107 F.3d 1328 (9th Cir. 1997), 93-16191, Valley Broadcasting Co. v. United States

Docket Nº:93-16191.
Citation:107 F.3d 1328
Party Name:97 Cal. Daily Op. Serv. 1307, 97 Daily Journal D.A.R. 1925 VALLEY BROADCASTING COMPANY, dba KVBC (TV), Channel 13, Las Vegas, NV; Sierra Broadcasting Company, dba KRNV (TV), Channel 4, Reno, NV, Plaintiffs-Appellees, v. UNITED STATES of America; Federal Communications Commission, Defendants-Appellants.
Case Date:February 25, 1997
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1328

107 F.3d 1328 (9th Cir. 1997)

97 Cal. Daily Op. Serv. 1307,

97 Daily Journal D.A.R. 1925

VALLEY BROADCASTING COMPANY, dba KVBC (TV), Channel 13, Las

Vegas, NV; Sierra Broadcasting Company, dba KRNV

(TV), Channel 4, Reno, NV, Plaintiffs-Appellees,

v.

UNITED STATES of America; Federal Communications

Commission, Defendants-Appellants.

No. 93-16191.

United States Court of Appeals, Ninth Circuit.

February 25, 1997

Argued and Submitted Feb. 15, 1995.

Page 1329

Scott R. McIntosh, United States Department of Justice, Washington, DC, for the defendants-appellants.

Janet Frasier Rogers, Las Vegas, Nevada and Gerald S. Rourke, Washington, DC, for the plaintiffs-appellees.

John Crigler and John M. Pelkey, Haley, Bader & Potts, Arlington, VA, for amici curiae Meredith Corporation and Interep National Radio Sales, Inc.

Michael E. Wilson, Deputy Attorney General, Gaming Division, Carson City, NV, for amicus curiae State of Nevada.

Ellen Whittemore, Lionel, Sawyer & Collins, Las Vegas, NV, for amicus curiae Nevada Resort Association.

Burt Neuborne, New York City; Henry L. Baumann, Valerie Schulte, Steven A. Bookshester, Washington, DC, for amici curiae Association of National Advertisers, Inc., The National Association of Broadcasters, The American Association of Advertising Agencies, KTNV-TV (Las Vegas), KOLO-TV (Reno), and KTVN-TV (Reno).

Appeal from the United States District Court for the District of Nevada, Philip M. Pro, District Judge, Presiding. D.C. No. CV-92-00400-PMP.

Before: BRUNETTI [*] and O'SCANNLAIN, Circuit Judges; MERHIGE, [**] District Judge.

O'SCANNLAIN, Circuit Judge:

We must determine whether regulations which criminalize the broadcast of advertisements for casino gambling are consistent with the First Amendment.

I

Commercial lotteries and the advertising thereof have long been the subjects of state and federal regulation. Indeed, as early as 1827, Congress provided that "no postmaster, or assistant postmaster, shall act as agent for lottery offices." Act of Mar. 2, 1827, § 6, 4 Stat. 238. By 1868, Congress had made it unlawful "to deposit in a post-office, to be sent by mail, any letters or circulars concerning lotteries, so-called gift concerts, or other similar enterprises offering prizes of any kind or any pretext whatsoever." Act of July 27, 1868, § 13, 15 Stat. 196. In 1890, Congress extended its mailing ban from letters and circulars to newspapers. Anti-Lottery Act of 1890, § 1, 26 Stat. 465; see also Ex Parte Rapier, 143 U.S. 110, 12 S.Ct. 374, 36 L.Ed. 93 (1892) (upholding 1890 Act against First Amendment challenge). And in 1895, Congress eliminated interstate lotteries altogether by prohibiting the transportation of lottery tickets in interstate commerce. Act of Mar. 2, 1895, § 1, 28 Stat. 963; see also Champion v. Ames (Lottery Case ), 188 U.S. 321, 23 S.Ct. 321, 47 L.Ed. 492 (1903) (upholding constitutionality of 1895 Act against challenge that it exceeded Congress' power under commerce clause).

Consistent with this regulatory tradition, Congress in 1934 enacted legislation criminalizing the broadcast advertisement of commercial

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lotteries. Communications Act of 1934, 48 Stat. 1064, 1088. This legislation is the predecessor of the statute at issue here, 18 U.S.C. § 1304. In the years following the enactment of section 1304, Congress has amended the federal anti-lottery statutes on several occasions; however, Congress has chosen not to lift the ban on the broadcast advertisement of private casino gambling.

