Arguments In Wire Act Lawsuit Begin In New Hampshire Federal Court — Live Updates

CONCORD, N.H. — On Thursday morning, a federal judge in New Hampshire will hear arguments in the legal challenge to the new Wire Act opinion issued in January by the US Department of Justice.

The NH Lottery Commission brought the first action against that opinion, seeking to protect its online ticket sales and its ambitions for regulated sports betting. The new interpretation of the 1961 federal law could affect all forms of interstate online gambling.

The lottery’s filing has since been joined in amicus by dozens of additional states and state agencies. The NHLC’s technology supplier, NeoPollard, is also listed as a plaintiff.

The docket lists US Attorney General William Barr and the DOJ as the defendants. Though Barr is the newly appointed top attorney in the country, Deputy AG Rod Rosenstein plays a more pivotal role in this case.

We’re inside the US District Court in Concord for the arguments this morning. Refresh this page for periodic updates, and scroll to the bottom sections for a timeline of the litigation and links to key documents.

Judge Paul Barbadoro presides over the proceedings.

Updates from the courthouse

2:36 p.m. — Arguments conclude.

2:26 p.m. — Judge Barbadoro rules that the Rosenstein memo does not provide sufficient grounds for dismissal. “That letter does not convince me that I should dismiss this case for lack of standing, nor does it convince me that this case is moot.” He also requests an additional briefing from the DOJ if it desires to rebut the plaintiffs’ claim that the Wire Act does not apply to states.

2:22 p.m. — The judge calls into question the plaintiffs’ litigation strategy, contending that his decision may have been made easier if other Powerball states were listed as co-plaintiffs.

2:17 p.m. — Amicus counsel contends that the new opinion is legally sound, whether or not the plaintiffs find it agreeable. “It is a reasonable interpretation.” In fact, he argues, it resembles the DOJ’s interpretation for all but a short window from 2011-2018.

2:09 p.m. — An amicus counsel for the defendants argues that states do not have a statutory right to conduct business with one another. He also contends that existing case law stipulates that Judge Barbadoro can provide relief only to the NHLC and NeoPollard — not to any other party.

2:00 p.m. — Judge Barbadoro poses an interesting question to DOJ counsel: “If I were to grant declaratory relief to the plaintiffs in this case that the Wire Act is limited to sports betting… would the government follow that order or appeal? Or does the government feel that it is free to disregard that order?”

Myers initially declines to speculate, but the judge presses him for an answer. “It would depend on how the order is written,” he admits.

On multi-state lotteries

1:56 p.m. — In discussing Powerball, it sounds like the judge sees the need for a declaratory judgement. “Among the things that the New Hampshire lottery is concerned about is the ability to carry on its pact with these states… If [I] just declare that the New Hampshire Lottery Commission is not in violation of the Wire Act, they don’t get accorded complete relief because they’re not able to conduct the lawful activity with their partners.”

1:48 p.m. — The Michigan assistant AG testifies that the DOJ has poked an $80 billion hole in state budgets. He asks for “complete relief” that either enjoins the opinion or imposes declaratory judgment. Judge Barbadoro indicates that nationwide injunctive relief is not consistent with the way he views his responsibilities. “Fortunately,” he says, “you have very able federal judges in your district.”

1:42 p.m. — The judge responds to the plea for expedience: “I have to get it right. I have to do my best to get it right, and that’s going to take some time because it’s a complex issue.” Plaintiffs’ counsel reminds the judge about the June 14 deadline for compliance.

1:35 p.m. — The NHLC asks for a declaratory ruling that (1) the Wire Act does not apply to non-sports gambling, (2) the Wire Act does not apply to states, and (3) the 2018 opinion is invalid. Counsel reiterates the need for a speedy adjudication: “We can not grow our business. We can not raise capital. We can not enter into new contracts.”

1:26 p.m. — The defendants’ counsel argues that there has been no “final agency action” yet — a prerequisite to a ruling in a case like this. The judge interrupts: “Aren’t there two legal consequences that are identified here?” He offers that (1) attorneys must abide by the opinion and (2) the DOJ has the power to prosecute violations. The defense argues that those are not legal consequences, but the points don’t seem to stick with Judge Barbadoro.

1:22 p.m. — NeoPollard counsel makes a brief case for declaratory judgement, and Judge Barbadoro raises the question of whether relief would be satisfactory. Counsel says no, asking the judge to fully “vacate and set aside the 2018 opinion.”

On grammar

12:36 p.m. — The parties are still debating which forms of gambling Congress intended to prohibit with the Wire Act. The “three-clause” advocates are making the case that their reading results in the most natural, coherent statute — and one that falls in line with the Lyons decision.

Here is the excerpt being debated:

Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined not more than $10,000 or imprisoned not more than two years, or both.

We’ve already covered what “whoever” means, but is that two clauses or three?

