Hawkeye Commodity Promotions, Inc. v. Vilsack

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 06-2406
___________
Hawkeye Commodity Promotions, Inc., *
*
*
Plaintiff – Appellant, *
*
v. *
*
Thomas J. Vilsack, in his *
official capacity as Governor of *
the State of Iowa, *
*
Defendant, *
*
Thomas J. Miller, in his official * Appeal from the United States
capacity as the Attorney General * District Court for the Northern
of the State of Iowa; Kevin W. * District of Iowa.
Techau, in his official capacity *
as the Commissioner of the Iowa *
Department of Public Safety, *
*
Defendants – Appellees, *
*
Iowa Lottery Authority; *
Edward Stanek, Dr., in his *
official capacity as the Chief *
Executive Officer of the Iowa *
Lottery Authority, *
*
Defendants. *
___________
Submitted: December 11, 2006
Filed: April 24, 2007
___________
Before BYE, COLLOTON, and BENTON, Circuit Judges.
___________
BENTON, Circuit Judge.
In March 2006, Iowa enacted legislation ending the TouchPlay lottery game.
Hawkeye Commodity Promotions, Inc., a licensed TouchPlay retailer, tried to enjoin
the law before it took effect. Hawkeye argued that the law violates the Contracts,
Takings, Equal Protection, and Due Process clauses of the federal constitution. The
district court1 rejects these claims. See Hawkeye Commodity Promotions, Inc., v.
Miller, 432 F. Supp. 2d 822 (N.D. Iowa 2006). Hawkeye appeals, reiterating those
claims and asserting that the district court should have admitted the deposition
testimony of the president of the Iowa Lottery Authority (the Lottery). This court
affirms.
I.
Following revenue shortfalls in 2000 and 2001, the Iowa General Assembly
authorized the Lottery to "establish a plan to implement the deployment of pull-tab
vending machines with video monitors." The Lottery then added the TouchPlay
game. A TouchPlay machine is "a vending machine that dispenses or prints and
dispenses lottery tickets that have been determined to be winning or losing tickets by
a predetermined pool drawing machine prior to the dispensing of the tickets." IOWA
1
The Honorable Linda R. Reade, Chief Judge, United States District Court for
the Northern District of Iowa.
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ADMIN. CODE r. 531-14.3. With flashing lights and captivating sounds, TouchPlay
machines resemble slot machines. Unlike slot machines, which are random,
TouchPlay is not random. Tickets are loaded into the machine electronically, and like
pull-tab tickets, the outcome of each game is predetermined.
The Lottery never owned any TouchPlay machines. They were manufactured
and distributed to retailers, who purchased or leased them. The Lottery contracted for
the manufacture of TouchPlay machines; licensed the retailers to put them in
businesses; set the number of winning tickets and the amount paid out on each
machine; collected data from the machines; and split the revenue with manufacturers
and retailers. TouchPlay began with 30 machines in May 2003, expanding rapidly:
By April 2006, more than 6,400 machines operated at 3,800 businesses across Iowa.
Hawkeye was incorporated and capitalized solely as an Iowa TouchPlay
retailer. On January 3, 2005, Hawkeye applied for an MVM (monitor vending
machines) retailer license, which was issued on January 10. Accompanying the
license were: a letter including a five-year revenue-sharing formula; door decals for
Hawkeye's machines; and, a memo entitled "Licensing Terms and Conditions (January
2005)," summarizing the applicable laws and regulations. Hawkeye owns 724
TouchPlay machines, 581 of which operated at 187 Iowa businesses in April 2006.
Hawkeye invested about $6.8 million in this venture – $4.7 million to buy the
machines, and $2.1 million in start-up and operational costs.
Responding to concerns about the "proliferation of gambling," in January 2006
Governor Thomas J. Vilsack ordered a 60-day moratorium on new TouchPlay licenses
while a task force studied it. In March the task force recommended restrictions to
protect gambling addicts and minors. Governor Vilsack extended the moratorium "to
give the Iowa Legislature time to act on the matter if it so chooses." The General
Assembly passed legislation banning TouchPlay, which the Governor signed March
20 (to be codified at Iowa Code § 99G.30A(4)). The ban took effect May 4.
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On April 5, Hawkeye sued for declaratory and injunctive relief, invoking the
Contracts, Takings, Equal Protection, and Due Process clauses of the United States
Constitution. An expedited trial occurred April 12, with testimony by affidavit.
Hawkeye later moved to re-open the record to add the deposition of Dr. Edward J.
