Monarch Content Mgmt. LLC v. Ariz. Dep't of Gaming

• Decision Date: 20 August 2020
• Docket Number: No. 20-15047,20-15047
• Citation: 971 F.3d 1021
• Parties: MONARCH CONTENT MANAGEMENT LLC, a Delaware limited liability company; Laurel Racing Association, Inc., dba Laurel Park, a Maryland corporation, Plaintiffs-Appellants, v. ARIZONA DEPARTMENT OF GAMING, a political subdivision; Ted Vogt, Director, in his official capacity; Rudy Casillas, Deputy Director and Racing Division Director, in his official capacity; Arizona Racing Commission, a subordinate political entity; Rory S. Goree, Chairman, in his official capacity; Tom Lawless, Vice Chairman, in his official capacity; J.C. McClintock, Commissioner, in his official capacity; Chuck Coolidge, Commissioner, in his official capacity, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

971 F.3d 1021

MONARCH CONTENT MANAGEMENT LLC, a Delaware limited liability company; Laurel Racing Association, Inc., dba Laurel Park, a Maryland corporation, Plaintiffs-Appellants,

v.ARIZONA DEPARTMENT OF GAMING, a political subdivision; Ted Vogt, Director, in his official capacity; Rudy Casillas, Deputy Director and Racing Division Director, in his official capacity; Arizona Racing Commission, a subordinate political entity; Rory S. Goree, Chairman, in his official capacity; Tom Lawless, Vice Chairman, in his official capacity; J.C. McClintock, Commissioner, in his official capacity; Chuck Coolidge, Commissioner, in his official capacity, Defendants-Appellees.

No. 20-15047

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 17, 2020 San Francisco, California

Filed August 20, 2020

Scot L. Claus (argued), Vail C. Cloar, and Holly M. Zoe, Phoenix, Arizona, for Plaintiffs-Appellants.

Patrick Irvine (argued) and Charles Markle, Fennemore Craig P.C., Phoenix, Arizona; Mark Brnovich, Attorney General; Kelly M. Wagner, Assistant Attorney General; Office of the Attorney General, Phoenix, Arizona; for Defendants-Appellees.

Before: A. Wallace Tashima and Andrew D. Hurwitz, Circuit Judges, and Consuelo B. Marshall,^* District Judge.

HURWITZ, Circuit Judge:

The central issue in this case is whether the Interstate Horse Racing Act of 1978, 15 U.S.C. §§ 3001 – 3007 ("IHA"), preempts Arizona Revised Statutes ("A.R.S.") § 5-112(U), a statute governing "simulcasts" of horse races. We conclude that it does not, and that the plaintiffs’ other facial constitutional attacks on the Arizona law also fail. We therefore affirm the district court's denial of the plaintiffs’ motion for a preliminary injunction.

I.

A. The Arizona Statutory Scheme

Arizona law generally prohibits gambling, with several exceptions. See A.R.S. §§ 5-112, 13-3305(A), 13-3301(6). "Pari-mutuel wagering," a system that distributes among successful bettors "the total amount wagered less the amount withheld under state law," is the only legal form of gambling on horseracing. See id. § 5-101(23). That wagering can occur only at the live-racing track of a permittee, or at licensed off-track betting sites ("OTBs"), id. § 5-112(A), (H), sometimes referred to as "additional wagering facilities" or "teletracks," see id. § 5-101(1); Ariz. Admin. Code § R19-2-401(12).¹ OTB wagering typically involves a "simulcast," defined in Arizona law in pertinent part as "the telecast shown within this state of live audio and visual signals of horse [races] conducted at an out-of-state track or the telecast shown outside this state of live audio and visual signals of horse [races] originating within this state for the purpose of pari-mutuel wagering." A.R.S. § 5-101(26). But, no provision of Arizona law expressly conditions OTB wagering on the use of a simulcast. Simulcasts are regulated by the Arizona Department of Gaming and the Arizona Racing Commission. See id. §§ 5-107, 5-108; Ariz. Downs v. Ariz. Horsemen's Found. , 130 Ariz. 550, 637 P.2d 1053, 1056-57, 1060 (1981) ; see also Ariz. Admin. Code § R19-2-419.

The Arizona statute at issue in this case requires that "[a]ny simulcast of live racing into this state that originates from outside" Arizona "must be offered to each commercial live-racing permittee ... and additional wagering facility" in the state. A.R.S. § 5-112(U). The statute also prohibits a "provider of simulcasts originating from outside" Arizona from engaging in "any anticompetitive or deceptive practice." Id. The same requirements and proscriptions apply to providers of simulcasts originating from the racetracks of Arizona live-racing permittees.² Id. § 5-112(T).

