Marcel Shipp lands an assistant coaching job with an NFL team for the 2015 season? These are difficult and troubling questions.

Viewing it through a different lens, what efforts, if any, should New Jersey’s lawyers have undertaken to discover this information? Were they under a duty to discover this latest link? Are they required to play detective to ferret out any and all potential conflicts? After all, it took me no longer than 15 minutes of Google and Twitter searches to learn of Marcel Shipp’s participation in the Walsh Fellowship Program. But imposing such a duty on the other side seems impractical as well as unfair. If anything, the burden of disclosing such information to New Jersey should be placed on those having unique, first-hand personal knowledge of the facts.

On appeal (assuming they lose at the preliminary injunction stage), expect New Jersey to challenge Judge Shipp on his interpretation of the law favoring the NFL and the other leagues. It will be interesting to watch if New Jersey attempts to link its scrutiny of Judge Shipp’s legal reasoning to his brother’s pursuit of an NFL coaching job.

Wednesday, October 29, 2014
 
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.