Interactive Gaming Council v. Commonwealth

• Decision Date: 21 February 2014
• Docket Number: No. 2011–CA–001859–MR.,2011–CA–001859–MR.
• Citation: 425 S.W.3d 107
• Parties: INTERACTIVE GAMING COUNCIL, Appellant v. COMMONWEALTH of Kentucky, ex rel., J. Michael BROWN, Secretary Justice and Public Safety Cabinet, Appellee.
• Court: Kentucky Court of Appeals

425 S.W.3d 107

INTERACTIVE GAMING COUNCIL, Appellant

v.COMMONWEALTH of Kentucky, ex rel., J. Michael BROWN, Secretary Justice and Public Safety Cabinet, Appellee.

No. 2011–CA–001859–MR.

Court of Appeals of Kentucky.

Feb. 21, 2014.

John L. Tate, Louisville, KY, for appellant.

Ian T. Ramsey, Bethany A. Breetz, Chadwick A. McTighe, Louisville, KY, A. Jeff Ifrah, Washington, D.C., for appellant.

D. Eric Lycan, William H. May, III, William C. Hurt, Jr., Lexington, KY, for appellee.

Before ACREE, Chief Judge; JONES and MAZE, Judges.

OPINION

JONES, Judge:

The Appellee, the Commonwealth of Kentucky ex rel., J. Michael Brown, Secretary of the Justice and Public Safety Cabinet (the Commonwealth), initiated this action in Franklin Circuit Court seeking forfeiture of 141 internet domain names it claimed were used illegally for gambling in the Commonwealth. The Appellant, Interactive Gaming Counsel (IGC), a trade association comprised of various entities involved in the internet gaming industry, moved the Franklin Circuit Court to allow it to intervene on behalf of the owners of the domain names. On September 12, 2011, the Franklin Circuit Court denied IGC's motion after concluding that IGC had failed to satisfy all the prerequisites for associational standing. IGC now appeals from the September 12, 2011, order. For the reasons more fully explained below, we reverse.

I. Procedural & Factual Background

This case has a long, complex, and somewhat tortured procedural history. For the purpose of brevity, we recount only the facts and procedural history most relevant to understanding and appropriately analyzing the narrow associational standing issue before us.

On August 26, 2008, the Commonwealth filed an in rem civil action in the Franklin Circuit Court seeking forfeiture to the Commonwealth of 141 internet domain names it alleged were illegal gambling devices, and therefore subject to forfeiture pursuant to KRS ¹ 528.100 and KRS 500.090. On the Commonwealth's motions, the trial court sealed the case, conducted an ex parte hearing, and issued a seizure order for the domain names. The trial court then unsealed the case.

After allegedly learning of the seizures from media accounts, IGC moved the trial court to allow it to intervene in the forfeiture action so that it could contest the forfeitures on behalf of its members, some of whom allegedly claimed an ownership interest in a portion of the seized domain names. Specifically, IGC requested intervention so that it could assert with respect to the entire forfeiture that: (1) the trial court lacked jurisdiction; (2) domain names are not “property” subject to forfeiture; (3) the domain names do not constitute a “gambling device or gambling record” as required by KRS Chapter 528; and (4) poker is not gambling under KRS Chapter 528. In addition to contesting IGC's arguments on the merits, the Commonwealth countered that IGC did not have standing to intervene in the civil forfeiture action.

The trial court conditionally granted IGC's motion to intervene for the purpose of allowing the parties to file briefs on the issues that IGC raised as well as on the issue of IGC's standing to intervene in the forfeiture action. In an October 16, 2008, opinion and order, the trial court found that it had subject matter jurisdiction over the civil forfeiture action and in rem jurisdiction over the 141 domain names, which the trial court classified as property subject to seizure and forfeiture as “gambling devices.” The trial court then retroactively denied IGC's motion to intervene on the basis that IGC had not demonstrated that it was an indispensable party.

IGC, among other entities, then sought a writ of prohibition from this Court. IGC asked us to enter a writ prohibiting the trial court from proceeding with the forfeiture. Interactive Media Entm't and Gaming Ass'n, Inc. v. Wingate, No. 2008–CA–2036–OA, 2009 WL 142995 (Ky.App. Jan. 20, 2009), rev'd Com. ex rel. Brown v. Interactive Media Entm't and Gaming Ass'n, Inc., 306 S.W.3d 32 (Ky.2010) (hereinafter iMega I ). After reviewing the matter, a panel of this Court concluded that the internet domain names were not “gambling devices” within the statutory definition of KRS 528.010(4). ²Id. As such, this Court concluded that the trial court lacked jurisdiction to conduct a forfeiture of the domain names and entered an order prohibiting the trial court from enforcing its order seizing the 141 domain names and from conducting a scheduled forfeiture hearing.³Id.

