State ex rel. Walgate v. Kasich

• Decision Date: 24 March 2016
• Docket Number: No. 2013–0656.,2013–0656.
• Citation: 147 Ohio St.3d 1,59 N.E.3d 1240
• Parties: The STATE ex rel. WALGATE et al., Appellants, v. KASICH, Governor, et al., Appellees.
• Court: Ohio Supreme Court

147 Ohio St.3d 1

59 N.E.3d 1240

The STATE ex rel. WALGATE et al., Appellants,

v.KASICH, Governor, et al., Appellees.

No. 2013–0656.

Supreme Court of Ohio.

Submitted June 23, 2015.

Decided March 24, 2016.

Black, McCuskey, Souers & Arbaugh, Thomas W. Connors, and James M. Wherley, Canton, for appellants.

Michael DeWine, Attorney General, Eric E. Murphy, State Solicitor, Michael J. Hendershot, Chief Deputy Solicitor, and Stephen P. Carney, Deputy Solicitor, for appellees Governor John R. Kasich, Ohio Casino Control Commission, Ohio Lottery Commission, and Tax Commissioner Joseph W. Testa.

Calfee, Halter & Griswold, L.L.P., Christopher S. Williams, James F. Lang, Matthew M. Mendoza, Alexander B. Reich, and Lindsey E. Sacher, Cleveland, for appellees Rock Ohio Caesars, L.L.C., Rock Ohio Caesars Cleveland, L.L.C., and Rock Ohio Caesars Cincinnati, L.L.C.

Ice Miller, L.L.P., Matthew L. Fornshell, John H. Oberle, and Albert G. Lin, Columbus, for appellees Central Ohio Gaming Ventures, L.L.C., and Toledo Gaming Ventures, L.L.C.

Dinsmore & Shohl, L.L.P., and Alan H. Abes, for appellee Thistledown Racetrack, L.L.C.

Taft, Stettinius & Hollister, L.L.P., Charles R. Saxbe, James D. Abrams, Columbus, Irv Berliner, Cleveland, and Celia M. Kilgard, Columbus, for appellees Northfield Park Associates, L.L.C., Lebanon Trotting Club, Inc., MTR Gaming Group, Inc., and PNK (Ohio), L.L.C.

Porter, Wright, Morris & Arthur, L.L.P., Tami Hart Kirby, William G. Deas, Dayton, and L. Bradfield Hughes, Columbus, urging affirmance for amici curiae the Dayton Chamber of Commerce, the Youngstown/Warren Regional Chamber, the Seafarers Entertainment and Allied Trades Union, the Affiliated Construction Trades Ohio Foundation, and the Lebanon City School District.

Paul Langon Cox III, urging affirmance for amicus curiae the Fraternal Order of Police of Ohio, Inc.

FRENCH

, J.

{¶ 1} This action raises a variety of challenges to recently enacted legislation and administrative rules related to gambling in the state, both at casinos and at race tracks, but the questions before us involve only the existence or nonexistence of standing and the requirements for a trial court to dismiss a complaint for lack of standing. We conclude that one plaintiff-appellant has standing to maintain this action, but the other plaintiffs-appellants do not.

I. Case background

{¶ 2} This appeal involves numerous constitutional provisions, statutes, administrative rules, and claims. Yet because of the case's procedural posture, only a limited portion of the underlying dispute is now before us. To fully understand the relevant issue, a brief review of the relevant law and the underlying facts is necessary.

A. State constitutional provisions

{¶ 3} Article XV, Section 6(A) of the Ohio Constitution

establishes the General Assembly's authority with respect to lotteries:

The General Assembly may authorize an agency of the state to conduct lotteries, to sell rights to participate therein, and to award prizes by chance to participants, provided that the entire net proceeds of any such lottery are paid into a fund of the state treasury that shall consist solely of such proceeds and shall be used solely for the support of elementary, secondary, vocational, and special education programs as determined in appropriations made by the General Assembly.

{¶ 4} Article XV, Section 6(C)(1) of the Ohio Constitution

permits limited casino gambling in the state:

Casino gaming shall be authorized at four casino facilities (a single casino at a designated location within each of the cities of Cincinnati, Cleveland, and Toledo, and within Franklin County) to create new funding for cities, counties, public school districts, law enforcement, the horse racing industry and job training for Ohio's workforce.

The remaining provisions of Article XV, Section 6(C)

detail other procedures related to casino gambling, including how casino revenue will be taxed, how that revenue will be distributed, how the state will oversee casino gambling, and how casino licenses will be obtained.

B. Legislative enactments and administrative provisions

{¶ 5} In 2009, pursuant to its power to authorize agencies of the state to conduct lotteries, the General Assembly approved 2009 Am.Sub.H.B. No. 1 (“H.B. 1”), which authorized the Ohio Lottery Commission to operate video lottery terminal (“VLT”) games, and, in turn, the commission issued administrative rules to implement operation of VLTs. Ohio Adm.Code 3770:2–1 et seq. These rules limited those who could obtain licenses for VLTs to those with a permit to conduct horse races. Ohio Adm.Code 3770:2–3–01

.

