Bala v. Stenehjem
| Decision Date | 30 November 2009 |
| Docket Number | Case No. 1:09-cv-015. |
| Citation | 671 F.Supp.2d 1067 |
| Parties | Susan BALA and RSI Holdings, Inc., Plaintiffs, v. Wayne STENEHJEM, Paul Bowlinger, Howard W. Wrigley, and Drew Wrigley, in their individual capacities, and Michael Cichy, Defendants. |
| Court | U.S. District Court — District of North Dakota |
Bruce A. Schoenwald, Stefanson Plambeck Foss & Fisher, Moorhead, MN, for Plaintiffs.
Douglas Alan Bahr, Attorney General's Office, Bismarck, ND, Shon Hastings, Drew H. Wrigley, U.S. Attorney's Office, Matthew Kipp, Sarah Andrews Herman, Dorsey & Whitney, Fargo, ND, for Defendants.
ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS
Before the Court are the Defendants' motions to dismiss filed on May 1, 2009; May 27, 2009; June 1, 2009; and June 25, 2009. See Docket Nos. 5, 10, 12, and 15. The Plaintiffs filed responses in opposition to the motions on June 29, 2009; July 6 2009; and July 16, 2009. See Docket Nos. 18, 21, and 26. The Defendants filed reply briefs on July 8, 2009; July 9, 2009; and July 28, 2009. See Docket Nos. 24, 25, and 30. Oral argument was held in Fargo, North Dakota on November 13, 2009. For the reasons set forth below, the Court grants the Defendants' motions.
In 1989, the State of North Dakota legalized simulcast parimutuel wagering on horse racing conducted outside the state and simulcast to licensed off-track betting sites. The North Dakota Racing Commission administers this heavily regulated regime. North Dakota statutory law limits the entities that may conduct simulcast parimutuel wagering to charities and other "public-spirited organizations." See N.D.C.C. § 53-06.2-06.
In United States v. Bala, 489 F.3d 334, 336-37 (8th Cir.2007), the Eighth Circuit Court of Appeals set forth the factual background of Susan Bala's and RSI Holding, Inc.'s involvement in the North Dakota wagering industry:
In 1993, RSI became the sole entity licensed by the [North Dakota Racing] Commission to provide simulcast services to the charities licensed as [off-track betting] operators. RSI as simulcast service provider contracted with out-of-state race tracks to provide satellite broadcast signals of live racing events to licensed [off-track betting] locations in North Dakota. RSI also established and maintained the combined parimutuel pools of North Dakota wagers and performed many record-keeping functions.
In 2001, Bala, the Commission, and interested North Dakota constituents such as horse breeders and the racing industry persuaded the North Dakota Legislature to amend its parimutuel wagering statutes to permit parimutuel "account wagering." Before account wagering, parimutuel bettors placed bets with [off-track betting] operators before the simulcast horse race, usually appearing in person and paying the [off-track betting] operator's teller in cash. The various wagers were combined into a parimutuel pool. After the race, approximately 80% of the pool was paid to winning bettors. The remaining 20% was divided between the race track, the [off-track betting] operator, North Dakota taxes and fees, and RSI, the simulcast service provider. With account wagering, bettors may establish accounts and place simulcast parimutuel wagers electronically, eliminating the need for cash-handling tellers. Rather than authorize multiple [off-track betting] operators to establish bettor accounts and receive account wagers, the account wagering statute provided that account wagers "may only be made through the licensed simulcast service provider," RSI. N.D. Cent.Code § 53-06.2-10.1. The way RSI conducted account wagering resulted in this prosecution.
On December 10, 2003, Bala, RSI, and others were charged in a twelve-count indictment in federal district court for conspiring to conduct and conducting an "illegal gambling business" within the meaning of 18 U.S.C. §§ 1955 and 371; violating 18 U.S.C. § 1084(a) when, being engaged in the business of betting and wagering, they knowingly made interstate wire transmissions of bets, wagers, and the information assisting in the placing of bets and wagers; and conspiring to use and using the proceeds of an illegal gambling business for the purpose of promoting the business and concealing their unlawful activity in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and (B)(i). See Case No. 3:03-cr-112, Docket No. 1. Trial commenced in federal court on January 18, 2005. On February 4, 2005, a jury found Bala and RSI guilty on all twelve counts. See Case No. 3:03-cr-112, Docket No. 88. On July 20, 2005, Bala was sentenced to twenty-seven months imprisonment and ordered to forfeit $19,719,186 joint and several with the co-defendants. See Case No. 3:03-cr-112, Docket No. 118. RSI was ordered to pay a special assessment of $4,800 and forfeit $99,013,200. See Case No. 3:03-cr-112, Docket No. 117. Bala and RSI appealed to the Eighth Circuit Court of Appeals, and the Eighth Circuit reversed the Plaintiffs' convictions, finding:
The evidence at trial established that the North Dakota Racing Commission knew charities must receive the "net proceeds" of the account wagering that RSI, and only RSI, was authorized to conduct. Yet the Commission neither drafted regulations prescribing how this complex task should be accomplished nor adequately monitored RSI's compliance. Issues predictably arose. Rather than pursue possible violations in state court, the Commission brought the complicated situation to federal authorities, who then commenced a federal prosecution based upon flawed interpretations of state law, of 18 U.S.C. § 1955, and of 18 U.S.C. § 1084. The result was a trial at which the government failed to prove any of the offenses charged.