Stanek, president of the Lottery. On April 26, the district court denied the motion and
issued a decision. This court reviews the district court's factual findings for clear
error, and its legal and constitutional conclusions de novo. Daggitt v. United Food
& Commercial Workers Int'l Union, Local 304A, 245 F.3d 981, 986 (8th Cir. 2001).
II.
No state shall pass any law "impairing the Obligation of Contracts." U.S.
CONST. art. I, § 10, cl. 1. Hawkeye's main argument is that SF 2330 (the bill number
of the TouchPlay law) "completely destroyed" Hawkeye's contracts with the Lottery,
and with over 200 Iowa businesses.
Much of Hawkeye's discussion addresses its license. Hawkeye emphasizes at
length that its license could not be terminated without good cause, 60 days' notice, and
a hearing. IOWA ADMIN. CODE r. 531-14.1 to -14.20. But Hawkeye's license has not
been terminated; Hawkeye still has its license. The Licensing Terms and Conditions,
which Hawkeye agreed to in its application, state: "If a provision in this document
conflicts with an applicable statutory or regulatory provision, the statutory or
regulatory provision preempts the conflicting provision in this document." The
abolition of TouchPlay did not trigger the administrative rules governing Hawkeye's
license.
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A.
A three-part test determines whether a statute violates the Contracts Clause.
"The first question is whether the state law has, in fact, operated as a substantial
impairment on pre-existing contractual relationships." Equip. Mfrs. Inst. v. Janklow,
300 F.3d 842, 850 (8th Cir. 2002). This question "has three components: whether
there is a contractual relationship, whether a change in law impairs that contractual
relationship, and whether the impairment is substantial." Gen. Motors Corp. v.
Romein, 503 U.S. 181, 186 (1992).
i.
The parties appear to assume that the existence of a contract is governed by
state law. Indeed, the district court looks only to Iowa law, finding an implied-in-fact
unilateral contract of indefinite duration, which either party could cancel at any time.
See Hawkeye, 432 F. Supp. 2d at 843-46. But "whether a contract was made is a
federal question for purposes of Contract Clause analysis." Romein, 503 U.S. at 187
(citing Irving Trust Co. v. Day, 314 U.S. 556, 561 (1942)).
In Stone v. Mississippi, 101 U.S. 814 (1880), the Supreme Court rejected a
private company's Contracts Clause challenge to the state's cancellation of its lottery
charter.
Any one, therefore, who accepts a lottery charter does so with the
implied understanding that the people, in their sovereign capacity, and
through their properly constituted agencies, may resume it at any time
when the public good shall require, whether it be paid for or not. All that
one can get by such a charter is a suspension of certain governmental
rights in his favor, subject to withdrawal at will. He has in legal effect
nothing more than a license to enjoy the privilege on the terms named for
the specified time, unless it be sooner abrogated by the sovereign power
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of the State. It is a permit, good as against existing laws, but subject to
further legislative and constitutional control or withdrawal.
Id. at 821. In Douglas v. Kentucky, 168 U.S. 488, 502 (1897), the Supreme Court said
flatly, "a lottery grant is not, in any sense, a contract within the meaning of the
Constitution of the United States, but is simply a gratuity and license, which the State,
under its police powers, and for the protection of the public morals, may at any time
revoke, and forbid the further conduct of the lottery."
This court is "bound to decide for ourselves whether a contract was made, what
are its terms and conditions, and whether the state has, by later legislation, impaired
its obligation. This involves an appraisal of the statutes of the states and the decisions
of its highest courts." Ind. ex rel. Anderson v. Brand, 303 U.S. 95, 100 (1938). In
Romein, 503 U.S. at 187, the Supreme Court adopted the state supreme court's holding
that workers' compensation benefits were not an implied term of a contract. Looking
to Indiana law, the Court in Brand, 303 U.S. at 104, concluded, "the petitioner had a
valid contract with the respondent."
Stone and Douglas are clear: A lottery "grant" or "charter" is not protected by
the Contracts Clause. Hawkeye responds that Stone and Douglas, while "certainly
good law," involve "an entirely different circumstance." On the contrary, Stone and
Douglas are not distinguishable: in both cases, the legislature allowed a private party
to operate a lottery, which was later nullified (in Stone, by the state's Reconstruction
constitution; in Douglas, by act of the legislature and then by amendment to the state
constitution). That fairly describes the history of TouchPlay in Iowa. Whatever
agreement existed between Hawkeye and the Lottery is not protected by the Contracts
Clause of the federal constitution.
ii.
