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 Posted: Mon Aug 23, 2004 3:50 pm Post subject: Casino City's First Amendment Challenge |
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Casino City, Inc. v. U.S. Dept. of Justice
We are grateful to Casino City for boldly posting materials related to its constitutional challenge launched this summer against the U.S. Justice Dept. (DOJ) at Middle Louisiana District Court. Click on Legal Documents here to read the Complaint filed Aug. 9/04 as well as summonses to the attorneys general and an order for a scheduling conference. Meet Our Attorneys, Barry Richard, Patrick O'Brien and Laureen Galieota.
The Complaint:
| Quote: | See p. 2 at para. 6: ...Casino City seeks a declaration as to its constitutional rights to engage in lawful commercial speech...,
p. 3 at para. 14: A portion of Casino City's revenues are derived from the sale and running of advertisements on its informational Internet sites for lawful overseas companies that offer online casino or sports book gambling...advertisements...not contrary to the law of Louisiana,
at para. 15: The advertisements are not misleading and concern lawful activity, and
at para. 16: Casino City does not conduct or participate in online casino or sports book activity...and the company has taken reasonable steps to ensure that such proceeds are not received. " |
So if everything is legal, what's the problem?
See paras. 17 and 18 of the Complaint, which state as follows:
| Quote: | 17. The advertisements that Casino City sells and runs are of the same content and nature as those that the DOJ warned may constitute the offense of aiding and abetting a violator of 18 U.S.C. Sections 1084, 1952 and/or 1955. Thus, a reasonable and imminent threat of prosecution exists if Casino City continues to sell and run advertisements for overseas online casino and sports book operations. (emphasis ours)
18. Application of the aforesaid criminal statutes against the plaintiff and others similarly situated, as threatened by the DOJ, would constitute a violation of such entities' rights under the First Amendment (emphasis ours) to the United States Constitution in that:
(a) The United States does not have a substantial interest sufficient to justify the imposition upon the exercise of free expression resulting from such application and the threat of such application;
(b) The threatened application would not effectively serve any purported government interest; and
(c) The application is not narrowly drawn to effectuate any purported government interest. |
DOJ on Internet gambling:
We searched the DOJ website using the terms, "internet gambling." Click here to see our 52 hits obtained Aug. 28/04, up to 58 hits Nov. 26/04. Most notable are the Internet gambling links under Electronic Commerce Legal Issues and this recent post describing the Gambling Subunit of the FBI's Racketeering Records Analysis Lab, described thus:
| Quote: | | Gambling Subunit—Examines records relating to sports bookmaking, loansharking, prostitution, illegal lottery, video gambling machines, and Internet gambling. Records may reveal the type of operation, dates of activity, wagering amounts, types of wagers, roles of participants, operational accounting methods, and annual percentage rates. |
We'll take a closer look at these results in the next while. In the meantime, juxtapose this 2002 position paper by Asst. Attorney General John G. Malcolm of DOJ's Criminal Division, Money laundering, with Turning Up the Heat, a piece written Oct. 29/03 by Allyn Jaffrey Shulman of Cardplayer.com.
What can you tell me about the First Amendment and how it relates to this Complaint?
We began with a search at Google of the terms, 'First Amendment commercial speech advertising gambling casinos Internet and Louisiana', which yielded a whopping 527 results Aug. 28/04, 963 on Nov. 26/04: click here. Happily, many of those we found are from links featuring astute, readable analysis by Lawrence G. Walters of Weston, Garrou & DeWitt in Orlando, FL. (See publications and articles).
Here is a particularly instructive excerpt of his work from Chapter 20 of our newly purchased, most illuminating text, Internet Gambling Report Seventh Edition (see cover photo and brief, favorable review elsewhere at this forum) at p. 358:
| Quote: | In this case (Valley Broadcasting Co. v. U.S., originating in Nevada), an association of broadcasters desired to broadcast advertisements for casino gambling, an activity that is legal in the state of Nevada, but which also could be heard by audiences in California and Utah. This time, the Ninth Circuit Court of Appeals struck down ss1304 on First Amendment grounds. The problem with the law, as the appeals court saw it, was the existence of numerous exceptions to the broadcasting ban, such as advertising any gaming by Indian tribes, fishing tournaments, and state run lotteries. If the government's interests were truly focused on reducing gambling, as claimed by the United States attorneys, it would not have included all these bizarre exceptions. Thus the intent of the law in discouraging public participation in commercial gambling was not being served in light of the numerous exceptions. This case marked the beginning of the end of the argument that the government can ban gambling advertising because it can ban gambling (emphasis ours). In light of the First Amendment protections afforded to commercial speech, things were no longer that simple.
