Great Lakes Quarterhorse Ass'n v. Governor Of The State Of Mich.

• Citation: 622 F.3d 579
• Decision Date: 27 September 2010
• Docket Number: No. 09-1370.,09-1370.
• Parties: NORTHVILLE DOWNS, Plaintiff-Appellant, Oil Capital Race Venture, Inc., dba Mt. Pleasant Meadows; Great Lakes Quarterhorse Association, Plaintiffs, v. Governor of the State of Michigan, Jennifer GRANHOLM; Michigan Attorney General, Michael A. Cox; MGM Grand Detroit, LLC, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

622 F.3d 579

NORTHVILLE DOWNS, Plaintiff-Appellant,

Oil Capital Race Venture, Inc., dba Mt. Pleasant Meadows; Great Lakes Quarterhorse Association, Plaintiffs,

v.Governor of the State of Michigan, Jennifer GRANHOLM; Michigan Attorney General, Michael A. Cox; MGM Grand Detroit, LLC, Defendants-Appellees.

No. 09-1370.

United States Court of Appeals,Sixth Circuit.

Argued: Jan. 20, 2010.

Decided and Filed: Sept. 27, 2010.

COPYRIGHT MATERIAL OMITTED.

ARGUED: Phillip B. Maxwell, Phillip B. Maxwell & Associates, PLLC, Oxford, Michigan, for Appellant. Melinda A. Leonard, Office of the Michigan Attorney General, Lansing, Michigan, Peter H. Ellsworth, Dickinson Wright PLLC, Lansing, Michigan, for Appellees. ON BRIEF: Phillip B. Maxwell, Phillip B. Maxwell & Associates, PLLC, Oxford, Michigan, Edward Draugelis, Draugelis & Ashton LLP, Clawson, Michigan, for Appellant. Melinda A. Leonard, Donald S. McGehee, Office of the Michigan Attorney General, Lansing, Michigan, Peter H. Ellsworth, Jeffery V. Stuckey, Dickinson Wright PLLC, Lansing, Michigan, Phillip J. DeRosier, Dickinson Wright PLLC, Detroit, Michigan, for Appellees.

Before: MERRITT, GIBBONS, and ROGERS, Circuit Judges.

GIBBONS, J., delivered the opinion of the court, in which ROGERS, J., joined. MERRITT, J. (pp. 590-91), delivered a separate concurring opinion.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Plaintiff-appellant Northville Downs appeals the district court's grant of judgment on the pleadings to defendants-appellees Jennifer Granholm, Governor of the State of Michigan, Michael A. Cox, Attorney General of Michigan, and MGM Grand Detroit, LLC (collectively, “the defendants”). Northville Downs, Oil Capital Race Venture, Inc., and Great Lakes Quarterhorse Association (collectively, “the plaintiffs”) sued the defendants under 42 U.S.C. § 1983, alleging that article IV, section 41 of the Michigan Constitution, as amended by voter referendum, violates their federal constitutional rights under the First Amendment, Equal Protection Clause, and Commerce Clause. For the following reasons, we affirm the district court's decision.

I.

The plaintiffs operate several horse-racing tracks in Michigan. A significant part of their operations involves simulcast wagering, in which a horse race that takes place in one location, often outside of Michigan, is simultaneously broadcast to one or more other locations to allow bettors to wager in the same betting pool. The plaintiffs' business has been decimated in recent years by competition from the state lottery and casino gaming. According to the plaintiffs' expert, Dr. Richard Thalheimer, wagering at Detroit-area tracks, in real terms, declined eighty-five percent between 1972, when casino gaming began in the state, and 2007. The defendants are state officials and the operator of a casino in Detroit.

Before 1972, horse-racing was the only legal form of gambling in Michigan. In 1972, Michigan amended its constitution to allow the legislature to “authorize lotteries and permit the sale of lottery tickets in the manner provided by law.” Mich. Const. art. IV, § 41 (amended 1972). The legislature created a state lottery in 1972, Mich. Comp. Laws § 432.1 et seq. , and authorized charitable gambling soon thereafter, Mich. Comp. Laws § 432.101 et seq. In the 1980s, a number of Indian gaming casinos also opened in the state pursuant to a federal law under which tribes may negotiate compacts with states and receive authorization for gambling activities. See 25 U.S.C. § 2701 et seq.

In 1996, Michigan voters expanded legalized gambling in the state through Proposal E. Initiated Law 1 of 1996 (codified at Mich. Comp. Laws §§ 432.201-432.226). This provision allowed limited casino gambling in Detroit. The legislature subsequently created the Michigan Gaming Control Board (“the Board”). Mich. Comp. Laws § 432.204. The new law permitted up to three gaming casinos in any city whose local legislature enacted an ordinance approving casino gambling and that met the following qualifications: (1) population of 800,000 or more; (2) located within 100 miles of any other state or country in which gaming is authorized; and (3) has had casino gaming approved by a majority of the voters in the city. Mich. Comp. Laws §§ 432.206(3), 432.202(i), 432.203, 432.206(1)(a), (2), (3). The Board does not have authority over federally regulated Indian casinos. See Mich. Comp. Laws § 432.203(2)(d).