As to the location contracts, it is undisputed on appeal – and this court decides
– that they are contracts within the Contracts Clause, and are impaired by SF 2330.
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This court therefore asks whether the impairment of Hawkeye's contracts – with its
locations and with the Lottery (assuming the district court is correct that they are
protected by the Contracts Clause) – is substantial.
iii.
Substantial impairment depends on "the extent to which the [parties'] reasonable
contract expectations have been disrupted. Reasonable expectations are affected by
the regulated nature of an industry in which a party is contracting." In re: Workers'
Comp. Refund Western Nat'l Mut. Ins. Co., 46 F.3d 813, 819 (8th Cir. 1995)
(citations omitted). "In determining the extent of the impairment, we are to determine
whether the industry the complaining party has entered has been regulated in the past."
Energy Reserves Group v. Kan. Power & Light Co., 459 U.S. 400, 411 (1983).
Like Hawkeye, the public utility in Energy Reserves was "operating in a heavily
regulated industry. State authority to regulate natural gas prices is well established."
Id. at 414 (citations omitted). State authority to regulate gambling is similarly well-
established: "No one would question that [the State] has the power to regulate
gambling in the interest of the public health, safety, and general welfare." Neb.
Messenger Servs. Ass'n v. Thone, 611 F.2d 250, 251-52 (8th Cir. 1979) (quoting the
district court to uphold a Nebraska statute prohibiting service fees on pari-mutuel
betting against federal constitutional challenges).
In this case, the contracts themselves demonstrate Hawkeye's diminished
contract expectations. The location contracts provide:
In consideration of the sum of $10.00, Proprietor hereby grants unto
HCP [Hawkeye] the exclusive right for five (5) years to install and
maintain all Monitor Vending Machines, Lottery Touchplay, and lottery
vending machines as may be allowed by law or promulgated regulation
. . ..
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(emphasis added). In regard to any agreement with the Lottery, the Licensing Terms
and Conditions memorandum that Hawkeye agreed to in January 2005 state at the top
of the first page:
The provisions of Iowa Code chapter 99G, 531 Iowa Administrative
Code, and any other applicable statutory or regulatory provisions are
herein incorporated by reference. If a provision in this document
conflicts with an applicable statutory or regulatory provision, the
statutory or regulatory provisions preempts the conflicting provision in
this document.
Likewise, the contracts in Energy Reserves "expressly recognize the existence of
extensive regulation by providing that any contractual terms are subject to relevant
present and future state and federal law." Id. at 416. This court holds that, like the
plaintiff in Energy Reserves, Hawkeye's "reasonable expectations have not been
impaired." Id. SF 2330 does not substantially impair any Lottery or location
contracts. Hawkeye's Contracts Clause argument fails on the first prong of Janklow.
B.
Alternatively, assuming a substantial impairment, the second and third prongs
of the Contracts Clause analysis come into play. The second prong of the three-part
test is whether the state has a "significant and legitimate public purpose behind the
regulation." Janklow, 300 F.3d at 850. If, as Hawkeye claims, "the State offers no
significant and legitimate public purpose for abolishing TouchPlay while continuing
all other lottery games," then SF 2330 is unconstitutional under the Contract Clause.
The state has the burden to show this purpose. Id. at 859-60.
The state identifies the need "to curb the expansion of gambling" as the purpose
of SF 2330. Gambling is illegal in Iowa. IOWA CODE § 725.7. Gambling in Iowa is
permissible only if authorized by a specific statutory exception. See, e.g., IOWA
CODE §§ 725.14, .15 (ban on gambling does not apply to pari-mutuel betting
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regulated by the state racing and gaming commission, or to state lottery games
regulated by the Iowa Lottery Authority). Existing at the sufferance of the
Legislature, gambling is a heavily regulated industry in Iowa. See IOWA CODE §§
99G.1-.42; IOWA ADMIN. CODE r. 531-1.1 to -20.23. The regulation of gambling –
including its expansion and contraction – is a significant and legitimate public purpose
for SF 2330.