In 2003, the State of North Dakota brought civil and criminal actions against the Plaintiffs. See Docket Nos. 9-1 (State v. Racing Services, Inc., Cass County District Court, Case No. 09-03-C-2331) and 9-2 (State v. Bala et al., Cass County District Court, Case No. 09-03-K-4297). In the civil action, the State alleged that RSI "had `underreported' handle from October 2, 2002, through April 2003, in an amount of $98,975,620.00"; that RSI was in arrears in the amount of $1,336,841.84 in its payment of special funds due to the North Dakota Racing Commission; that RSI was in arrears in the amount of $840,635.98 in its payment of State general fund taxes; that RSI was in arrears in the amount of $6,329,463.06 to the North Dakota Racing Commission and the State's general fund. See Docket No. 9-1 (State v. Racing Services, Inc., Cass County District Court, Case No. 09-03-C-2331). In the criminal action, the State alleged that Bala and RSI operated an illegal gambling business under North Dakota law. See Docket No. 9-2 (State v. Bala et al., Cass County District Court, Case No. 09-03-K-4297). On August 1, 2005, the state district court dismissed the civil action without prejudice. See Docket No. 9-3 (Order of Dismissal). On September 14, 2005, the state district court dismissed the criminal action with prejudice, finding "that the State of North Dakota is [barred] from prosecution in the present matter pursuant to N.D.C.C. 29-03-13 as a result of the conviction for the acts charged and convicted in Federal District Court...." See Docket No. 9-4 (Order of Cass County District Court).
On April 7, 2009, Bala and RSI filed an action in federal district court, alleging violations of 42 U.S.C. § 1983, liability under Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), and interference with business and prospective advantage. RSI was formed as a Delaware corporation with its principle place of business located in Fargo, North Dakota. Defendant Wayne Stenehjem is the Attorney General for the State of North Dakota. Defendant Paul Bowlinger is the former Director of Racing for the North Dakota Racing Commission, an administrative agency of the State of North Dakota. Defendant Drew Wrigley is the former United States Attorney for the State of North Dakota. Defendant Howard W. Wrigley is the father of Drew Wrigley and a former commissioner and Chair of the Racing Commission from July 1, 2002 until he resigned in October 2003. Defendant Michael Cichy is the former Simulcast Coordinator and Lead Race Control Manager for RSI.
On May 1, 2009; May 27, 2009; June 1, 2009; and June 25, 2009, the Defendants filed motions to dismiss the Plaintiffs' complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Defendants contend that the Plaintiffs have failed to plead facts that state a claim as a matter of law.
Rule 8 of the Federal Rules of Civil Procedure sets forth the federal pleading requirements for civil cases. Rule 8(a) provides that pleadings must contain: "(1) a short and plain statement of the grounds for the court's jurisdiction"; (2) "a short and plain statement of the claim showing that the pleader is entitled to relief"; and (3) "a demand for the relief sought." Fed. R.Civ.P. 8(a).
Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates the dismissal of a claim if there has been a failure to state a claim upon which relief can be granted. When considering a motion to dismiss under Rule 12(b)(6), the court must accept all factual allegations in the complaint as true. "`However, the complaint must contain sufficient facts, as opposed to mere conclusions, to satisfy the legal requirements of the claim to avoid dismissal.'" Levy v. Ohl, 477 F.3d 988, 991 (8th Cir.2007) (quoting DuBois v. Ford Motor Credit Co., 276 F.3d 1019, 1022 (8th Cir.2002)). The court may generally only look to the allegations contained in the complaint to make a Rule 12(b)(6) determination. McAuley v. Fed. Ins. Co., 500 F.3d 784, 787 (8th Cir.2007). "[I]n considering a ...
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