B. The Interstate Horse Racing Act

In the IHA, Congress stressed that "the States should have the primary responsibility for determining what forms of gambling may legally take place within their borders." 15 U.S.C. § 3001(a)(1). However, "in the limited area of interstate off-track wagering on horseraces," Congress found "a need for Federal action to ensure States will continue to cooperate with one another in the acceptance of legal interstate wagers." Id. § 3001(a)(3) ; see id. § 3001(b) (stating legislative policy "to regulate interstate commerce with respect to wagering on horseracing, in order to further the horseracing and legal off-track betting industries"). To that end, the IHA provides that an "interstate off-track wager may be accepted by an off-track betting system only if consent is obtained from" four parties: the host racing association, the relevant horsemen's group in the host state, the host racing commission, and the racing commission in the state where the off-track wager is placed.³ Id. § 3004(a)(1)–(3). Interstate off-track wagering is otherwise prohibited by federal law. Id. § 3003.

C. Facts

Monarch Content Management is a simulcast purchaser and sales agent for racetracks. Monarch has a "Simulcast Wagering Contract" with TP Racing ("Turf Paradise"), one of three live-racing permittees in Arizona. Monarch provides simulcasts to Turf Paradise's live-racing track and OTBs, access to the betting pools of out-of-state racetracks for the races broadcast, and betting information. Monarch's simulcasts include jockey, horse, and trainer information, interviews, analysis, and graphics; Monarch facilitates this content and controls how races are bundled for distribution. Laurel Park Racing Association is a Maryland racetrack, whose races Monarch simulcasts.

Arizona Downs also runs a live-racing track and OTBs. In 2018, Monarch agreed to provide simulcasts at Arizona Downs’ live racetrack, but declined to provide simulcasts to Arizona Downs’ OTBs. Laurel Park followed suit and refused to allow Arizona Downs’ OTBs to simulcast its races, or to accept pari-mutuel wagers from Arizona Downs’ OTBs. Monarch and Laurel Park claim that "the location and character" of Arizona Downs’ OTBs would dilute "the Monarch wagering product" and compromise their business interests.⁴

After A.R.S. § 5-112(U) was enacted in 2019, Monarch and Laurel Park sued the Arizona Department of Gaming, the Arizona Racing Commission, and various state officials, alleging that the statute is preempted by the IHA and facially violates the First and Fourteenth Amendments, the dormant Commerce Clause, and the Contracts Clause.⁵ The plaintiffs sought a temporary restraining order against the statute's enforcement; the district court converted that application into a motion for a preliminary injunction and denied it, finding that the plaintiffs were unlikely to succeed on the merits.

II.

We have jurisdiction over this appeal of the district court's denial of a preliminary injunction under 28 U.S.C. § 1292 and review for abuse of discretion. Cuviello v. City of Vallejo , 944 F.3d 816, 825–26 (9th Cir. 2019). "A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Nat. Res. Def. Council, Inc. , 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008).

III.

A. Preemption

There is no express preemption provision in the IHA. See 15 U.S.C. §§ 3001 – 3007. But, under the Supremacy Clause, U.S. Const. art. VI, cl. 2., even if a federal law lacks an express provision for preemption, state law is preempted "to the extent of any conflict with a federal statute." Crosby v. Nat'l Foreign Trade Council , 530 U.S. 363, 372, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000) (cleaned up). The plaintiffs assert that the Arizona statute is preempted because it conflicts with the IHA. "Conflict preemption" is present either "where it is impossible for a private party to comply with both state and federal law," or "where under the circumstances of a particular case, the challenged state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Id . at 372–73, 120 S.Ct. 2288 (cleaned up); see also Nation v. City of Glendale , 804 F.3d 1292, 1297 (9th Cir. 2015) ("Conflict preemption consists of impossibility and obstacle preemption."). We must be "cautious" when "a federal statute is urged to conflict with state law regulations within the traditional scope of the state's police powers," and therefore "start with the assumption that a state's historic police powers will not be superseded absent a ‘clear and manifest purpose of Congress.’ " Chae v. SLM Corp. , 593 F.3d 936, 944 (9th Cir. 2010) (quoting Wyeth v. Levine , 555 U.S. 555, 565, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009) ).

1.

On their faces, the IHA and the Arizona statute regulate different actors and activities. Under federal law, before an Arizona "off-track betting system" can accept an "interstate off-track wager" on Laurel Park's races, Laurel Park must consent as the "host racing association," and the Arizona Racing Commission must consent as the "off-track racing commission." 15 U.S.C. §§ 3002(9), 3004(a)(1), (3). Under state law, if Monarch wishes to simulcast (provide a live feed of racing to a live-racing permittee or OTB for purposes of pari-mutuel wagering) in Arizona, it must offer its signals to all live-racing permittees and OTBs in the state. A.R.S. § 5-112(U). The IHA does not address how the states can regulate simulcasts, and the Arizona statute does not address Laurel Park's statutory right to consent before interstate wagering on its races can be conducted. Thus, it is not facially "impossible" to comply with both laws. See Crosby , 530 U.S. at 372–73, 120 S.Ct. 2288.

The plaintiffs cite their agreement to make common business decisions and assert that A.R.S. § 5-112(U) requires Monarch to provide access to wagering on Laurel Park's races without Laurel Park's consent. It does not. The Arizona statute simply requires Monarch to offer "[a]ny simulcast of live racing" to each live-racing permittee and OTB in...