Telesweeps of Butler Valley, Inc. v. Kelly
| Decision Date | 10 October 2012 |
| Docket Number | 3:12-CV-1374 |
| Parties | TELESWEEPS of BUTLER VALLEY, INC. Plaintiff v. LINDA KELLY, Attorney General of the Commonwealth of Pennsylvania, and STEFANIE SALAVANTIS, District Attorney of Luzerne County Defendants |
| Court | U.S. District Court — Middle District of Pennsylvania |
(JUDGE MARIANI)
Plaintiff Teles weeps of Butler Valley, Inc. ("Telesweeps" or "Plaintiff') filed a Verified Complaint and Motion for a Temporary Restraining Order and Preliminary Injunction on July 17, 2012 seeking, inter alia, a declaratory judgment that Pennsylvania Act 81 of 2012 violated its First Amendment free speech and Fourteenth Amendment due process rights. (Doc. 1). On July 25,2012, three casinos1 ("Casinos" or "Interveners") moved to intervene as a matter of right under Fed. R. Civ. P. 24(a) or, in the alternative, for permissive intervention under Rule 24(b). (Doc. 10). The Court granted the motion on July 30, 2012. Following oral argument on August 7, 2012, the parties elected to have an evidentiary hearing on September 25, 2012.
Plaintiff's motion having been fully briefed, and the Court having heard the parties' oral arguments and received their evidence, the motion is ripe for determination.
On June 30, 2012, the Pennsylvania General Assembly passed Act 81 of 2012 ("Act 81"), 18 Pa. Cons. Stat. § 5513(a.1), which makes it a misdemeanor of the first degree to own, operate, maintain, place into business or have a financial interest in an electronic video monitor:
Act 81 goes on to define the term "simulated gambling program" as "any method intended to be used by a person interacting with an electronic video monitor in a business establishment that directly or indirectly implements the predetermination of sweepstakes cash or cash-equivalent prizes or otherwise connects the sweepstakes player or participant with the cash or cash-equivalent prize." 18 Pa. Cons. Stat. § 5513(f).
At the evidentiary hearing, Plaintiff called several witnesses, both factual and expert, to testify about how Telesweeps operates.2 David Bogansky, owner of Lynrose Consultingand consultant for Pong Marketing & Promotions, Inc., testified that Telesweeps is in the business of selling both domestic and international phone cards, as well as cellular phone accessories, office products and services, and Internet time at its on-site computer terminals. (Tr. of Evid. Hearing at 8:7-9:13; 10:20-11:10).
Michelle des Lauriers, an expert in the phone card industry, testified that the "going rate" for domestic calling cards is between four and five cents per minute, as exemplified by AT&T calling cards. The phone cards are competitively priced at three cents per minute for the domestic TelConnect cards and beginning at five cents per minute for the international Interconnect cards. (Id. at 87:25-88:3). At three cents per minute, Plaintiff's TelConnect cards are "highly competitive." (Id. at 88:4-25). Upon entering Telesweeps, a customer is met immediately with various and sundry advertisements promoting the phone cards. (Id. at 94:2-7). As such, Ms. des Lauriers testified that Plaintiff's phone cards are a valuable product and are not shams. (Id. at 92:7-14). The market for phone cards includes, but is not limited to, "students, families of military who are out of the country or in another place within the country, people who are traveling" who wish to avoid incurring roaming charges, businesspeople who wish to separate their billings, and people who do not own phones. (Id. 95:5-13). However, Ms. des Laurier did not know what the customer pool was for Telesweeps, in particular. (Id. at 100:7-9). She was also not provided with any information regarding how many phone cards had been sold or how many sweepstakes points or credits were given to customers who purchased the phone cards. (Id. at 100:17-25).
According to Mr. Bogansky, Telesweeps uses sweepstakes entries as a promotional tool to boost sales of the phone cards. Such entries come with the purchase of a product commensurate with the amount of the purchase. (Id. at 22:4-9). Consuming all of one's sweepstakes entries does not diminish the value of the phone card; "you're not expending your product to play the sweepstakes." (Id. at 23:14-19). In other words, buying a $10 calling card and using up all of the 1,000 corresponding sweepstakes entries will not result in any reduction in value of the $10 calling card. Even after all of the entries are consumed, the customer still has the full value of the card to use. Sweepstakes entries are not for sale and cannot be purchased. (Id. at 27:13-16).
