Pic-A-State Pa., Inc. v. Reno

• Decision Date: 13 February 1996
• Docket Number: No. 95-7137,PIC-A-STATE,95-7137
• Citation: 76 F.3d 1294
• Parties: PA, INC., Scott McLean, Appellants, v. Janet RENO, in her official capacity as Attorney General of the United States of America; the United States Department of Justice; the United States of America.
• Court: U.S. Court of Appeals — Third Circuit

Page 1294

76 F.3d 1294

64 USLW 2518

PIC-A-STATE PA, INC., Scott McLean, Appellants, v. Janet RENO, in her official capacity as Attorney General of

the United States of America; the United States

Department of Justice; the United

States of America.

No. 95-7137.

United States Court of Appeals, Third Circuit.

Argued Nov. 13, 1995.

Decided Feb. 13, 1996.

Michael A. Finio (argued), Saul, Ewing, Remick & Saul, Harrisburg, Pennsylvania, William M. Janssen, Saul, Ewing, Remick & Saul, Philadelphia, Pennsylvania, for Appellants.

Matthew M. Collette (argued), Mark B. Stern, United States Department of Justice, Civil Division, Appellate Staff, Washington, DC, for Appellees.

Before: BECKER and SCIRICA, Circuit Judges and COHILL, District Judge. ^*

OPINION OF THE COURT

SCIRICA, Circuit Judge.

Pic-A-State Pa., Inc. brings a Commerce Clause challenge to the Interstate Wagering Amendment, which amended 18 U.S.C. § 1301 (1994) by prohibiting the transmission in interstate commerce of information to be used for the purpose of procuring a lottery ticket. Because the Amendment regulates an activity affecting interstate commerce and rationally relates to the goals articulated by Congress, we hold the Amendment was a constitutional exercise of Congress' power to legislate under the Commerce Clause.

I. FACTS AND PROCEDURAL HISTORY

Congress has restricted interstate traffic in lottery tickets for over a century. See generally United States v. Edge Broadcasting Co., 509 U.S. 418, 113 S.Ct. 2696, 125 L.Ed.2d 345 (1993); see also Act of July 12, 1876, ch. 186, § 2, 19 Stat. 90; Anti-Lottery Act of 1890, ch. 908, § 1, 26 Stat. 465. Title 18 U.S.C. § 1301, the current prohibition on interstate traffic in lottery tickets, was enacted by Congress in 1895. Before amendment by the Interstate Wagering Amendment, § 1301 provided:

Whoever brings into the United States for the purpose of disposing of the same, or knowingly deposits with any express company or any common carrier for carriage, or carries in interstate or foreign commerce any paper, certificate, or instrument purporting to be or to represent a ticket, chance, share, or interest in or dependent upon the event of a lottery, gift enterprise, or similar scheme, offering prizes dependent in whole or part upon lot or chance, or any advertisement of, or list of prizes drawn or awarded by means of, any such lottery, gift enterprise, or similar scheme; or knowingly takes or receives any such paper, certificate, instrument, advertisement, or list so brought, deposited or transported, shall be fined not more than $1,000 or imprisoned not more than two years, or both.

Act of March 2, 1895, 28 Stat. 963; 18 U.S.C. § 1301 (1988).

Pic-A-State Pa., Inc. is a Pennsylvania corporation that was engaged in the business of taking orders for, and purchasing, out-of-state lottery tickets on behalf of customers. Pic-A-State's operations were designed to avoid the longstanding prohibition on the interstate traffic in lottery tickets by keeping the tickets themselves in the state of origin and transferring only a computer-generated "receipt" to the customer.

The Commonwealth of Pennsylvania tried repeatedly to put a stop to Pic-A-State's operations. In 1993, the Pennsylvania legislature passed Act 8 of 1993, which prohibited the sale of any interest in another state's lottery. 72 Pa.Stat.Ann. § 3761-9(c) (1995). Pic-A-State challenged this legislation in federal court on dormant Commerce Clause grounds, and the statute was struck down by the district court. Pic-A-State Pa. v. Pennsylvania, No. 93-0814, 1993 WL 325539 (M.D.Pa. July 23, 1993). On appeal, we reversed citing an intervening change in federal law, the Interstate Wagering Amendment, which made the Pennsylvania statute fully consistent with federal law and not unduly burdensome on interstate commerce. Pic-A-State Pa. v. Pennsylvania, 42 F.3d 175, 178-80 (3d Cir.1994) ("Pic-A-State I ").

The Interstate Wagering Amendment amended 18 U.S.C. § 1301 by providing that, in addition to § 1301's extant prohibition on the transfer in interstate commerce of any lottery ticket, any person who:

being engaged in the business of procuring for a person in 1 State such a ticket, chance, share, or interest in a lottery, gift, enterprise or similar scheme conducted by another State (unless that business is permitted under an agreement between the States in question or appropriate authorities of those States), knowingly transmits in interstate or foreign commerce information to be used for the purpose of procuring such a chance, share or interest; ... shall be fined not more than $1,000 or imprisoned not more than two years, or both.

