Casino Ventures v. Stewart

• Decision Date: 07 May 1999
• Docket Number: No. 98-2653,CA-98-1923-18-2,98-2653
• Citation: 183 F.3d 307
• Parties: (4th Cir. 1999) CASINO VENTURES, Plaintiff-Appellee, v. ROBERT M. STEWART, in his official capacity as Chief of the State Law Enforcement Division; CHARLES M. CONDON, Attorney General, Defendants-Appellants. () Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 307

183 F.3d 307 (4th Cir. 1999)

CASINO VENTURES, Plaintiff-Appellee, v. ROBERT M. STEWART, in his official capacity as Chief of the State Law Enforcement Division; CHARLES M. CONDON, Attorney General, Defendants-Appellants.

No. 98-2653 (CA-98-1923-18-2)

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Argued: May 7, 1999

Decided: July 6, 1999

Appeal from the United States District Court for the District of South Carolina, at Charleston. David C. Norton, District Judge.

COUNSEL ARGUED: Nathan Kaminski, Jr., Senior Assistant Attorney General, Columbia, South Carolina, for Appellants. Edward A. Frazier, EDWARD A. FRAZIER, P.A., Columbia, South Carolina, for Appellee. ON BRIEF: Charles M. Condon, South Carolina Attorney General, Robert D. Cook, Assistant Deputy Attorney General, Christie Newman Barrett, Assistant Attorney General, Columbia, South Carolina, for Appellants.

Before WILKINSON, Chief Judge, NIEMEYER, Circuit Judge, and MOON, United States District Judge for the Western District of Virginia, sitting by designation.

Reversed by published opinion. Chief Judge Wilkinson wrote the opinion, in which Judge Niemeyer and Judge Moon joined.

OPINION

WILKINSON, Chief Judge:

Casino Ventures plans to offer gambling cruises from a port in South Carolina. Fearing prosecution, it brought suit seeking a declaration that state gambling laws prohibiting such cruises had been preempted by the Johnson Act, 15 U.S.C. § 1175. The district court found the state laws were preempted. Casino Ventures v. Stewart, 23 F. Supp. 2d 647, 649 (D.S.C. 1998). We reverse, holding that the Act does not preempt state regulatory authority over gambling. Thus South Carolina authorities remain free to enforce state criminal prohibitions against illicit gambling cruise activity.

I.

Casino Ventures seeks to operate a "day cruise" or "cruise to nowhere" business from a dock in South Carolina. The business would entail short cruises on ships that depart from and return to the same port in South Carolina without making any intervening stops. Once the ship is outside of the state's territorial waters, Casino Ventures would offer gambling to its passengers.

Casino Ventures fears that its cruise business will violate South Carolina criminal laws restricting gambling. State statutes have long prohibited the possession and use of certain gambling devices within South Carolina territory. In particular, Casino Ventures alleges that its business operations may violate South Carolina's ban on lotteries, S.C. Code Ann. §§ 16-19-10 to -30, its ban on unlawful games and betting, id. §§ 16-19-40, 16-19-130, and its ban on the possession and use of gaming tables and machines, id. §§ 12-21-2710, 12-21-2712, 16-19-50, 16-19-120.

To allay this fear of criminal prosecution, Casino Ventures brought suit against Robert M. Stewart, Chief of the State Law Enforcement Division, and Charles M. Condon, Attorney General of South Carolina. Casino Ventures sought a declaration that South Carolina's gambling laws are preempted by federal law and an order enjoining the enforcement of those state laws. Specifically, it asserted that the 1992 amendments to the Johnson Act created a federal right to operate a gambling cruise to nowhere. Pub. L. 102-251, §202, 106 Stat. 60, 6162 (1992).

The 1992 amendments altered the Johnson Act's general ban on maritime gambling. Prior to the amendments, it was"unlawful to manufacture, recondition, repair, sell, transport, possess, or use any gambling device . . . within the special maritime" jurisdiction of the United States. 15 U.S.C.A. § 1175 (1990). The Justice Department, however, interpreted this prohibition not "to apply to foreign-flag vessels entering the United States." H.R. Rep. No. 102-357 (1991). The effect was that American flag vessels were restricted from offering gambling to their passengers while foreign flag vessels were free to do so. This put American flag vessels at a competitive disadvantage in the lucrative leisure cruise industry. See id.