It is precisely this restriction which troubles our litigants. Valley Broadcasting Company and Sierra Broadcasting Company ("the Broadcasters") are Nevada corporations which own and operate television stations in Las Vegas and Reno, Nevada, respectively. The bulk of the Broadcasters' audience is located in Nevada; however, 4% (13,200/302,200) of all households receiving Valley Broadcasting signals reside in Utah, and 19% (37,200/197,200) of all households receiving Sierra Broadcasting signals reside in California. The Broadcasters desire to broadcast advertisements for casino gambling, an activity that is legal in the State of Nevada. The Broadcasters have declined to accept such advertising for fear of prosecution under 18 U.S.C. § 1304 and its implementing regulation, 47 C.F.R. § 73.1211. 1

On May 14, 1992, the Broadcasters brought suit against the United States and the Federal Communications Commission (collectively "the government"), seeking declaratory and injunctive relief. Among other claims, the Broadcasters contended that 18 U.S.C. § 1304 and 47 C.F.R. § 73.1211 violate the First Amendment of the United States Constitution. 2 The government disagreed.

The district court agreed with the Broadcasters and struck down the regulations as unconstitutional. The government appeals.

II

We begin our endeavor by remarking upon the unique protections afforded that speech which is commonly designated "commercial." It is without doubt that "[t]he First Amendment ... protects commercial speech from unwarranted governmental regulation." Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n, 447 U.S. 557, 561-62, 100 S.Ct. 2343, 2349, 65 L.Ed.2d 341 (1980) (rejecting "the 'highly paternalistic' view that government has complete power to suppress or regulate commercial speech"). That said, we note that such protection is less than that afforded other constitutionally protected expression. See id. at 563, 100 S.Ct. at 2350. Accordingly, restrictions that might be inconsistent with the First Amendment's protection of other varieties of speech are tolerated in the area of commercial speech.

In Central Hudson, the Supreme Court articulated a four-part test under which to analyze the constitutionality of government regulations limiting commercial speech:

At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading.

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Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.

Id. at 566, 100 S.Ct. at 2351. 3

The parties agree that the advertising at issue is neither illegal nor misleading. Rather, their dispute centers around the remaining three prongs of Central Hudson. We treat each prong in turn.

A

The government asserts two interests. First, the government contends, it has an interest in reducing public participation in commercial lotteries. Second, the government claims, it has a substantial interest in protecting those states that choose not to permit casino gambling within their borders.

With regard to its first interest, the government explains that "[s]ection 1304 serves an independent federal interest in discouraging public participation in commercial lotteries, including casino gambling, and thereby minimizing the wide variety of social ills that have historically been associated with these forms of gambling." The district court rejected this interest outright, concluding that the government had presented no specific evidence to support its claim that modern day lotteries are the vehicles of social ills.

The district court was correct in its premise. The government's burden "is not satisfied by mere speculation or conjecture; rather, a governmental body seeking to sustain a restriction on commercial speech must demonstrate that the harms it recites are real...." Edenfield v. Fane, 507 U.S. 761, 770-71, 113 S.Ct. 1792, 1800, 123 L.Ed.2d 543 (1993); see also Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626, 648, 105 S.Ct. 2265, 2280, 85 L.Ed.2d 652 (1985) (rejecting State's asserted interest in ban on illustrations in advertising by attorneys because "[t]he State's arguments amount to little more than unsupported assertions; nowhere does the State cite any evidence or authority of any kind for its contention ..."). This requirement does not, however, rise to the level of strict scrutiny; we have expressly held that "the asserted governmental interest must be 'substantial,'

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rather than 'compelling.' " Association of Nat'l Advertisers, Inc. v. Lungren, 44 F.3d 726, 729 (9th Cir.1994), cert. denied, --- U.S. ----, 116 S.Ct. 62, 133 L.Ed.2d 25 (1995) (applying the " 'more relaxed inquiry' " of intermediate scrutiny to restrictions on commercial speech).

Applying these principles, we are persuaded that the harms sought to be avoided are real. The government included in its pretrial papers excerpts from a 1984 hearing before the President's Commission on Organized Crime. These excerpts address, in part, "the attraction of traditional organized crime groups to licensed casinos." Organized Crime and Gambling: Hearings Before the President's Commission on Organized Crime, at vii (June 1985). Although it is true that the scope of the government's submissions is not extensive, and although portions of the proffered hearings suggest that "the threat of organized crime control has diminished considerably," id. at 22, the report when read in its entirety indicates that a link exists between casino gambling and organized crime. See id. at 617 (noting connection between casino employees and organized crime); id. at 622 (noting "substantial organized crime involvement" in the junket industry); id. at 801-03 (discussing methods employed by organized crime to "skim" money from casino gambling operations); id. at 805-12 ("Increasingly, organized crime has used casinos like private banks to launder the proceeds of narcotics trafficking."); id. at 515-17 (testimony of member of organized crime family regarding Chicago crime family's control of Las Vegas casinos);...

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