Greater Duluth COACT v. City of Duluth, Civ. No. 5-88-229.

• Decision Date: 22 December 1988
• Docket Number: Civ. No. 5-88-229.
• Citation: 701 F. Supp. 1452
• Parties: GREATER DULUTH COACT, a Minnesota corporation, Plaintiff, v. CITY OF DULUTH, a municipal corporation and The Minnesota Charitable Gambling Control Board, Defendants.
• Court: U.S. District Court — District of Minnesota

701 F. Supp. 1452

GREATER DULUTH COACT, a Minnesota corporation, Plaintiff, v. CITY OF DULUTH, a municipal corporation and The Minnesota Charitable Gambling Control Board, Defendants.

Civ. No. 5-88-229.

United States District Court, D. Minnesota, Fourth Division.

December 22, 1988.

Kenneth D. Butler, Mark S. Rubin, Van Evera, Clure, Butler & Michelson, P.A., Duluth, Minn., for plaintiff.

Bill Dinan, Duluth City Atty., and John Smedberg, Asst. City Atty., City Hall, Duluth, Minn., for defendant City of Duluth.

Hubert H. Humphrey, III, Atty. Gen., and Mary Magnuson, Sp. Asst. Atty. Gen., St. Paul, Minn., for defendant The Minnesota Charitable Gambling Control Bd.

MEMORANDUM AND ORDER

MacLAUGHLIN, District Judge.

On November 14, 1988 Duluth's city council passed a resolution disapproving the renewal of a charitable gambling license to Greater Duluth COACT (COACT). Under Minn.Stat. § 349.213, subd. 2, the city council's resolution prohibited the Minnesota Charitable Gambling Control Board (the board) from renewing COACT's license. COACT has filed suit claiming that the city council's action violated its right to due process and that Minn.Stat. § 349.213, subd. 2 is unconstitutionally vague. This memorandum and order addresses COACT's motion for a preliminary injunction. The Court has decided to issue a limited form of injunctive relief by requiring the city council to rehear COACT's application for a renewal of its charitable gambling license.

FACTS

Until 1984, charitable gambling in Minnesota was regulated entirely by local governmental bodies. That year, the Legislature rewrote chapter 349 of the Minnesota Statutes to establish a state-wide regulatory system which preserved some degree of local control over charitable gambling activity. Defendant Minnesota Charitable Gambling Control Board was created by chapter 349. The board has responsibility for issuing and revoking licenses, registering gambling equipment, regulating the activity of gambling organizations and making reports to the Governor and Legislature. Minn.Stat. § 349.151, subd. 4. Under chapter 349, local authorities may regulate charitable gambling through regulations stricter than those adopted by the board. Minn.Stat. § 349.213, subd. 1. Local authorities may prohibit some or all forms of charitable gambling in the municipality and may require a permit for the conduct of gambling exempt from the state's licensing requirements. Id.

Municipal authorities also have the power to prevent the issuance or renewal of licenses to organizations seeking to operate within their boundaries. Minn.Stat. § 349.213, subd. 2. The board is required to notify municipal authorities each time an application for a charitable gambling license is filed by an organization desiring to operate in that locality. Id. If, within sixty days of receiving such notice, the municipality adopts a resolution disapproving the organization's application and so informs the board, the board is prohibited from issuing or renewing the license. Id.

COACT is a nonprofit organization which has operated a licensed pull-tab operation in Duluth since October 1986. For approximately the last year, COACT's pull-tab operation has been located in the Gopher Lounge in Duluth, Minnesota. Apparently the Gopher Lounge is a choice site for pull-tab business.

On September 30, 1988, plaintiff applied for a renewal of its charitable gambling license. The license was scheduled to expire on November 17, 1988.

In late October, Duluth's city attorney decided, on the recommendation of the chief of police, to ask the city council to adopt a resolution disapproving the renewal of COACT's charitable gambling license. On November 3, 1988, copies of the proposed resolution, the statement of purpose and the exhibits that would be offered in support were mailed to COACT and to Mark Rubin, attorney for COACT. Affidavits of Mailing by Jacalyn Meier-Raffe dated November 3, 1988. Originally scheduled to be heard before a committee on November 7, 1988, the matter was instead referred to the city council's Committee of the Whole for hearing immediately prior to the regular city council meeting on November 14, 1988.

