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Wednesday, October 22, 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."





1 Comments:

Saying the leagues lack standing to assert a NJ Constitutional claim because they are non-residents is rather bizarre. State constitutional rights apply to all who are within the state's jurisdiction, regardless of state of citizenship. The leagues--to the extent they operate within the state or will sustain a concrete harm within the state--would have requisite standing to raise a state constitutional claim.

Blogger Grange95 -- 10/22/2014 9:34 PM  


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