12:22 p.m. — Plaintiffs’ counsel makes the case for a narrow reading: “There is not a single published federal court decision that adopts the newfangled interpretation from the Department of Justice. They want to you write the first one.” Counsel mentions that the DOJ itself seems uncertain about the implications. “As of Monday, they can’t even figure out whether this covers lottery or not.”

12:18 p.m. — “Punctuation is an important indicator of Congressional intent,” says DOJ counsel, arguing that the lack of certain commas undercuts the plaintiffs’ reading. The judge interjects to make the same argument about the defendants’ reading. “Both of you have the absence of the best kind of punctuation to make your case,” he says.

12:14 p.m. — So far, the judge seems to agree with the plaintiffs narrow interpretation of the Wire Act. “If you read it as the plaintiffs read it, then it is a completely coherent statute,” he says. That is not the case with the reading of the defendants, who argue that any problems with the language are not severe enough to dismiss the rule of the last antecedent.

12:10 p.m. — This dissection of the Wire Act language is equally tedious and important. As the 2018 opinion reflects, which clauses one groups with others can drastically affect the interpretation. Here’s Judge Barbadoro interrogating the defendants’ broad interpretation: “Why would [the second clause] criminalize the use of wires to receive money for doing something that is lawful under the first clause?”

11:59 a.m. — Unfortunately, the Wire Act itself is poorly written from a grammatical standpoint — specifically regarding comma placement. “The rule of the last antecedent” and “the serial qualifier” are competing legal tools used to analyze statutory language, and the parties have spent some time debating a “two-clause” or “three-clause” interpretation of the 1961 law.

“If you don’t think this is an unambiguous statute, you’re both wrong,” the judge says. “This statute is a mess of a statute.”

On the First Circuit case

11:56 a.m. — There’s another case that has come up a few times, too, the one in the Fifth Circuit (in re: Mastercard) which is very clearly a holding. The judge says he will do some additional reading to better understand what constitutes holding and what is dicta. “That ruling,” he said, “although not controlling on me, its reasoning certainly has to be considered.”

11:54 a.m. — Counsel for the plaintiffs argue that if there is confusion over the weight of a decision, the judge is obligated to treat it as a holding. Judge Barbadoro contends that such a treatment would still not preclude him from analyzing the merits of that decision.

11:51 a.m. — The debate over holding vs. dicta has gotten somewhat spirited. Both sides have cited numerous precedents and hypotheticals in an attempt to frame that previous First Circuit decision. The judge is disinclined to take that Lyons ruling as a holding for now. Our legal experts, including John Holden, tend to agree.

11:43 a.m. — According to Judge Barbadoro, his main concern with the Lyons ruling is whether or not it is a “holding” — or merely non-binding “dicta”. This is a potentially pivotal distinction for the judge. “If I am persuaded that this is indeed holding, then this might become an easy case.”

11:42 a.m. — Judge: “Now we’re going to consider the issue that I believe is really at the heart of the case. And that is whether or not the Wire Act apples to non-sports gambling.” He asks for arguments to help him decide how much weight to give the previous decision in Lyons.

11:41 a.m. — The courtroom is back in action after a short break. Judge Barbadoro indicates he wants to spend some time on the previous ruling involving the Wire Act out of the First Circuit. Here were his words before the break: “The issue you want me to engage on is, I find, one of the most challenging statutory constructions I’ve seen in my 26 years on the bench.”

On standing

11:16 a.m. — Much of the recent discussion has centered around the legal meaning of “whoever” and whether or not states are exempt. According to defendants’ counsel, a state is no longer “The Sovereign” where it is involved in a commercial business endeavor (such as a lottery). The Judge responds favorably to that argument.

11:12 a.m. — Leading into the first break of the day, Judge Barbadoro offers a prediction: “I have a strong feeling that however I resolve the case, or however the First Circuit resolves the case, it is likely going to be resolved by the US Supreme Court either way.”

11:01 a.m. — In a relaxed exchange with Jeff Ifrah, the judge perhaps shows his cards on the issue of standing. “[The Rosenstein memo] doesn’t come close to making the kind of voluntary cessation required to make the case moot.”

10:56 a.m. — Matthew McGill provides the most direct argument for his client’s standing. He cites the language in the first Rosentsein memo regarding enforcement. Here’s the excerpt:

As an exercise of discretion, Department of Justice attorneys should refrain from applying Section 1084(a) in criminal or civil actions to persons who engaged in conduct violating the Wire Act in reliance on the 2011 OLC opinion prior to the date of this memorandum, and for 90 days thereafter.

“That’s us!” McGill says. “That’s state lotteries.”

10:53 a.m. — Counsel for both parties discuss a couple of other pre-enforement review cases, and Judge Barbadoro opines that the act of making something illegal and the direct threat of enforcement are essentially the same for the purposes of determining standing.