No purchase is necessary to enter the sweepstakes. If a customer wishes to "play" without purchasing a product, he may take advantage of a limited number of free daily entries. (Id. at 22:9-11). Each day, a customer may obtain 100 free sweepstakes entries or credits. (Id. at 25:1-9; 68:18-25). The minimum "bet" per game is 25 credits (Id. at 180:12-13), so a customer can play up to 4 games for free each day or use all 100 entries in one game. Anyone is welcome to participate in free daily plays "as long as they're [sic] 18 [or older]." (Id. at 24:14-19). Alternatively, a customer may write in a request for points. Once a written request for points is received, Telesweeps mails back a certificate valid for 200 points which the customer can redeem in person for entries. (Id. at 22:11-21). There is no limit to how many free entries a customer may receive by mail, but each request must be in a separate envelope. (Id. at 26:11-13). Once a customer exhausts his free plays per day,he must purchase a product before he will receive any further sweepstakes opportunities. (Id. at 22:6-9; 68:8-15). Dave Bogansky testified that since Telesweeps opened, he has received 28 written requests in the mail for sweepstakes entries. (Id. at 35:18-21).
All methods of entry (whether obtained for free or after purchasing a product) are treated alike and no type of entry has any greater chance of winning a prize than any other. (Id. at 27:9-12). This same treatment is referred to as "equal dignity," and Ms. des Lauriers testified that Plaintiff operated its sweepstakes under equal dignity. (Id. at 92:15-24; 93:19-20) ("It's the same game, it's the same prizes, it's the same odds.").
According to Mr. Bogansky, once a customer creates an account to "play," he receives a card with a pin number. He may swipe the card at a computer terminal to begin playing or manually enter his pin number. (Id. at 31:15-21). To learn whether he has won a prize, a customer may: (1) ask the cashier, who will look up the results directly at the register computer, or (2) use the "game display" at his own computer terminal which will display the results through alphanumeric text, graphic icons, and code. (Id. at 22:25-23:10; 86:21-22). The odds of winning are available at each computer terminal. (Id. at 33:15-25).
The "game display" is tailored to mimic slot machines and other amusing casino-style games. (Id. at 28:19-23). According to Richard Williamson, a witness for the Interveners, "the experience is exactly like a slot machine." (Id. at 179:17-19). "From the player's perspective, . . . every outcome is a random outcome," so a player would perceive a slot machine and an internet sweepstakes as the same. (Id. 181:20-25).
Nick Farley, an expert in gaming software and hardware, testified that when a customer "plays" a game, he cannot affect his chances of winning or alter the outcome. Rather, (Id. at 117:20-23). Therefore, no matter what game a customer uses to display the results of an entry, and no matter what choices he makes within that game, the outcome is pre-determined. For instance, if a customer chose to play poker and received a hand of four aces and elected to discard his winning hand, it would not affect whether he won a prize during that game. (Id. at 118:13-19). Each game contains "directions" on how to maximize the chances of winning a hand. For example, in the poker games, there are suggested holds that a player should attempt to assemble.
However, despite these "directions," neither failure to follow them nor strict adherence to them will affect the outcome of the game. (Id. at 135:4-25). Mr. Farley admitted that "p]t does give the participant the, if you will, the look and feel of participating in actual poker, even though the prize is determined, and no matter what decision they make, they're going to get that prize." (Id. at 135:22-25). The Interveners' witness characterized it differently: the instructions "created the illusion ... that your choice of cards would have an impact on the result that you could obtain." (Id. at 189:7-11).
Mr. Farley stated that the computers at Plaintiff's facility do not utilize a "random number generator," which is more often associated with the operation of slot machineswhich are "tested and certified to make sure that those [random] outcomes occur freely, so any outcome can occur at any time and be repeated game after game." (Id. at 120:10-14). Instead, at Telesweeps, the "finite pool of entries is predetermined in advance of the start of the game promotion and only stored in the [on-site] server for delivery to the PCs." (...
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