Club Ass'n v. Wise

• Decision Date: 17 June 2002
• Docket Number: No. 01-2154.,01-2154.
• Citation: 293 F.3d 723
• Parties: CLUB ASSOCIATION of West Virginia, Incorporated; Chris Wakim; Foundation Corporation; Bradley Yeater; Truckstop Games of WV, LLC; Viking Vending Services, LLC, Plaintiffs-Appellants, v. Robert E. WISE, JR., in his official capacity as Governor of the State of West Virginia; John C. Musgrave, in his official capacity as the Director of the West Virginia Lottery Commission; West Virginia Lottery Commission; Howard E. Hill, JR., Colonel, in his official capacity of the West Virginia State Police, Defendants Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

293 F.3d 723

CLUB ASSOCIATION of West Virginia, Incorporated; Chris Wakim; Foundation Corporation; Bradley Yeater; Truckstop Games of WV, LLC; Viking Vending Services, LLC, Plaintiffs-Appellants, v. Robert E. WISE, JR., in his official capacity as Governor of the State of West Virginia; John C. Musgrave, in his official capacity as the Director of the West Virginia Lottery Commission; West Virginia Lottery Commission; Howard E. Hill, JR., Colonel, in his official capacity of the West Virginia State Police, Defendants Appellees.

No. 01-2154.

United States Court of Appeals, Fourth Circuit.

Argued February 25, 2002.

Decided June 17, 2002.

Richard B. Sandow, Jones, Gregg, Creehan & Gerace, L.L.P., Pittsburgh, Pennsylvania, for Appellants. Thomas Ryan Goodwin, Special Assistant Attorney General, Goodwin & Goodwin, L.L.P., Charleston, West Virginia, for Appellees. ON BRIEF: John P. Davis, III, Jones, Gregg, Creehan & Gerace, L.L.P., Pittsburgh, Pennsylvania, for Appellants. Johnny M. Knisely, II, Carrie Goodwin Fenwick, Goodwin & Goodwin, L.L.P., Charleston, West Virginia, for Appellees.

Before WIDENER, WILLIAMS, and MOTZ, Circuit Judges.

OPINION

PER CURIAM.

Club Association of West Virginia and other plaintiffs appeal the District Court's decision to dismiss the case pursuant to the Tax Injunction Act, and, in the alternative, abstain pursuant to Railroad Comm'n of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941). They seek an adjudication of the merits of their claims that, inter alia, the West Virginia Limited Video Lottery Act unconstitutionally infringes their rights of free association, unbridled interstate travel, equal protection, and due process. We affirm dismissal under the Tax Injunction Act, 28 U.S.C. § 1341.

I.

During a Special Session, the West Virginia legislature enacted, and Governor Wise, the defendant below, signed, the West Virginia Limited Video Lottery Act, W.Va.Code §§ 29-22B 101 et seq. The avowed purpose of this law was to establish a single state owned and regulated video lottery thus allowing the State to collect revenue therefrom, control the operators of the machines, and stem the proliferation of gambling in the State.¹ Prior to this Act, notwithstanding the repeated attempts of the legislature to ban this type of gambling, gambling machines were only prima facie illegal; evidence of their use in illegal gambling had to be shown before they could be seized and destroyed making enforcement difficult. As a result, the machines proliferated in West Virginia clubs, taverns, and the like. The State estimates that more than 13,000 of these machines were in West Virginia at the time of enactment.

The Act features a licensing scheme having the following elements: 1) the act establishes four types of licenses, manufacturer's, operator's, retailer's, and service technician's, each having its own fee structure ranging from $100 for a service technician's to $10,000 for an operator's license; 2) the licenses are awarded for renewable 10 year periods; 3) potential license holders are required to be West Virginia residents for a period of four years prior to application and during the duration of the license; 4) 30 to 50% of the gross profits from the operation of the machines are due to the State. W.Va. Code §§ 29-22B 1102, 1103, 1401-8. Authority to carry out the licensing scheme is given to the Lottery Commission. The Commission is allowed to inspect all premises where video lottery machines are located, seize illegal machines, books and records, and other papers. W.Va.Code §§ 29-22B 402. The Lottery Commission must determine that potential licensees are of good character, honesty, and integrity before they are licensed. The State Police are delegated the responsibility for investigating these traits. W.Va.Code §§ 2922B 502, 602.

The statute also provides for criminal penalties. As of January 1, 2002, unlicensed video lottery machines are per se illegal and may be seized at any time. W.Va.Code § 1801. Those who possess (actual or constructive) unauthorized machines are subject to a mandatory minimum of 1 year in jail and not less than $50,000 in fines. W.Va.Code §§ 29-22B 1705.

The State claims that this statutory scheme will result in $81 million in increased revenue. When the statute is fully implemented with the authorized 9,000 machines, the State would collect monies in excess of $250,000 per day.

Appellants are various individuals and organizations who fall into 4 classes: 1) those who are eligible to apply for a license; 2) those who are currently ineligible because they are non-residents (whether or not they intend to become so); 3) those who are eligible but will soon lose eligibility because of an impending move out of West Virginia; and 4) current owners of video gambling machines located in West Virginia. They seek declaratory and injunctive relief on the grounds that the statute violates their rights under the First and Fourteenth Amendments, the right of free travel, due process, and equal protection under the Privileges and Immunities, Due Process, and Equal Protection clauses, and the right to free interstate commerce. With respect to the first claim, the Appellants allege that the vague standards and delegation to the State Police to determine "good character" for potential licensees violates their right of freedom of association.

II.

In an exhaustive opinion detailing the extensive history of illegal gambling machines in West Virginia and the State's repeated efforts to curtail their use, the district court found that the West Virginia Limited Video Lottery Act constituted a tax. See Club Ass'n. v. Robert Wise, 156 F.Supp.2d 599, 613 (S.D.W.Va.2001). As such, it held that the Tax Injunction Act, 28 U.S.C....