New Jersey Changes its Playbook On Appeal to Third Circuit

Sports Betting

By Robert M. Crawford, Jr.

On June 26, 2013, a three judge panel of the Third Circuit heard oral argument in National Collegiate Athletic Association, et al. v. Governor of New Jersey, et al.  The NCAA and the North American professional sports leagues (collectively, the “Leagues”), had previously filed a Complaint for Declaratory and Injunctive Relief in the District Court to enjoin New Jersey from implementing the Sports Wagering Law, N.J. Sta. Ann. § 5:12A-1 et seq., on the ground that it violated the federal Professional and Amateur Sports Act (“PASPA”), 28 U.S.C. § 3701 et seq.

New Jersey opposed the Leagues’ effort to enjoin the Sports Wagering Law arguing that the Leagues lacked standing and PASPA was unconstitutional.  The Department of Justice (“DOJ”) intervened on the side of the Leagues.  The Court granted the Leagues’ motion for summary judgment, granted an injunction and denied New Jersey’s cross motion for summary judgment.  New Jersey appealed.

PASPA, passed in 1992, made it unlawful for “a government entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or a person to sponsor, operate, advertise, or promote, pursuant to the law or compact of a governmental entity a lottery, sweepstakes, or other betting, gambling, or wagering scheme based … on one or more competitive games in which amateur or professional athletes participate …;” (28 U.S.C. § 3702)

PASPA permitted four states with pre-existing sports wagering schemes – Nevada, Delaware, Montana and Oregon – to continue to allow sports wagering.  The Sports Wagering Law, signed into law by Governor Christopher Christie in January 2012, would permit sports wagering at casinos and racetracks in New Jersey.  The Leagues filed their Complaint for Declaratory and Injunctive Relief in the District Court on August 7, 2012.

In opposing the Leagues’ petition for an injunction, New Jersey argued that the Leagues lacked Article III standing because they had not suffered an injury-in-fact.  In addition, New Jersey argued that PASPA was unconstitutional in that it violated the Tenth Amendment’s prohibition on the federal government commandeering state legislatures or state officials to accomplish federal policy.  The District Court rejected New Jersey’s arguments and barred implementation of the Sports Wagering Law, holding among other things that PASPA was constitutional as it did not require any “affirmative activity” by New Jersey.

In its brief to the Third Circuit, New Jersey reiterated the arguments it had previously made to the District Court but changed its anti-commandeering argument, placing greater emphasis on Reno v. Condon, 528 U.S. 141 (2000), a case in which the Supreme Court had rejected a state’s anti-commandeering argument.  New Jersey had hardly mentioned Reno in its briefing to the District Court, relying instead on New York v. United States, 505 U.S. 144 (1992) and Printz v. United States, 521 U.S. 898 (1997), the only two cases in which the Supreme Court has invalidated federal laws on anti-commandeering grounds.

While New Jersey’s attempt in the District Court to liken PASPA to the federal statutes struck down in New York and Printz was understandable, it was an uphill battle because of the dissimilarity of PASPA to the statutes at issue in those cases.  The statute at issue in New York gave the state no choice but to implement a federal policy regarding disposal of nuclear waste, while the statute in Printz went even further by enlisting state officials to execute federal policy by conducting background checks for prospective gun buyers.  PASPA requires no such affirmative state involvement.  It does not “commandeer” in any way that is akin to the New York or Printz statutes.

New Jersey’s new-found reliance on Reno is an interesting strategy.  Although Reno rejected the anti-commandeering arguments made by South Carolina and upheld the federal statute under review, New Jersey has tried to use the language of the opinion to combat the District Court’s “affirmative activity” holding.  In Reno, South Carolina challenged, on anti-commandeering grounds, the constitutionality of the federal Driver’s Privacy Protection Act (“DPPA”) which restricted the ability of states to disclose a driver’s personal information without the driver’s consent.  Reno, 528 U.S. at 144, 147.