The third prong is "whether the adjustment of the 'rights and responsibilities of
contracting parties [is based] upon reasonable conditions and [is] of a character
appropriate to the public purpose justifying [the legislation's] adoption.'" Janklow,
300 F.3d at 850 (alteration in original). This court finds that it is. TouchPlay began
with 30 machines in bars and fraternal clubs in May 2003. Within three years, more
than 6,400 machines functioned in nearly 3,000 Iowa business of all sorts, including
grocery stores, restaurants, gas stations, truck stops, convenience stores, bowling
alleys, and laundromats. As TouchPlay expanded, the public became concerned about
protecting minors and compulsive gamblers. A state's police power encompasses
controlling gambling, even to the point of abolishing a particular lottery game. See,
e.g., Stone, 101 U.S. at 818 (the police power "extends to all matters affecting the
public health or the public morals. Neither can it be denied that lotteries are proper
subjects for the exercise of this power.") (citations omitted); Douglas, 168 U.S. at
502; Neb. Messenger, 611 F.2d at 251-52.
Iowa's abolition of TouchPlay does not violate the Contracts Clause.
III.
Private property shall not "be taken for public use, without just compensation."
U.S. CONST. amend. V. Hawkeye considers SF 2330 a legislative taking of its
property (i.e., the TouchPlay machines, its overall "business," the Lottery contract,
and the location contracts).
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A.
First, Hawkeye must show property interests protected by the Takings Clause.
See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001-03 (1984). See also Tex.
State Bank v. United States, 423 F.3d 1370, 1378 (Fed. Cir. 2005) ("'bedrock
requirement' of any successful takings challenge" is that the "plaintiffs must identify
a property interest cognizable under the Fifth Amendment.") The Constitution
"protects rather than creates property interests." Phillips v. Wash. Legal Found., 524
U.S. 156, 164 (1998). This court therefore looks to Iowa law to evaluate Hawkeye's
property interests. See Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577
(1972) ("the existence of a property interest is determined by reference to 'existing
rules or understandings that stem from an independent source such as state law.'").
No doubt the machines are property under the Takings Clause. Hawkeye also
claims a property interest in its TouchPlay business, and continued operation of its
enterprise. The district court finds (and the state does not dispute) that Hawkeye "has
some property interest" in the business itself. Hawkeye, 432 F. Supp. 2d at 852 (citing
Kimball Laundry Co. v. United States, 338 U.S. 1, 5 (1949) (Takings Clause protects
"intangible" business assets like trade routes, goodwill, and earning power)).
As to the continued operation of the business, Hawkeye's participation in
TouchPlay required an MVM license. "The possession of an MVM license . . . is a
privilege personal to that person or entity and is not a legal right." IOWA ADMIN.
CODE r. 531-14.12. As the district court explains, because Hawkeye's MVM license
cannot be sold, assigned, or transferred, it "lacks the indicia of a property interest."
See IOWA ADMIN CODE r. 531-14.6 ("MVM licenses may not be transferred to any
other person or entity . . .."). See generally Cent. States Theatre Corp. v. Sar, 66
N.W.2d 450, 455 (Iowa 1954) ("when a business is inherently illegal [e.g., liquor,
tobacco] a permit to operate may be granted or refused at the will of the licensing
body, is a privilege rather than a property right") (bracketed text added); Smith v.
Iowa Liquor Control Comm'n, 169 N.W.2d 803, 807 (Iowa 1969) (upholding the
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revocation of a liquor license because "a license to sell beer, is a privilege granted by
the state and is in no sense a property right."); Alfredo v. Iowa Racing & Gaming
Comm'n, 555 N.W.2d 827, 832 n.2 (Iowa 1996) (dicta, property rights in a gambling
license may exist only when statute expressly identifies the license as a right, as
opposed to a privilege). Cf. Cleveland v. United States, 531 U.S. 12 (2000) (state
video-poker license is not property under the federal mail fraud statute, 18 U.S.C. §
1341). Hawkeye does not have a property right in the continuation of its TouchPlay
business for Takings Clause purposes.
As to Hawkeye's property-in-contracts argument, the district court holds that
because the location contracts "allow for termination of the contract due to a change
in law or regulation," they "do not constitute a property interest for the purposes of the
takings clause." Hawkeye, 432 F. Supp. 2d at 854. The January 2005 Licensing
Terms and Conditions say, "If a provision in this document conflicts with an
applicable statutory or regulatory provision, the statutory or regulatory provisions
preempts the conflicting provision in this document." Contract rights are "a form of
private property" in Iowa, but to qualify as a "protectable property interest" under the
Takings Clause, "a contract must establish rights more substantial in nature than a
mere unilateral expectation of continued rights or benefits." Crippen v. City of Cedar
Rapids, 618 N.W.2d 562, 572 (Iowa 2000). Hawkeye's expectation that its contracts
would not be modified or nullified by the state is undermined by: (1) its participation
in a heavily regulated industry (gambling); (2) the "as may be allowed by law or
promulgated regulation" language in the location contracts; (3) the analogous
language in the Licensing Terms and Conditions; and, (4) the experience of its owners
with South Carolina's video-poker ban. See Armstrong v. Collins, 621 S.E.2d 368
(S.C. Ct. App. 2005). Hawkeye's contracts are not a cognizable property interest
under Iowa law for Takings Clause purposes.