The United States Supreme Court finally got into the act in 1999, when it decided Greater New Orleans Broadcasting Association, Inc. v. U.S.. This time, a broadcaster association challenged ss1304 by suing the FCC and asking for a determination that the law violated the First Amendment. In this case, the United States Supreme Court specifically held that in connection with gambling advertisement, the power to prohibit or regulate particular conduct does not necessarily include the power to prohibit or regulate speech about the conduct (emphasis ours). The court noted in deciding this case that the government's policy towards gambling advertising has become increasingly unclear given the numerous exceptions that have continued to swallow the gambling advertising ban. In addition, the court noted that "some form of gambling is legal in nearly every state." |
See also the excellent Chapter 24 Free Speech on the Internet from Internet Law and Practice, a two-volume set published by West Publications, to be updated regularly. Ms. Carpenter and Ms. Kelley, partners in Jenner & Block's Media and First Amendment Practice, coauthored the chapter with former firm partner John B. Morris, Jr., now with the fascinating Center for Democracy and Technology. Here is a sample from ss24:43 - Who is liable for illegal content?
| Quote: | Content on the Internet is most often provided by the person or group that creates a Web site, often called the host. However, users - those who access the Internet from their computers at home, work, or cybercafe - may also provide content if they participate in chat rooms or discussion groups. Finally, Internet Service Providers who provide the telephone lines and servers which allow the connections between users and Web sites or users and chat rooms, generally act simply as conduits, and not providers of content, although some may also provide some content as part of their service. All three groups are affected by content regulation.
The question of who may be held liable for illegal content is often the critical question in a content regulation framework, since imposing liability on more kinds of participants tends to lessen the amount of material generally available, and imposing liability on fewer types of participants tends to increase the amount of material generally available. So, in countries like the United States and Canada, where freedom of speech and information are highly valued, liability tends to follow the content provider. In contrast, in countries like China and Korea, where the centralized control of information is highly valued, liability tends to be imposed on all levels of Internet participation.
ss24:44 - What laws regulate content?
Like other forms of communication, Internet content is most often regulated by the laws of individual countries. But many countries and groups of countries have created laws that apply specifically to the Internet. Some countries have imposed codes of conduct on Internet Service Providers, and some providers have voluntarily agreed to create and cooperate with their own. Some coalitions of countries have banded together to address the issues. And finally, several international treaties contain provisions about regulation of expression that affect the Internet. |
Note the passages on foreign jurisdictions and the conflict of laws that arise between countries with different content rules:
| Quote: | ss24:40 - Obtaining jurisdiction over a foreign party in a U.S. court
The jurisdictional test does not differ substantially in determining whether a given U.S. court has jurisdiction over the foreign defendant. The main difference in the analysis is the determination whether the exercise of jurisdiction over the foreign defendant could be considered reasonable based on the circumstances. Resolution of these cases is necessarily fact specific. That said, courts will exercise jurisdiction over foreign defendants who meet the Zippo test in circumstances the courts deem appropriate. In MacConnell v. Schwamm, for example, the court exercised personal jurisdiction over a Japanese defendant accused of cybersquatting a domain name using an American company's trademark. The court took into account the fact of the Japanese defendant's residency, but concluded that minimum contacts were met, and the court's interest in protecting California companies outweighed any inconvenience that litigating in a foreign forum caused.
ss 24:41 - The approach of foreign courts, and a U.S. court's reaction
Of significant concern to U.S. individuals and businesses is the exercise of jurisdiction, based on Internet activity, by foreign courts. Such cases have increasingly made headlines, as courts across the world have exerc ised jurisdiction over U.S. companies for their Internet-based activity. The case that to date has raised the most significant First Amendment concerns is that involving the French government's prosecution of Yahoo!, Inc. - a U.S. company whose English language Web site targets U.S. audiences. At issue in the Yahoo! case was the auction of memorabilia on Yahoo!'s Web site. Such activity is clearly lawful, and indeed constitutionally protected, in the in the U.S. In France, however, any display of Nazi memorabilia is unlawful. Although Yahoo!, Inc. has a separately incorporated French subsidiary that hosts a Web site in French and complies with French law, the French court nonetheless exercised jurisdiction over the U.S.-based Yahoo!, Inc. on the ground that French users could access the U.S. Web site if they chose and thus "the damage was suffered in France." The French court ordered Yahoo! to render its site inaccessible to French users, or face a daily fine.