Rubin and seven members of COACT were present at the meeting of the Committee of the Whole. See, Transcript of Duluth City Council, Committee 1, Meeting Regarding Greater Duluth COACT Charitable Gambling Licenses (hereinafter Committee Transcript) at 5. John Smedberg, Assistant City Attorney, and the police chief spoke in favor of the resolution to disapprove the renewal of COACT's license. Rubin and six of the COACT members spoke in opposition. Council members directed numerous questions at both sides. COACT did not, however, have the opportunity to question Smedberg¹ or the police chief.

The city council was concerned about allegations that COACT had not complied with an ordinance limiting the amount of rent which pull-tab operators could pay to bar owners. There were also allegations that COACT "froze" pull-tab boxes to allow customers who had lost a large amount to recoup some of their loss, and that COACT had not filed reports required by law. Rubin and the COACT members attempted to address all of these concerns. It may be, however, that broader concerns also influenced the city council's vote. Much of the council's discussion focused on the state policy regarding the enforcement of charitable gambling regulations. Several council members expressed a belief that the state had abdicated its responsibility for monitoring the practices of the multimillion dollar gambling industry. These council members saw the vote on COACT's license renewal application as an opportunity to send a cautionary message to the other charitable gambling organizations and to impress on the State the need for better enforcement of gambling regulations.

At the city council meeting which followed the hearing on COACT's license renewal application, the council members voted 5-3 (with one member absent) to disapprove COACT's application for a renewal of its license.² The reasons for the resolution were "set forth" in attachments consisting of the same statement of purpose and exhibits which had been submitted in support of the resolution. The city council did not make any findings based on the record developed at the hearing.

On November 17, 1988, with its license scheduled to expire at midnight, COACT petitioned this Court for a temporary restraining order which would allow the pull-tab operation to continue. The petition was denied. Since then, COACT has not been able to do any fund raising or pay its employees, and it is now in danger of losing its lease at the Gopher Lounge. On November 28, 1988, COACT filed a new application for a charitable gambling license allowing it to operate at the Gopher Lounge. The city council has taken no action on the new application because of this lawsuit.

COACT is now before the Court seeking a preliminary injunction which would allow it to resume its pull-tab operation.

DISCUSSION

COACT's complaint raises two claims: first, that the city council denied COACT due process in violation of the fourteenth amendment and 42 U.S.C. § 1983, and second, that Minn.Stat. § 349.213, subd. 2, which allows local authorities to prevent the issuance or renewal of charitable gambling licenses, is unconstitutionally vague.

The board has responded to COACT's suit by claiming that the eleventh amendment bars suit by a citizen against his own state in federal court. That claim is correct. Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984). The exception created by Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), which held that a suit challenging the constitutionality of a state official's action is not one against the state, does not apply in this case because COACT has not raised a claim against any state official. Therefore, the board will be dismissed from this case.

COACT's Motion for a Preliminary Injunction

The test for whether preliminary injunctive relief should issue is set forth in Dataphase Systems, Inc. v. CL Systems, Inc., 640 F.2d 109 (8th Cir.1981). "At base, the question is whether the balance of equities so favors the movant that justice requires the court to intervene to preserve the status quo until the merits are determined." 640 F.2d at 113. Four factors are weighed:

(1) the threat of irreparable harm to the movant;

(2) the state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant;

(3) the probability that movant will succeed on the merits; and

(4) the public interest.

Dataphase, 640 F.2d at 114. Each factor will be considered in turn, beginning with the probability of success on the merits.

A. Probability of Success on the Merits

1. COACT's Due Process Claim

The fifth and fourteenth amendments prohibit governmental action which would deprive "any person of life, liberty, or property, without due process of law." Due process encompasses two distinct, but related, protections. The doctrine of substantive due process protects certain fundamental rights and voids arbitrary action by the government. Procedural due process guarantees that deprivations of life, liberty or property be accomplished only through fair procedures.

Property interests, for the purposes of the due process clause,

are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law—rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.

Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). Daniels v. Woodbury County, 742 F.2d 1128, 1132 (8th Cir.1984) (authorizing statute and implementing regulations of general relief program create a legitimate claim of entitlement and expectancy of benefits in persons who meet eligibility...