The Reno Court, after setting forth the principles announced in New York and Printz, held that even though the DPPA would “require time and effort on the part of state employees,” the DPPA did not violate the anti-commandeering doctrine of the Tenth Amendment because “the DPPA does not require the States in their sovereign capacity to regulate their own citizens” (the “sovereign capacity language”).  Id. at 151.  The Court continued, “[t]he DPPA regulates the States as the owners of data bases” and the DPPA does not require South Carolina “to enact any laws or regulations, and it does not require state officials to assist in the enforcement of federal statutes regulating private individuals” (the “no affirmative activity language”).  Id.

In its brief to the Third Circuit, addressing the District Court’s “affirmative activity” holding, New Jersey argued that “the Supreme Court’s decision in Reno rejected the suggestion that the presence or absence of ‘affirmative activity’ should be a touchstone of the commandeering inquiry,” and the relevant inquiry is whether the law seeks to “‘control or influence the manner in which States regulate private parties.’”  National Collegiate Athletic Association, et al. v. Governor of the State of New Jersey, et al., No. 13-1715 (3d Cir.), Doc. No. 003111244175 at 53-54 (quoting Reno, 528 U.S. at 150).

New Jersey argued that the very result of Reno, rejecting an anti-commandeering argument and upholding a federal law even though it required some action by the State, showed that the Supreme Court was not focused on whether the federal law under review required affirmative activity by the State.  Even though the outcome of Reno seems to cut against New Jersey – i.e., the Court rejected South Carolina’s anti-commandeering argument and upheld the federal statute – the “sovereign capacity language” of the opinion allowed New Jersey to argue that the inquiry was no longer whether the federal statute required affirmative activity by the state.

In their briefing to the Third Circuit, neither the Leagues nor the DOJ undermined New Jersey’s Reno argument.  The Leagues ignored the “sovereign capacity language” and selectively quoted only the second half of the Reno holding, the “no affirmative activity” language: “Reno could not have been clearer that there was no commandeering violation because the challenged law did ‘not require the South Carolina Legislature to enact any laws or regulations, and it d[id] not require state officials to assist in the enforcement of federal statutes regulating private individuals.’”  NCAA, et al. v. Governor of the State of New Jersey, et al., Doc. No. 003111286350 at 49 (quoting Reno, 528 U.S. at 151).

Similarly, the DOJ focused on the “no affirmative activity” language.  The DOJ also argued, however, that New Jersey’s reliance on the “sovereign capacity language” – “the DPPA does not require the States in their sovereign capacity to regulate their own citizens” – misread the import of Reno because, the DOJ argued, the “sovereign capacity language” was the Court’s response to South Carolina’s separate anti-commandeering argument “that the DPPA is unconstitutional because it regulates States exclusively.”  NCAA, et al. v. Christopher J. Christie, et al, No. 13-1713 (3d Cir.), Doc. No. 003111286367 at 38.  But the final two paragraphs of Reno suggest that New Jersey’s reading is correct.  The language the DOJ relies on to try to undercut New Jersey’s argument comes from a separate part of the Reno holding and was in response to a separate anti-commandeering argument made by South Carolina.

At first blush, New Jersey’s focus on Reno, a case in which the Court rejected an anti-commandeering argument, seems misplaced.  However, the language of Reno and the relatively weak oppositions of the Leagues and the DOJ suggest that perhaps New Jersey’s shift to focus on Reno was a good strategic step.  New Jersey had attempted the uphill battle to liken PASPA to the statutes at issue in New York and Printz, but had been rebuffed by the District Court’s holding that PASPA did not require any “affirmative activity.”  In Reno, the Court rejected the anti-commandeering argument even though it acknowledged that the DPPA would require some time and effort by state officials – i.e., affirmative activity – thus suggesting that the affirmative activity distinction may not be determinative.

Oral argument occurred on June 26, 2013 before The Honorable Julio M. Fuentes, The Honorable D. Michael Fisher, and The Honorable Thomas I. Vanaskie.  Even though New Jersey had placed greater emphasis on Reno in its briefing, at oral argument it returned its focus to New York and Printz.  In line with their briefing, both the Leagues and the DOJ argued that New Jersey’s reliance on Reno shows New Jersey to be optimistic because Reno was not a successful anti-commandeering case.  We’ll see what the Third Circuit has to say.

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