L.E. Services, Inc. v. State Lottery Com'n of Indiana

• Decision Date: 31 January 1995
• Docket Number: No. 49A04-9406-CV-226,49A04-9406-CV-226
• Citation: 646 N.E.2d 334
• Parties: L.E. SERVICES, INC., Virginia Bonyor, and Neil Bonyor, Appellants-Defendants, v. STATE LOTTERY COMMISSION OF INDIANA, Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 334

646 N.E.2d 334

L.E. SERVICES, INC., Virginia Bonyor, and Neil Bonyor Appellants-Defendants, v. STATE LOTTERY COMMISSION OF INDIANA, Appellee-Plaintiff.

No. 49A04-9406-CV-226.

Court of Appeals of Indiana Fourth District.

Jan. 31, 1995.

Susan L. Williams, Brown, Todd & Heyburn, New Albany, for appellants.

Linda L. Pence and David J. Hensel, Law Offices of Linda L. Pence, Indianapolis, for appellee.

OPINION

RILEY, Judge.

STATEMENT OF THE CASE

Defendant-Appellant L.E. Services, Inc., Virginia Bonyor and Neil Bonyor (hereinafter collectively referred to as L.E. Services) bring this interlocutory appeal from the trial court's entry of partial summary judgment in favor of the State Lottery Commission of Indiana (Lottery Commission) and the denial of L.E. Services' motion for summary judgment.

We affirm.

ISSUES

L.E. Services raises six issues for our review, which we restate as follows:

1. Whether the trial court was correct in concluding that L.E. Services' proposed activities were violative of Indiana's anti-gambling laws.

2. Whether the trial court was correct in concluding that L.E. Services' proposed activities were violative of the Indiana Civil Remedies for Racketeering Activity Act.

3. Whether Indiana's anti-gambling statutes are constitutionally sound.

4. Whether the Lottery Commission properly designated evidentiary material pursuant to Ind.Trial Rule 56.

5. Whether the trial court was correct in granting injunctive relief.

FACTS AND PROCEDURAL HISTORY

L.E. Services is a Delaware corporation which was authorized to do business in Indiana in January, 1992. Virginia and Neil Bonyor are currently residents of New Jersey, and are president and vice-president, respectively, of L.E. Services.

The Lottery Commission is "a body politic and corporate separate from the [S]tate" pursuant to IND.CODE 4-30-3-1 (1988). The Commission is charged by statute to maintain the integrity and dignity of the Hoosier Lottery. L.E. Services' proposed business plan was thwarted by the Lottery Commission when the Commission secured injunctive relief prohibiting L.E. Services from executing its plan.

Pursuant to the court's order and mutual agreement, the parties jointly submitted a stipulation of facts for purposes of the hearing on their cross motions for summary judgment. In granting partial summary judgment in favor of the Lottery Commission, the trial court relied exclusively on the stipulation of facts.

I. Stipulation of Facts

An outline of L.E. Services' proposed business plan was submitted in the stipulation of facts. L.E. Services' proposed business plan was to provide, via service outlets/retailers, an order entry service for state lottery tickets from various jurisdictions, including Ohio, Pennsylvania, New York, Illinois, California, Florida and Michigan, and excluding Indiana. The plan was intended to provide a means by which Indiana residents could participate in other legally authorized state operated lotteries.

Specifically, L.E. Services intended to sell these out-of-state lottery tickets to Indiana residents by hiring sales representatives to solicit Indiana retailers. The Indiana retailers would then enter into Service Outlet Agreements with L.E. Services. Pursuant to the Service Outlet Agreement, L.E. Services would receive, for profit, purchase orders for out-of-state lottery tickets from the service outlets, via computer transmission telephone lines (modem). L.E. Services intended to charge the service outlet a one time software license user fee and operational set up fee of $495.00. Indiana resident customers would then place their orders at the service outlet, paying the face value of the ticket plus the L.E. Services service charge. L.E. Services would contractually agree to pay the service outlet 20% of its service charge. L.E. Services would then purchase the out-of-state tickets from the authorized state approved retailer, through its agents in the targeted states for face value, and either deliver the tickets directly to the Indiana resident via courier service or retain the tickets in the issuing state. L.E. Services had several proposed options for the customer with a winning ticket. Under each of the plans, all winning tickets were redeemable exclusively through the state of issuance. Neither the service outlet nor L.E. Services made monetary payment on any winning ticket. However, L.E. Services did offer to accept an assignment of a winning ticket in exchange for future services through L.E. Services. L.E. Services would not have provided an order entry service for Indiana lottery tickets.