In response to the French court's order, Yahoo!, Inc. filed suit in federal district court in Northern California, seeking a declaration that the French court order is unenforceable in the U.S. The court issued the declaration...The federal district court decision is now on appeal to the U.S. Court of Appeals for the Ninth Circuit. In the meantime, the French authorities have initiated criminal proceedings against Yahoo!, Inc. and its former Chief Executive Officer. (footnotes omitted)
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Clickable case law:
For those who like their law like a good single malt - neat - here is Bandwidth Market's clickable U.S. Supreme Court decision on Louisiana casino ads, at New Orleans broadcasters.
What is a government interest drawn broadly, narrowly or nice and slow with a good head of foam?
For a concise explanation of these legal tests, we admired this brisk three-paragraph analysis by Kristen M. Fletcher, U.S. Supreme Court: Multi-State Casino Advertising Legal, an article at p. 11 of this 1999 issue of The Water Log, published by The Sea Grant Law Center at the University of Mississippi.
For a more in-depth review of the points of law at issue in the broadcasters decision, we liked Erik Jaffe's 2001 piece, Free spech & election law, at the Federalist Society website. Here is an interesting excerpt from that article:
| Quote: | | On two other points, the Court raises interesting and potentially promising arguments. When the Court discussed the first part of the Central Hudson test, it made the approving observation that the advertising at issue "would convey information - whether taken favorably or unfavorably by the audience - about an activity that is the subject of intense public debate in many communities." — U.S. at —, 119 S. Ct. at 1930. The Court also noted the messages would "benefit listeners by informing their consumption choices and fostering price competition." Id., 119 S. Ct. at 1930. And when discussing whether the speech restriction materially advanced the government's interests, the Court argued that "[w]hile it is no doubt fair to assume that more advertising would have some impact on overall demand for gambling, it is also reasonable to assume that much of that advertising would merely channel gamblers to one casino rather than another." Id. at —, 119 S. Ct. at 1932-33. Arguments such as these have long been made in connection with cigarette advertising, and it will be interesting to see if the Court's seeming approval of these arguments will ever be tested in the context of tobacco products. (emphasis ours) |
But see also Erik Jaffe Center for Individual Freedom at Townhall.com, a website devoted to what it describes as "the broad umbrella of conservative thoughts, ideas and actions" and which displays in bold colored caps the slogan, WE CAN STOP IMMORAL LIBERALISM. Indeed.
Further reading:
Internet gambling in the U.S.:
We visited the University of Nevada's Gaming Studies Research Center, where we found I. Nelson Rose, a Harvard law grad, now a professor at California's Whittier Law School. See Is it a Crime to Play Poker Online? and Gambling Wins Again At The Polls: How the Results of the November 2002 Elections Will Affect the Industry and the fascinating Federalist Society website, where we found 142 hits Sept. 1/04 searching the terms, 'Internet gambling 2004:' click here. For reference, see National Gambling Impact Study Commission and final report of 1999, especially Chapter Five on Internet Gambling here.
Advertising:
For snippets of not-so-new but still important developments in the law of e-gaming advertising not just in the U.S. but throughout the world, check out our 49 hits from our search Aug. 28/04 of the terms, Internet gambling 2004,' at AdLaw By Request.
Free speech advocacy sites to join:
Center for Democracy and Technology. Click here, too, for a list of groups represented in the amicus brief filed Sept. 13/04 in support of Yahoo!, Inc.'s First Amendment appeal (see above). We have long admired the New Yorker magazine ad campaign for this representative, the American Civil Liberties Union.
We'll continue updating these materials as often as we can. Please let us know if there are reports, articles or websites that shed some light on these issues. Send your comments to legal@pokerpulse.com. We would be more than pleased to hear from you.
Link to this entry
http://pokerpulse.com/legal/viewtopic.php?p=18#18 |
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legal
Site Admin
Joined: 18 Aug 2004
Posts: 510
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| Posted: Fri Nov 26, 2004 3:05 pm Post subject: |
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DOJ files motion to dismiss, Casino City replies:
We were somewhat puzzled by DOJ's reasoning in its motion Oct. 29/04 to dismiss Casino City's First Amendment challenge described above. Click here to see <a href=http://online.casinocity.com/FirstAmendment/legaldocuments.cfm">Legal Documents filed so far.