{¶ 6} In 2010, the General Assembly enacted 2010 Am.Sub.H.B. No. 519 (“H.B. 519”), which, in part, extended the period of time for casino operators to make their initial investments required by Article XV, Section 6(C)(5) of the Ohio Constitution

. R.C. 3772.27. And in 2011, the General Assembly enacted 2011 Sub.H.B. No. 277 (“H.B. 277”). As relevant to this appeal, H.B. 277 amended R.C. 5751.01(F)(2)(hh) and 5753.01(D) to exclude certain amounts collected by casino operators from the commercial-activity tax imposed by R.C. 5751.02 ; amended R.C. 3772.01, 5751.01, and 5753.01 and enacted R.C. 3772.34 to institute changes to the collection and distribution of taxes on casino revenues; and amended R.C. 3772.27 to refine the procedure for opening and operating casino facilities.

C. Procedural history

{¶ 7} In October 2011, plaintiffs-appellants, Robert L. Walgate Jr., David P. Zanotti, the American Policy Roundtable (“Ohio Roundtable”), Sandra L. Walgate, Agnew Sign & Lighting, Inc. (“ASL”), Linda Agnew, Paula Bolyard, Jeffrey Malek, Michelle Watkin–Malek, Thomas W. Adams, and Donna J. Adams, filed a complaint in the Franklin County Court of Common Pleas seeking a declaratory judgment, injunctive relief, and a writ of mandamus. In January 2012, those parties, along with plaintiffs-appellants, Joe Abraham and Frederick Kinsey, filed an amended complaint in the case. The amended complaint named as defendants (appellees here) Governor John R. Kasich; the State Lottery Commission; the interim director and members of the State Lottery Commission; the Casino Control Commission; the chairman, vice chairman, executive director, and members of the Casino Control Commission; and Ohio Tax Commissioner Joseph W. Testa (collectively, “the state”).

{¶ 8} The amended complaint raises 17 claims. The first ten claims relate to the constitutionality of VLTs and H.B. 1, the act that authorized them. Those claims allege, in part, that (1) VLT operation exceeds the state's authority to conduct lotteries, (2) the lottery commission will violate the Constitution by not conducting VLT games in their entirety, (3) the net proceeds of VLT games will be distributed in an unconstitutional manner, (4) allowing VLTs to be operated by racing facilities will violate the prohibition against the state's financial involvement in private enterprise, (5) H.B. 1 violates the one-subject rule of Article II, Section 15(D) of the Ohio Constitution

, and (6) in enacting H.B. 1, the General Assembly failed to comply with the requirement in Article II, Section 15(C) of the Ohio Constitution that each house consider every bill on three different days.

{¶ 9} Claims 11 through 16 in the amended complaint challenge legislative actions that relate to Ohio's four casinos, particularly H.B. 277 and H.B. 519. Included in these are claims that legislation pertaining to the commercial-activity tax, casino-license fees, and tax exclusion for promotional gaming credits, as well as legislation allowing for multiple casino facilities in one city and graduated payments of the required initial investment, exceeded the legislature's constitutional authority.

{¶ 10} The final claim in the amended complaint is that Article XV, Section 6 of the Ohio Constitution

, H.B. 1, H.B. 277, and H.B. 519 violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution by granting a monopoly to the gaming operators whom the state approved.

{¶ 11} Appellants sought a variety of relief in their amended complaint, including declarations that portions of H.B. 1, H.B. 277, and H.B. 519 violate the Ohio Constitution; preliminary and permanent injunctions enjoining the state from implementing H.B. 1; peremptory or other writs of mandamus ordering that VLTs be conducted solely by the state for the benefit of education programs in Ohio; preliminary and permanent injunctions enjoining the state from implementing portions of H.B. 277 and H.B. 519; peremptory or other writs of mandamus ordering the state to ensure that casino operators will be subject to the commercial-activity tax and the taxes and licensing fees set forth in Article XV, Section 6(C) of the Ohio Constitution

; and a declaration that Article XV, Section 6 of the Ohio Constitution, H.B. 1, H.B. 277, and H.B. 519 violate the Fourteenth Amendment to the United States Constitution.

{¶ 12} Motions to intervene were filed by gaming operators Raceway Park, Inc.; HJC/PDC Holdings, L.L.C.; Central Ohio Gaming Ventures, L.L.C.; Toledo Gaming Ventures, L.L.C.; Rock Ohio Caesars, L.L.C.; Rock Ohio Caesars Cleveland, L.L.C.; Rock Ohio Caesars Cincinnati, L.L.C.; Thistledown Racetrack, L.L.C.; Northfield Park Associates, L.L.C.; Lebanon Trotting Club, Inc.; MTR Gaming Group, Inc.; and PNK (Ohio), L.L.C. (collectively, “gaming operators”). The gaming operators also filed motions for judgment on the pleadings.

{¶ 13} The state moved the trial court to dismiss this action pursuant to Civ.R. 12(B)(6)

for lack of standing and for failure to state a claim upon which relief can be granted.

D. Trial court's decision

{¶ 14} The trial court granted the state's motions to dismiss. It concluded that none of the appellants had standing either as a general citizen or as a taxpayer. It also determined that no appellant had standing based on his, her or its status as a contributor to the commercial-activity tax, as a teacher or...