Hawke Ye Commodity Promotions, Inc. v. Miller

• Decision Date: 26 April 2006
• Docket Number: No. C-06-2026-LRR.,C-06-2026-LRR.
• Parties: HAWKE YE COMMODITY PROMOTIONS, INC., Plaintiff, v. Thomas J. MILLER, in his official capacity as the Attorney General of the State of Iowa, and Kevin W. Techau, in his official capacity as the Commissioner of the Iowa Department of Public Safety, Defendants.
• Court: U.S. District Court — Northern District of Iowa

432 F.Supp.2d 822

HAWKE YE COMMODITY PROMOTIONS, INC., Plaintiff, v. Thomas J. MILLER, in his official capacity as the Attorney General of the State of Iowa, and Kevin W. Techau, in his official capacity as the Commissioner of the Iowa Department of Public Safety, Defendants.

No. C-06-2026-LRR.

United States District Court, N.D. Iowa, Eastern Division.

April 26, 2006.

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Patrick M. Roby, Elderkin Law Firm, Cedar Rapids, IA, for Plaintiff.

Julie F. Pottorff, AAG, Robert Kenneth Porter, Iowa Attorney General's Office, Des Moines, IA, for Defendant.

TRIAL ORDER

READE, District Judge.

                TABLE OF CONTENTS
                    I. INTRODUCTION.........................................................833
                   II. PROCEDURAL BACKGROUND ...............................................833
                  III. JURISDICTION ........................................................834
                  IV. FINDINGS OF FACT .....................................................835
                      A. The History of TouchPlay ..........................................835
                      B. The Players .......................................................837       C. Documents Authored by the Lottery .................................838
                      D. HCP's Business ....................................................839
                      E. The Ban ...........................................................840
                   V. COUNT III—IMPAIRMENT OF CONTRACT .....................................841
                      A. The Contract Between HCP and the Lottery ..........................842
                         1. Whether there is a substantial impairment on a pre-existing
                             contractual relationship? .....................................843
                            a. Whether a contractual relationship exists? ..................843
                                i. Offer ...................................................844
                               ii. Acceptance ..............................................845
                              iii. Consideration ...........................................845
                               iv. Conclusion ..............................................846
                            b. Whether the change in the law impairs that contractual
                                relationship? ..............................................846
                            c. Whether the contractual impairment is substantial? ..........846
                               i. Nature of the impairment .................................847
                              ii. Previous regulation ......................................847
                       2. Conclusion .......................................................849
                   B. The Location Contracts ...............................................849
                

                  VI. COUNT III—THE TAKINGS CLAUSE .........................................850
                      A. Property Rights ...................................................851
                         1. Machines .......................................................851
                         2. Business .......................................................852
                            a. Business itself .............................................852
                            b. Continuing to operate the business ..........................852
                         3. Contracts ......................................................853
                         4. Conclusion .....................................................854
                      B. Taking ............................................................854
                         1. Per se takings .................................................854
                            a. Permanent physical invasion .................................854
                            b. All economically beneficial use .............................855
                        2. Penn Central analysis ...........................................856
                            a. Economic impact .............................................856
                            b. The character of the governmental action ....................857
                 VII. COUNTS II & IV—FOURTEENTH AMENDMENT ..................................858
                      A. Equal Protection Clause ...........................................858
                      B. Due Process Clause ................................................860
                VIII. PERMANENT INJUNCTION .................................................861
                 IX. CONCLUSION ............................................................861
                

I. INTRODUCTION

Plaintiff Hawkeye Commodity Promotions, Inc. ("HCP") is a company that owns 724 TouchPlay lottery machines ("TouchPlay Machines") and operates 572 of them in the State of Iowa ("the State"). On March 20, 2006, Senate File 2330 was signed into law by Iowa Governor Thomas J. Vilsack. The new law amends part of Iowa Code chapter 99G, the chapter governing the Iowa Lottery Authority ("the Lottery"). HCP seeks to enjoin Defendants from enforcing Iowa Code chapter 99G, as amended by Senate File 2330, because the amendment will make it illegal for "retailers" to offer TouchPlay Machines to the public after May 3, 2006 at 11:59 p.m. HCP also seeks a declaratory judgment that Senate File 2330 is unconstitutional as applied to HCP.