In the early 2000s, horse-race tracks lobbied the legislature for approval to offer slot machines, off-track racing theaters, and account wagering. They succeeded in persuading the Michigan House of Representatives and Senate to pass bills in their favor in 2004. These bills were not yet enacted when existing casino interests financed a referendum initiative that appeared as Proposal 1 on the 2004 general election ballot. As recounted by the district court, the official ballot language read:

PROPOSAL 04-1

A PROPOSAL TO AMEND THE STATE CONSTITUTION TO REQUIRE VOTER APPROVAL OF ANY FORM OF GAMBLING AUTHORIZED BY LAW AND CERTAIN NEW STATE LOTTERY GAMES

The proposed constitutional amendment would:

• Require voter approval of any form of gambling authorized by law after January 1, 2004.

• Require voter approval of any new state lottery games utilizing “table games” or “player operated mechanical or electronic devices” introduced after January 1, 2004.

• Provide that when voter approval is required, both statewide voter approval and voter approval in the city or township where gambling will take place must be obtained.

• Specify that the voter approval requirement does not apply to Indian tribal gaming or gambling in up to three casinos located in the City of Detroit.

Should this proposal be adopted?

Yes

No

Northville Downs v. Granholm, No. 08-11858, 2009 WL 483076, at * 2 & n. 3 (E.D.Mich. Feb.25, 2009).

The voters approved the proposal and amended article IV, section 41 of the state constitution to read:

The legislature may authorize lotteries and permit the sale of lottery tickets in the manner provided by law. No law enacted after January 1, 2004, that authorizes any form of gambling shall be effective, nor after January 1, 2004, shall any new state lottery games utilizing table games or player operated mechanical or electronic devices be established, without the approval of a majority of electors voting in a statewide general election and a majority of electors voting in the township or city where gambling will take place. This section shall not apply to gambling in up to three casinos in the City of Detroit or to Indian tribal gaming.

Mich. Const. art. IV, § 41 (amended 2004) (hereinafter “Proposal 1”).

In May 2008, the plaintiffs brought suit in federal district court under 42 U.S.C. § 1983, seeking an injunction against the enforcement of Proposal 1 and a declaration of its invalidity on the grounds that it violated the federal Constitution and various state laws. The district court dismissed the state law counts, leaving only federal constitutional claims under the Commerce Clause, First Amendment, and Equal Protection Clause of the Fourteenth Amendment.

In August 2008, the defendants moved for judgment on the pleadings. The exhibits to the motion included the legislative history of the 2004 state House and Senate bills, a newspaper article characterizing the proponents of Proposal 1 as “an unlikely combination of anti-gambling interests, Detroit casino owners and Indian tribe-owned casinos,” and a newspaper article reporting on the success of Proposal E's expansion of gambling in 1996. The plaintiffs filed a response to the motion and filed a cross-motion for partial summary judgment on the basis of their second amended complaint, which was included in the motion papers but had not yet been filed with the district court. The exhibits to the plaintiffs' response and motion included affidavits from one of the sponsors of the state legislation, the plaintiffs' economic expert, and one of the plaintiffs' owners; the texts of the 2004 state legislation; legislative analysis of these bills; newspaper articles; and the texts of a proposed 2008 amendment to the state constitution and implementing legislation allowing Detroit casinos to take bets on horse-racing.

The district court denied the plaintiffs' motion for partial summary judgment without prejudice to its renewal after disposition of the motion for judgment on the pleadings. The court then gave the plaintiffs leave to file their second amended complaint and did not require the defendants to file an answer until the court ruled on the motion for judgment on the pleadings.

On February 25, 2009, the district court granted judgment on the pleadings to the defendants on the allegations contained in the second amended complaint. With respect to the First Amendment claim, the district court ruled that the plaintiffs lacked standing because they had alleged only a subjective chill of their speech that was insufficient to show an injury-in-fact. The district court then ruled that the plaintiffs' Dormant Commerce Clause claim failed because they had not shown any discrimination in favor of in-state interests and they had not shown that their decreasing revenues amounted to a burden on interstate commerce. Finally, the district court reasoned that the plaintiffs were not entitled to “heightened scrutiny” under the Equal Protection Clause. The court granted judgment on this count and held that Proposal 1 survived rational basis review because Michigan had a legitimate governmental interest in regulating gambling. Northville Downs timely appealed.

II.

Before turning to the merits, we first address the applicable standard of review. Northville Downs contends that the district court committed reversible error by deciding this case under Federal Rule of Civil Procedure 12(c) rather than Federal Rule of Civil Procedure 56. It argues that the district court improperly considered matters outside the pleadings...