10:48 a.m. — Myers’ tries to bring up the Rosenstein memo again to reiterate that there are no plans for lottery prosecution. Judge Barbadoro pushes back. “In a world without the Rosenstein letter,” he says, “there isn’t any statement from you that you’re not going to prosecute. In fact, quite the contrary.”

10:45 a.m. — The judge opines that things might be more clear-cut if the defendants had explicitly stated they would not take enforcement action against state lotteries.

“We’re not in that different of a posture,” Myers says.

“You may think so,” the judge answers. “But…” That’s enough to cue the day’s first laugh in the courtroom.

On ripeness and the Rosenstein memo

10:40 a.m. — More arguments from NHLC counsel: “The 2018 opinion has criminalized my client’s entire business. We can not grow. We can not generate capital… This review that the Deputy AG has announced has no timetable. It could last for an indefinite duration.” He reiterates the need for an expedited summary judgment. “The Monday memo changes nothing.”

10:31 a.m. — NeoPollard counsel McGill argues similar points, contending that the Rosenstein memo does not make the case moot. “It explicitly preserves the possibility that there may be prosecution in the future,” he says.

Also this: “It is demonstrably false the the DOJ did not consider the effect on lotteries in the 2018 memo.” McGill reads directly from pages 21-22 of the newest opinion. The judge finds his arguments to be a “slight overstatement.”

10:29 a.m. —  Counsel for the plaintiffs argue the case is ripe and in good standing to proceed. “[The OLC] cast a pallor of criminality over our entire business model,” counsel says.

10:22 a.m. — Judge Barbadoro says he’d like to explore whether or not the Wire Act even applies to states as entities. The more pressing concern, about which he has not yet been briefed, is whether or not such an exclusion would apply to individual employees and vendors.

10:17 a.m. — The judge is not seeing the motion from the DOJ’s standpoint so far. Under the language of the new opinion, he argues, Powerball could be seen as a multi-state “criminal conspiracy.” He cites the 2011 OLC opinion, which was issued at the direct behest of state lotteries. Myers continues to argue that there are no immediate plans to direct enforcement against lottery programs. “That question is under active review at the DOJ,” he says.

10:11 a.m. — The judge offers a preliminary opinion that the DOJ lottery memo does not affect ripeness. “I have a very difficult time seeing how the Rosenstein letter would deprive the plaintiffs of the standing they would otherwise have,” he says. He offers the DOJ a chance to provide better support for that stance. Myers contends that there is no good counterargument, as there are no immediate plans for enforcement against lotteries.

10:08 a.m. — Judge Barbadoro asks for a citation to support the DOJ’s claim that the case is not ripe. “If the threat of prosecution exits, and a lawsuit is brought because of a significant threat of prosecution,” he contends, the case is ripe. Myers can not satisfy this request.

10:04 a.m. — DOJ counsel Steven Myers tells the judge that this case is not ripe for litigation. “Plaintiffs did not have a specific and credible fear of prosecution,” he says. Myers says the federal government does not have an opinion on the legality of lotteries under the new opinion. Judge Barbadoro contends this point, citing the original filing.

Getting started

10:02 a.m. — The judge begins with the DOJ’s motion to dismiss and the newest memo from Rosenstein. The defendants will offer their arguments first.

10:01 a.m. — Judge Barbadoro takes the bench just one minute late. He’s hearing arguments in Courtroom 4 while Courtroom 3 serves as an overflow area. He runs through the schedule, which includes a break every 90 minutes or so.

9:35 a.m — Attorneys and other interested parties begin to arrive and congregate inside the courtroom. Those spotted so far include Matthew McGill (representing the plaintiffs) and David Satz (Ceasars).

Wire Act timeline

Nov. 2, 2018: The DOJ’s Office of Legal Counsel (OLC) drafts a new interpretation of the 1961 federal law, overriding a narrower 2011 opinion.

Jan. 14, 2019: The DOJ formally issues the new opinion.

Jan. 15: Rosenstein sends a memo to US attorneys and the FBI, granting business 90 days to comply with the new opinion.

Feb. 8: During deposition, acting AG Matthew Whitaker fields questions about the steps that led to the new opinion. One Congressmen brings up the name Sheldon Adelson.

Feb. 13: New Jersey Senate President Stephen Sweeney threatens legal action if the DOJ does not rescind the opinion.

Feb. 15: The NHLC takes legal action. It files the first complaint in US District Court.

Feb. 28: Rosentein issues a second memo delaying enforcement by an additional 60 days. The deadline for compliance is now June 14.

March 26: The DOJ files a motion to dismiss the suit.

Apr. 8: Rosentsein drafts a notice indicating that the Nov. 2018 opinion does not address lottery programs. That aspect of enforcement is under review, says the Deputy AG.

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