Here's the problem:
DOJ's much discussed letter of June 11/03 advised advertisers of Internet gaming sites that take bets from U.S. players that such advertisers may be subject to criminal prosecution. Said letter notwithstanding, the government asserts that Casino City (CC) lacks standing, first because DOJ never sent the letter to CC, second because if CC's claims that its ads concern lawful activity are true, there is no threat of imminent prosecution, third, that DOJ's letter stated only that running such ads may constitute aiding and abetting, fourth, that CC's decision to wait for more than a year from the letter's issue to file suit should be taken as an indication that the purported threat is not immediately forthcoming and that all of the above show plaintiff's challenge is not yet ripe (legally ready) for review.
So DOJ had no intention to prosecute?
Good question. It's a little difficult to tell what the Justice Dept. had in mind when it sent the letter, but if you were CC, would it be prudent to take the risk?
DOJ's memorandum also states what it calls at p. 3 "the government's substantial interest in reducing illegal Internet and offshore gambling," an interest which becomes at p. 21"the legislature's 'obligation and responsibility to protect its citizens, and in particular, its youngest citizens, from the pervasive nature of gambling which can occur via the Internet and the use of computers connected to the Internet.'"
Then there's the reminder at p. 10 that "state and federal laws prohibit the operation of sportsbook and Internet gambling within the United States, whether or not such operations are based offshore." (emphasis ours)
What is the effect, if any, of the recent WTO decision against U.S. e-gaming prohibitions?
CC certainly mentions the decision in its reply memorandum filed Nov. 18/04. Here's footnote 8 from p. 19 of that retort:
| Quote: | | For instance, online gaming is expressly legal in Antigua. On November 10, 2004 the World Trade Organization Dispute Panel ruled in favor of Antigua in a challenge to the U.S. policies regarding online gambling. While this ruling is not controlling it is informative in that it reflects the sentiment of other nations, i.e., that online gaming is not illegal. The U.S. was found to be in violation of the terms of the General Agreement on Trade Services...Furthermore, non-sports casino gambling does not violate federal law unless the laws of the state in which the business is conducted prohibits same. (emphasis ours) |
What does DOJ say about the First Amendment?
DOJ's memorandum states at p. 17,
| Quote: | | If there is any threat of prosecution against Casino City, it is because the company is running advertisements for gambling operations that illegally cater to bettors located in the United States. Under such circumstances, Casino City's claim fails as a matter of law, for it is well-established that there is no First Amendment right to advertise illegal activity...(at p. 19) By definition, then, the only speech at issue that the letter identifies as even potentially subject to criminal liability is speech tat is advertising illegal activity. Moreover, as stated in the DOJ letter, such speech is also misleading because it falsely suggests that Internet gambling is legal...(at p. 20) ...the Supreme Court has specifically noted on several occasions that the government has a substantial interest in reducing gambling by regulating gambling advertising...(at p. 21) Moreover, internet and offshore sports book gambling operations are particularly vulnerable populations such as children and compulsive gamblers, via a computer or telephone, and also due to the potential for fraud and money laundering. (emphasis ours) |
It sounds like it's all over for Casino City.
Not at all. Judging from the strong fighting language and skillful construction of argument in CC's reply memorandum, DOJ is well matched punch for punch. The crux of this matter, in our view, is a conflict of laws -- whether and how to regulate a multi-sovereign cyberspace. Here's what CC had to say about the issue Nov. 18 beginning at p. 18:
| Quote: | Casino City places advertisements for offshore books and online casinos in its network of a collection of portal sites. Once in "cyberspace, - located in no particular geographical location," these advertisements placed by Casino City become, "available to anyone, anywhere in the world, with access to the Internet; including places where the advertised activities are expressly legal and places where the advertised activities might be prohibited. This is a key point ignored by the DOJ in its Rule 12 (b)(6) challenge. The U.S. Supreme Court's Reno and Ashcroft decisions are of particular importance here, as the Court in each action was confronted with a First Amendment challenge, and the implications of the Internet and technolkogy on same. Reno and Ashcroft both confronted challenges by Internet content providers and civil liberties groups concerning the passage of legislation that sought to protect minors from harmful material on the Internet. The Reno decision, in particular, explained the broad global impact of the Internet; this acknowledgement of the broad global impact of the Internet is of special relevance here.