Prior to the inception of the business, the Lottery Commission sought and secured an injunction preventing L.E. Services from carrying out its plan. Thus, at the time the restraining order was secured, L.E. Services was not operational.

II. Procedural History

The Lottery Commission filed a nine count complaint against L.E. Services alleging in pertinent part that L.E. Services' proposed business plan was violative of state and federal anti-gambling laws and the Indiana State Lottery Statute. The Lottery Commission further made application for a temporary restraining order and motioned for a preliminary injunction to enjoin L.E. Services from going forward with its plan. By order of the court and by agreement of the parties, the issues were to be submitted to the court by cross-motions for summary judgment.

After taking the matter under advisement, the court granted partial summary judgment in favor of the Lottery Commission. Summary judgment was entered in favor of the Lottery Commission as to: Count I Professional Gambling, I.C. 35-45-5-3 (1988); Count II Promoting Professional Gambling, I.C. 35-45-5-4 (1994); Count III Unlawful Gambling, I.C. 35-45-5-2 (1988); Count VIII Indiana Civil Remedies for Damages Caused by Racketeering Activity, I.C. 34-4-30.5-1 et seq. ¹

STANDARD OF REVIEW

Before reaching the merits of this appeal, we recite the familiar standard of review by which we review the granting of motions for summary judgment. When reviewing the trial court's ruling on a motion for summary judgment, this court applies the same standard as the trial court. American Family Mut. Ins. Co. v. Dye (1994), Ind.App., 634 N.E.2d 844, 846, reh'g denied, trans. denied. Thus, no deference is given to the trial court's judgment. Foreman v. Jongkind Bros., Inc. (1993), Ind.App., 625 N.E.2d 463, 467, reh'g denied. Summary judgment is appropriate if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. T.R. 56(C). When reviewing cross motions for summary judgment, the inquiry remains the same: Whether a genuine issue of material fact exists which requires resolution by the trier of fact. American Family Mut. Ins., 634 N.E.2d at 846. When the parties do not dispute the facts material to the claim, our task is to determine whether the trial court correctly applied the law to the undisputed facts. O'Neal v. Throop (1992), Ind.App., 596 N.E.2d 984, 986, trans. denied.

DISCUSSION AND DECISION

I. Indiana's Anti-Gambling Laws

We first consider whether the trial court was correct in concluding that L.E. Services' proposed activities were violative of Indiana's anti-gambling laws. Historically, Indiana has strictly prohibited gambling. With the exception of lotteries conducted by the State Lottery Commission, lotteries are considered illegal gambling in Indiana. I.C. 35-45-5-6 (1993 Supp.); Lashbrook v. State (1990), Ind.App., 550 N.E.2d 772, 776 n. 6 (prohibition on lotteries deleted from the Indiana Constitution following voter approval of the amendment in the 1988 general election). The Lottery Commission contends that although Indiana made gambling legal in 1988 as to the State operated lottery, ² this does not alter the historic prohibition of gambling and Indiana's anti-gambling laws. The Commission contends that offering lottery tickets for sale to Indiana citizens for profit is clearly proscribed activity under Indiana's anti-gambling laws. After considering the arguments of counsel and the relevant statutory authority, we have no hesitation in concluding that L.E. Services' proposed activities are strictly prohibited by Indiana anti-gambling laws. It is clear that Indiana's statutory scheme is to create and maintain state regulated control over all lotteries conducted in this State.

A. Professional Gambling I.C. 35-45-5-3

The trial court granted summary judgment as to Count I of the Lottery Commission's complaint. The Commission alleged in Count I that L.E. Services' proposed operation was violative of Indiana's statutory prohibition against professional gambling. The trial court agreed and concluded that L.E. Services' proposed activities violated subsections (4) and (6) of Indiana's prohibition against professional gambling. That statute provides, in pertinent part, as follows:

A person who knowingly or intentionally:

(4) conducts lotteries, gift enterprises, or policy or numbers games, or sells chances therein; [or]

(6) accepts, or offers to accept, for profit, money or other property risked in gambling;

commits professional gambling, a Class D felony.

I.C. 35-45-5-3. The elements of a violation of subsection (6) are that a person must (1) knowingly or intentionally, (2) accept, or offer to accept, (3) for profit, (4) money risked in gambling. As evidenced by the undisputed facts, L.E. Services proposed to accept or offer to accept money from Indiana residents that would be risked in gambling in out-of-state lotteries. L.E. Services intended to provide this service for a "service charge." "Profit" is defined in the statute as a "realized or unrealized benefit (other than a gain) and includes benefits from proprietorship or management and unequal advantage in a series of transactions." I.C. 35-45-5-1 (1988). Thus, the trial court reasoned that the fact that L.E. Services'...