B.
Having identified Hawkeye's property interests (the machines and the
TouchPlay business itself), the issue becomes whether Hawkeye suffered a taking
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without just compensation. Two kinds of takings are: (1) per se, involving the "direct
government appropriation of or physical invasion of private property"; and (2)
regulatory, where a regulation affecting private property "goes too far." Lingle v.
Chevron U.S.A., Inc., 544 U.S. 528, 537-38 (2005) (quoting Pa. Coal Co. v. Mahon,
260 U.S. 393, 415 (1922)).
This case is not a per se taking. Hawkeye did not suffer a "permanent physical
invasion." Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982).
Nor does the statute constitute a total regulatory taking in which Hawkeye has "been
called upon to sacrifice all economically beneficial uses in the name of the common
good." Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019 (1992) (emphasis in
original). The parties dispute whether Lucas applies to non-real property. The district
court holds that it does not. Hawkeye, 432 F. Supp. 2d at 855. Lucas involved land,
not personal property. And the Court in Lucas recognized that landowners have
different expectations than owners of personal property about the potential impact of
government regulation:
And in the case of personal property, by virtue of the state's traditionally
high degree of control over commercial dealings, he ought to be aware
of the possibility that new regulation might even render his property
economically worthless (at least if the property's only economically
productive use is sale or manufacture for sale).
Id. at 1027-28. The Supreme Court since has held that Lucas requires compensation
"when a regulation deprives on owner of 'all economically beneficial uses' of his
land." Tahoe-Sierra Pres. Council, Inc., v. Tahoe Reg'l Planning Agency, 535 U.S.
302, 330 (2002). The Court emphasized that Lucas "was limited to 'the extraordinary
circumstance when no productive or economically beneficial use of land is
permitted.'" Id. And this court has held that Lucas does not apply to a claimed
property interest in the right to prepay a loan. See Parkridge Investors Ltd. P'ship v.
Farmers Home Admin., 13 F.3d 1192, 1199 (8th Cir. 1994). Thus, it appears that
Lucas protects real property only.
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Even if Lucas applies to non-real property, Hawkeye still owns 724 working
TouchPlay machines. Even without TouchPlay, Hawkeye may take them to another
state (or nation) that allows monitor-vending-machine gambling. Hawkeye's President
states in an affidavit that the machines "have virtually no market value outside Iowa."
But the district court finds that Hawkeye "could sell TouchPlay machines (e.g. salvage
value) or reconfigure the TouchPlay machines for a different use." Hawkeye, 432
F. Supp. 2d at 856.2 SF 2330 did not deprive Hawkeye of "all economically beneficial
uses" of its property.
Hawkeye next proposes that SF 2330 is a regulatory taking without just
compensation under Penn Central Transportation Co. v. New York City, 438 U.S. 104
(1978). Penn Central provides "no set formula" to determine when the Fifth
Amendment requires compensation. "Whether a particular restriction amounts to a
taking depends on the circumstances of each case." Outdoor Graphics, Inc. v. City
of Burlington, 103 F.3d 690, 694 (8th Cir. 1996). Factors to consider in this "ad hoc,
factual inquiry" include: "(1) the economic impact of the regulation on the claimant;
(2) the extent to which the regulation has interfered with distinct, investment-backed
expectations; and (3) the character of the government regulation." Id. The first two
factors are"primary"; the third "may be relevant in determining whether a taking has
occurred." Lingle, 544 U.S. at 538-39.
Weighing the Penn Central factors, the district court concludes that "the cost
of banning TouchPlay machines must not be borne by the public." Hawkeye, 432
F. Supp. 2d at 858. This court agrees. As to the first prong, SF 2330 had a
"devastating economic impact" on its multi-million-dollar TouchPlay investment. But
in terms of the second prong, Hawkeye's expectations in its TouchPlay business are
discounted by: (1) the heavily regulated nature of gambling in Iowa; (2) the "as may
2
Hawkeye objects in passing to this factual finding. Mr. Armstrong's affidavit,
which the district court considered, states that the machines "have virtually no market
value outside Iowa," not that the machines have no salvage value, as Hawkeye now
contends. The district court's finding is not clearly erroneous. See FED R. CIV. P.