To begin, the Reno court exlained that, "the Internet is an international network of interconnected computers...now enable[ing] tens of millions of people to communicate with one another and to access vast amounts of information from around the world." It is "a unique and wholly new medium of worldwide human communication." [Emphasis added]. "No single organization controls any membership in the Web, nor is there any single centralized point from which individual Web sites or services can be blocked from the Web." (citations omitted) (emphasis ours) |
We'll continue sifting through the analysis. Please check back for updates and send us legal@pokerpulse.com your comments or questions. We'd love to hear from you.
Link to this entry
http://pokerpulse.com/legal/viewtopic.php?p=97#97
Last edited by legal on Thu Apr 02, 2009 11:51 am; edited 4 times in total |
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legal
Site Admin
Joined: 18 Aug 2004
Posts: 510
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| Posted: Tue Apr 18, 2006 12:32 pm Post subject: |
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It's over - for Casino City, at least
Many thanks to River City for sending the alert Feb. 3/06 to Bradley Valerius's story, Casino City Drops First Amendment Case Against DOJ. Here's an excerpt:
| Quote: | The United States Court of Appeals for the Fifth Circuit has this week accepted Casino City's motion to dismiss its declaratory judgment case against the U.S. Department of Justice. Launched in August 2004, Casino City's case sought a ruling from the U.S. court system as to whether certain actions taken by the DOJ to discourage online gambling advertisements violate the First Amendment of the U.S. Constitution.
Casino City's President Michael Corfman ...stated, "In it's original motion to dismiss our case in the District Court, the DOJ conceded that advertising online gambling sites accepting bets from U.S. citizens did not constitute aiding and abetting an illegal activity unless the advertiser was also associated with the online gambling venture. (emphasis added) We felt this admission by the government was a major victory. Given that the Department of Justice seemed to have also ceased targeting advertisements for online gaming, we felt there was little to be gained by continuing to press our case."
..."During the appeal hearing it became clear we were really breaking new ground with the case, and the nature of First Amendment rights on the Internet," Corfman said. "The DOJ has argued that online gambling has to be legal everywhere before you can advertise it, and we have argued that if online gambling is legal anywhere we should be able to advertise it. While the DOJ's position is clearly too restrictive, based on the court's questions at the hearing, we did not feel confident that the court was necessarily ready to take the leap to our position. First Amendment rights are extended a small step at a time, and we were trying to take such a large step that we were concerned the court might not take that step with us."
...three days after Casino City filed its motion to dismiss the case, the DOJ revealed that Sporting News had agreed to a $7.2 million settlement to drop charges it faced for running online gambling advertisements. Catherine Hanaway, U.S. attorney for eastern Missouri, has stated that the Sporting News settlement agreement is only *one of many settlements that have already taken place.
If what Hanaway says is true, it would indicate that the DOJ has silently pursued action against advertisers all along without the online gambling industry being aware of it... |
* Settlements were said to total about $40 million in Sporting News agrees to $7.2 million settlement over gambling ads by Jim Salter at KMOV.com Jan. 20/06. Here are a few highlights:
| Quote: | --In January 2000, Paradise Casino agreed to forfeit $14 million. In 2003, PayPal Inc., an online payment network, forfeited $10 million to settle allegations it aided in illegal online gambling.
--In 2004, the Discovery Channel forfeited $6 million for accepting money for ads for Internet gambling companies PartyPoker.com and ParadisePoker.com. Also in 2004, St. Louis sports radio stations KFNS-AM, KFNS-FM and KFRT-AM paid $158,000 to settle allegations that they promoted illegal online gambling.
The gaming companies themselves are difficult to prosecute because they're located in places like the Dominican Republic, Malaysia and Costa Rica, Hanaway said.
Typically in Internet gambling, the customer uses a credit card to open an account with a third party, then bets on sporting events, plays poker or engages in some other form of gambling. His losses are deducted from his credit card account; winnings are credited to the credit card.
Hanaway said many credit card companies now prohibit use of the cards in Internet gambling. "One trend we're starting to see now is more use of wire transfers as opposed to credit card use," she said.
Hanaway wouldn't say if other sports magazines, radio programs or networks, or Web sites were also under investigation. She said ads in legitimate publications make users believe online wagering is OK.
It isn't.
"When you place a bet online, you're engaging in illegal activity," Hanaway said. (emphasis added) |
If that's so, why bother with Leach and Goodlatte, the latest attempts to ban Internet gambling in the U.S.? |
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