Violent Crime Control and Law Enforcement Act of 1994, Pub.L. No. 103-322, § 320905, 108 Stat. 2126, 2147 (emphasis added). This Amendment was explicitly intended to prohibit Pic-A-State's line of business.

Senator Arlen Specter of Pennsylvania was the primary sponsor of the Interstate Wagering Amendment. He explained that "current law prohibit[s] interstate transfer of lottery tickets.... However, due to advances in communication technologies, current law does not accomplish its intended goals." 139 Cong.Rec. S15247. He also noted the district court's decision in Pic-A-State Pa. v. Pennsylvania, No. 93-0814, 1993 WL 325539 (M.D.Pa. July 23, 1993), allowed "the sale of interests in out-of-state lottery tickets via computer transaction with no paper crossing state lines." Id. The Amendment was designed to close this "loophole." Id.

Senator Specter identified two other purposes for the Interstate Wagering Amendment. First, that the Amendment was necessary to preserve "the right of a State to regulate lottery [sic] and gambling within its borders." Id. He stated, "Federal laws should continue to limit the proliferation of interstate gambling to preserve the sovereignty of States that do not permit certain forms of gambling." Id. Second, that businesses such as Pic-A-State's would "undermine [the states'] ability to realize projected revenues." Id. Senator Joseph Biden echoed Senator Specter's concerns, noting the interstate sale of interests in lottery tickets "hurts the operation of lotteries in smaller States." Id.

Three days after the Interstate Wagering Amendment was signed into law, Pic-A-State filed this suit seeking injunctive relief and a declaratory judgment that the Amendment was unconstitutional. The district court dismissed Pic-A-State's complaint, finding no merit in any of its arguments. Pic-A-State Pa. v. Reno, No. 94-1490 (M.D.Pa. Feb. 23, 1995). Since passage of the Amendment, Pic-A-State has terminated its business.

We have jurisdiction to review the district court's final judgment dismissing the action under 28 U.S.C. § 1291 (1988). "Our standard of review is plenary." Juzwin v. Asbestos Corp., 900 F.2d 686, 689 (3d Cir.), cert. denied, 498 U.S. 896, 111 S.Ct. 246, 112 L.Ed.2d 204 (1990).

II. RIPENESS, STANDING AND EQUITABLE RELIEF

As an initial matter, the Government disputes whether the district court had jurisdiction to hear this case under 28 U.S.C. § 1331 (1988). Article III, section 2 of the United States Constitution requires an actual "controversy" for a federal court to have jurisdiction. U.S. Const. art. III, § 2. The Government argues no justiciable controversy exists because Pic-A-State has never been threatened with prosecution under amended § 1301. It asserts the controversy is not ripe, Pic-A-State lacks standing, and Pic-A-State is not entitled to equitable relief. ¹ We will examine each of these contentions in turn.

A. Ripeness

In Abbott Lab. v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 1515-16, 18 L.Ed.2d 681 (1967), overruled on other grounds, Califano v. Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 984, 51 L.Ed.2d 192 (1977), and Pacific Gas & Elec. Co. v. State Energy Resources Conservation & Dev. Comm'n, 461 U.S. 190, 201, 103 S.Ct. 1713, 1720-21, 75 L.Ed.2d 752 (1983), the Supreme Court held that ripeness turns on "the fitness of the issue for judicial decision" and "the hardship to the parties of withholding court consideration." For declaratory judgments, we have refined this test because declaratory judgments are typically sought before a completed injury has occurred. In determining whether to engage in pre-enforcement review of a statute in a declaratory judgment action, we look, among other factors, to (1) the adversity of the parties' interests, (2) the conclusiveness of the judgment, and (3) the utility of the judgment. Freehold Cogeneration Assocs. v. Bd. Reg. Comm'rs, 44 F.3d 1178, 1188 (3d Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 68, 133 L.Ed.2d 29 (1995); Step-Saver Data Systems, Inc. v. Wyse Technology, 912 F.2d 643, 647 (3d Cir.1990). After considering these factors, we believe this case presents a controversy ripe for resolution.

1. Adversity of Interest

"For there to be an actual controversy the defendant must be so situated that the parties have adverse legal interests." Step-Saver, 912 F.2d at 648 (quoting 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2757, at 582-83 (2d Ed.1983)). Although Pic-A-State has not been prosecuted under the Interstate Wagering Amendment, the impact of the Amendment is sufficiently direct and immediate to create an adversity of interest between Pic-A-State and the Government. Not only has Pic-A-State terminated its business and suffered economic loss in response to the passage of the Amendment, but any further attempt to pursue its line of business would risk serious criminal penalties. ² 2] "Where the legal issue presented is fit for judicial resolution, and where a regulation requires immediate and significant change in the plaintiffs' conduct of their affairs with serious penalties attached to noncompliance, access to the courts ... under the Declaratory Judgment Act must be permitted, absent a statutory bar or some other unusual circumstances." Abbott Lab. v. Gardner, 387 U.S. at...