The Commonwealth appealed our ruling to the Kentucky Supreme Court. iMega I, 306 S.W.3d at 34–35. The Supreme Court noted that many compelling arguments had been put before it for affirming the writ. Id. at 35. However, it ultimately reversed and vacated our decision granting the writ on the basis that none of the parties before it had demonstrated standing to challenge the trial court. Id. at 36. Of relevance, the Supreme Court held that IGC could not demonstrate associational standing without at least putting forth some evidence to establish that its members included entities with an interest in the domain names at issue. Id. at 37–40. The Court then instructed the parties that the petition could be re-filed with the Court of Appeals, if a party with standing came forward. Id. at 40.

Thereafter, IGC filed a renewed motion with this Court supported by evidence allegedly establishing that its members included owners of the seized domain names. Interactive Media Entm't and Gaming Ass'n, Inc. v. Wingate, 320 S.W.3d 692 (Ky.2010) (hereinafter iMega II ). This Court recommended that the writ petition be transferred to the Kentucky Supreme Court. Id. The Kentucky Supreme Court accepted transfer and issued an opinion clarifying its prior opinion. Id. The Court clarified that the trial court was in the best position to determine whether IGC had established associational standing and the applicability of associational standing to this in rem proceeding. Id. at 696.

Thereafter, as directed, the parties returned to the trial court for a determination on the associational standing issue. The trial court issued an opinion and order on September 12, 2011, finding that IGC presented sufficient evidence that at least one of its members, Pocket Kings Ltd., is one of its members and is the owner of fulltiltpoker.com, one of the domain names at issue. The trial court further concluded that IGC's actions in this litigation are germane to its purpose. Nevertheless, the trial court concluded that IGC could not establish associational standing because civil forfeiture actions require the participation of individual property owners. It is from this order that IGC appeals.

II. Standard of Review

Our review requires us to consider both the trial court's factual findings and legal conclusions. Different standards of review apply depending on whether we are reviewing findings of fact or conclusions of law.

The trial court's ultimate determination on the standing issue is a pure legal question. Tax Ease Lien Inv. 1, LLC v. Commonwealth Bank & Trust, 384 S.W.3d 141, 143 (Ky.2012). Therefore, our review of that issue is de novo. Id. Under de novo review, we owe no deference to the trial court's application of the law to the established facts. Cinelli v. Ward, 997 S.W.2d 474, 476 (Ky.App.1998).

In this case, however, the trial court also made threshold factual determinations regarding IGC's membership and purpose. Those preliminary, factual determinations are entitled to deference. Medley v. Bd. of Educ. of Shelby Cnty., 168 S.W.3d 398, 402 (Ky.App.2004). We cannot reverse factual findings that are supported by substantial evidence. Id. “Substantial evidence” is “evidence of substanceand relevant consequence sufficient to induce conviction in the minds of reasonable people.” Abbott Lab. v. Smith, 205 S.W.3d 249, 253 (Ky.App.2006).

III. Analysis

The precise question before us is whether IGC established associational standing to allow it to advance its members' interests in this forfeiture action. The concept of associational standing is not well developed in Kentucky. While Kentucky has generally recognized associational standing, it has never officially adopted a precise test to determine whether an association has standing in a particular circumstance. See Bailey v. Preserve Rural Roads of Madison Cnty., Inc., 394 S.W.3d 350, 356 (Ky.2011) (citing iMega I, 306 S.W.3d at 38). Furthermore, it appears that whether an association can represent its members' interests in the context of a forfeiture action is also an issue of first impression for our courts.

A. Standing in General

Standing is a legal term defined as a “sufficient legal interest in an otherwise justiciable controversy to obtain some judicial decision in the controversy.” Kraus v. Kentucky State Senate, 872 S.W.2d 433, 439 (Ky.1993). Standing and justiciability are separate, but interrelated concepts. Justiciability focuses on whether there is a live controversy for the court to decide. “Questions which may never arise or which are merely advisory, academic, hypothetical, incidental or remote, or which will not be decisive of a present controversy” do not present justiciable controversies. Hughes v. Welch, 664 S.W.2d 205, 208 (Ky.App.1984).

Standing, a subset of justiciability, focuses on whether the parties before the court have a personal stake in the outcome of controversy. “In order to have standing to sue, a plaintiff need only have a real and substantial interest in the subject matter of the litigation, as opposed to a mere expectancy.” Rose v. Council for Better Educ., Inc., 790 S.W.2d 186, 202 (Ky.1989). “The purpose of requiring standing is to make sure that the party litigating the case has a ‘personal stake in the outcome of the controversy’ such that he or she will litigate vigorously and effectively for the personal issues.” Bailey, 394 S.W.3d at 362 (Noble, J. dissenting) (quoting Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 7...