Congress reacted to the disparity by amending the Johnson Act to make clear that it applied to vessels "documented under the laws of a foreign country." 15 U.S.C. § 1175(a). Additionally, Congress crafted exceptions to the Johnson Act's blanket restrictions related to gambling devices. First, section 1175 no longer restricts the transport and possession of gambling devices on vessels, provided that those devices are not used while the vessel is within the boundaries of a state or possession of the United States. Id. § 1175(b)(1)(A)-(B). Second, section 1175 no longer prohibits the repair and use of gambling devices outside of those boundaries, unless the ship is on a cruise to nowhere and the state in which that cruise "begins and ends has enacted a statute the terms of which prohibit that repair or use on that voyage." Id. § 1175(b)(1)(A), (b)(2).

After examining these amendments, the district court granted Casino Ventures' request for a declaratory judgment. First, the court held that the 1992 amendments created a federal right to operate day cruises, thereby preempting conflicting state laws. Casino Ventures, 23 F. Supp. 2d at 649. Second, the court noted that under section 1175 a state could defeat preemption if it "has enacted a statute the terms of which prohibit that repair or use" on cruises to nowhere. 15 U.S.C. § 1175(b)(2)(A). But it found that South Carolina's existing laws restricting gambling did not meet this statutory requirement because they were not passed after the 1992 amendments took effect. Casino Ventures, 23 F. Supp. 2d at 649-50. Thus, the district court declared that Casino Ventures could lawfully operate a cruise to nowhere business in South Carolina. Id. at 652. Stewart and Condon appeal. Because we hold that the district court's initial finding of federal preemption was erroneous, we reverse.¹

II.

Although the Constitution plainly permits federal law to supplant state authority, "[c]onsideration under the Supremacy Clause starts with the basic assumption that Congress did not intend to displace state law." Maryland v. Louisiana, 451 U.S. 725, 746 (1981); see also Worm v. American Cyanamid Co., 970 F.2d 1301, 1305 (4th Cir. 1992). This presumption is at its zenith when federal law impinges upon core state police powers. States have long possessed primary responsibility in our federal system to protect the health, welfare, safety, and morals of their citizens. The Supreme Court has indicated "that when a State's exercise of its police power is challenged under the Supremacy Clause, `we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.'" Ray v. Atlantic Richfield Co., 435 U.S. 151, 157 (1978) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)); see also Reid v. Colorado, 187 U.S. 137, 148 (1902). This "approach is consistent with both federalism concerns and the historic primacy of state regulation of matters of health and safety." Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996).

The state laws at issue in this case restrict gambling within South Carolina. Because such restrictions are aimed at promoting the welfare, safety, and morals of South Carolinians, they represent a wellrecognized exercise of state police power. Posadas de Puerto Rico Assocs. v. Tourism Co. of Puerto Rico, 478 U.S. 328, 341 (1986). For this reason, respect for state prerogatives dictates a cautious preemption analysis -one which is reluctant to imply a broad ouster of state authority.

III.

Neither party contends that Congress has expressly preempted the state laws at issue here. Instead, Casino Ventures argues that state laws banning the use and possession of gambling devices on vessels have been impliedly preempted by federal law. Casino Ventures asserts that the 1992 amendments to the Johnson Act worked an implicit preemption of state laws, such as South Carolina's, that prohibit gambling voyages to nowhere.

We disagree. "The purpose of Congress is the ultimate touchstone" in a preemption case. Retail Clerks v. Schermerhorn, 375 U.S. 96, 103 (1963). That being so, state law is preempted"if federal law so thoroughly occupies a legislative field as to make reasonable the inference that Congress left no room for the States to supplement it." Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992) (internal quotation marks omitted). Additionally, courts imply preemption if state law "actually conflicts with federal law, that is, when it is impossible to comply with both state and federal law, or where the state law stands as an obstacle to the accomplishment of the full purposes and objectives of Congress." Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248 (1984) (citation omitted); see also Worm, 970 F.2d at 1304.

A.

There is no basis for finding federal field preemption of South Carolina's restrictions on gambling. Maritime matters and gambling are not fields subject to exclusive federal control. To the contrary, federal law in these fields respects both our system of dual sovereignty and the important regulatory interests of the states.

As a general matter, "Maritime law is not a monistic system. The State and Federal Governments jointly exert regulatory powers today as they have played joint roles in the development of maritime law throughout our history." Romero v. International Terminal Operating Co., 358 U.S. 354, 374 (1959).

This is also true of the regulation of gambling. Indeed, Congress has explicitly recognized the preeminent state interests in controlling gambling and has sought to extend, not curb, state police power in this field. Congress has done so by delegating to the states significant authority to shape applicable federal law. For example, it is a federal crime "to transport any gambling device to any place in a State." 15 U.S.C. § 1172(a). But such activity is not a federal crime if a...