The matters before the court are HCP's Motion for Preliminary Injunctive Relief (docket no. 4) and the Second Amended Complaint for Declaratory and Injunctive Relief (docket no. 32). The court held a bench trial in this case on April 12, 2006. Attorneys Paula Lynn Roby and Roger J. Marzulla appeared on behalf of HCP. Deputy Attorney General Julie F. Pottorff and Assistant Attorney General Robert K. Porter represented Defendants.

II. PROCEDURAL BACKGROUND

On April 5, 2006, HCP filed a Complaint for Declaratory and Injunctive Relief against the Iowa Lottery Authority and four Iowa officials in their official capacities—Governor Vilsack, Attorney General Thomas J. Miller ("Attorney General Miller"), Iowa Department of Public Safety Commissioner Kevin Techau ("Commissioner Techau") and Chief Executive Officer of the Lottery, Dr. Edward Stanek. The Complaint includes claims brought pursuant to 42 U.S.C. § 1983 for violations of the takings clauses, the equal protection clauses, the due process clauses and the contract clauses of the Iowa Constitution and the United States Constitution. HCP also asserted a claim for breach of contract.

On the same date, HCP filed a Motion for Preliminary Injunctive Relief ("Motion"). On April 6, 2006, the court held a status hearing regarding the Motion. At that status hearing, the court utilized Federal Rule of Civil Procedure 65(a)(2) and determined that the hearing on the Motion would be consolidated with an April 12, 2006 trial on the merits of the Complaint. See Fed.R.Civ.P. 65(a)(2) ("Before or after the commencement of the hearing on an application for a preliminary injunction, the court may order the trial of the action on the merits to be advanced and consolidated with the hearing of the application.").

On April 11, 2006, Defendants filed a Motion to Dismiss. Citing the Eleventh Amendment and 42 U.S.C. § 1983, Defendants sought to dismiss each of the state law claims and the Lottery as a partydefendant. Just before the trial on April 12, 2006, HCP filed an Amended Complaint, eliminating the state law claims. During the trial, HCP's counsel represented that, although HCP had intended to eliminate the Lottery as a party-defendant from the caption of the Amended Complaint, it inadvertently neglected to do so. On April 13, 2006, HCP filed a Second Amended Complaint naming only the four individuals as defendants.

On April 14, 2006, Defendants filed Defendants' Brief in Support of Resistance to Plaintiff's Request for Preliminary and Permanent Injunction (docket no. 33). In footnote one of the brief, Defendants represented that "Plaintiff agreed to remove the remaining individual defendants from this suit." On April 17, 2006, when HCP filed its Reply Brief, it listed only Attorney General Miller and Commissioner Techau as defendants (docket no. 38). Therefore, only Attorney General Miller and Commissioner Techau remain as defendants in this suit.

III. JURISDICTION

Because HCP raises claims pursuant to the Declaratory Judgment Act (28 U.S.C. § 2201 et seq.), the Fifth Amendment of the Constitution, the Fourteenth Amendment of the Constitution, Article I of the Constitution, 42 U.S.C. § 1981 and 42 U.S.C. § 1983, this court has federal question subject-matter jurisdiction over this matter. See 28 U.S.C. § 1331 ("The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States."); see also 28 U.S.C. § 1343(a) (providing that district courts have original jurisdiction over certain civil rights actions).

The court also has jurisdiction over Defendants Attorney General Miller and Commissioner Techau. The Eleventh Amendment of the United States Constitution provides: "The Judicial power of the United States shall not be construed to extend to any suit ... commenced or prosecuted against one of the United States by Citizens of another State ... ." U.S. Const. amend. XI. This provision "has been interpreted to provide a state with immunity from suit in federal court by ... its own citizens." Skelton v. Henry, 390 F.3d 614, 617 (8th Cir.2004) (citing Hans v. Louisiana, 134 U.S. 1, 10, 10 S.Ct. 504, 33 L.Ed. 842 (1890)).

The Ex Parte Young exception to immunity applies to state officials "who threaten and are about to commence proceedings, either of a civil or criminal nature, to enforce against parties affected an unconstitutional act, violating the Federal Constitution . . .." Ex Parte Young, 209 U.S. 123, 156, 28 S.Ct. 441, 52 L.Ed. 714 (1908). "[T]he Ex Parte Young doctrine describes an exception to Eleventh Amendment immunity for a state official where the relief sought is prospective and not compensatory." Heartland Acad. Cmty. Church v. Waddle, 427 F.3d 525, 530 (8th Cir.2005) (citations omitted). "A federal...