52(a) ("findings of fact . . . shall not be set aside unless clearly erroneous").
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be allowed by law or promulgated regulation" language in the location contracts; (3)
the statement in the Licensing Terms and Conditions that, "If a provision in this
document conflicts with an applicable statutory or regulatory provision, the statutory
or regulatory provisions preempts the conflicting provision in this document"; and, (4)
the owners' experience with South Carolina's video-poker ban. No doubt Hawkeye
hoped that the Legislature would not stringently regulate or abolish TouchPlay before
calendar year 2009 when it would have recouped its investment. However, a
"'reasonable investment-backed expectation' must be more than a 'unilateral
expectation or an abstract need.'" Ruckelshaus, 467 U.S. at 1005.
As to the third prong, the district court is correct that SF 2330 "will only
prevent a specific use of TouchPlay Machines," and that usage is "a single stick in the
bundle of property rights." Hawkeye, 432 F. Supp. 2d at 857. SF 2330 may deprive
Hawkeye's TouchPlay machines of their most immediately profitable use, but
Hawkeye still "has the right to possess, lease and sell" the machines. Id. As to
Hawkeye's business, Hawkeye can still use its trade routes and goodwill in any legal
business other than TouchPlay. Under Penn Central, SF 2330 is not a regulatory
taking of Hawkeye's property.
IV.
States shall not deprive any person of "life, liberty, or property, without due
process of law", or of "the equal protection of the laws." U.S. CONST. amend. XIV,
§ 1. Hawkeye argues that SF 2330 violates both provisions.
A.
"When an equal protection claim is neither based on a 'suspect class' or
grounded in a fundamental right, it is subject to a rational basis review." Gilmore v.
County of Douglas, 406 F.3d 935, 937 (8th Cir. 2005). SF 2330 implicates neither.
For social and economic legislation like SF 2330, "the Equal Protection Clause allows
the States wide latitude, and the Constitution presumes that even improvident
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decisions will eventually be rectified by the democratic process." City of Cleburne
v. Cleburne Living Ctr., 473 U.S. 432, 440 (1985). As to SF 2330, therefore, the
Constitution requires merely that "there is a plausible public policy reason for the
classification, the legislative facts on which the classification is apparently based may
have been considered to be true by the governmental decisionmaker, and the
relationship of the classification to its goal is not so attenuated as to render the
distinction arbitrary or irrational." Nordlinger v. Hahn, 505 U.S. 1, 11 (1992).
First, Hawkeye must show that it is "similarly situated to another group for
purposes of the challenged government action." Carter v. Arkansas, 392 F.3d 965,
969 (8th Cir. 2004). Hawkeye contends that TouchPlay is similar to all other lottery
games, and even to non-lottery amusement devices that dispense tickets redeemable
for prizes instead of cash. The district court concludes otherwise. Hawkeye, 432
F. Supp. 2d at 860. But the district court allows that "even if" TouchPlay is sufficiently
similar to other forms of gambling that SF 2330 does not affect, Hawkeye still must
negate "'every conceivable basis which might support' the classification." Id. (quoting
Gilmore, 473 F.3d at 939).
Hawkeye claims that "Appellees have been unable to offer" a reason for
banning TouchPlay. To the contrary, the Governor imposed a moratorium on new
TouchPlay licenses because of concerns about the "proliferation of gambling," and
appointed a task force to study ways to protect minors and compulsive gamblers.
Regulating gambling is a legitimate public purpose. The Legislature chose to ban
TouchPlay entirely. The district court is correct that this "incremental reform of the
gaming industry" is not "so attenuated to its asserted purpose that the distinction it
draws is wholly arbitrary and irrational." Id.; Nordlinger, 505 U.S. at 11.
Hawkeye also attacks the district court's speculation that "perhaps" the purpose
of SF 2330 "might have been" "in part" TouchPlay's "inadequate safeguards." Id.
The Equal Protection Clause "does not demand for the purpose of rational-basis
review that a legislature or governing decision maker actually articulate at any time
the purpose or rationale supporting its classification." Nordlinger, 505 U.S. at 15.
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Hawkeye cites statistics that most compulsive gambling happens in casinos, and that
there are only two confirmed cases of minors using TouchPlay machines. But "a
legislative choice is not subject to courtroom fact-finding and may be based on
rational speculation unsupported by evidence or empirical data." FCC v. Beach
Communications, Inc., 508 U.S. 307, 315 (1993). The district court properly rejects
Hawkeye's equal protection claim.
B.
Hawkeye asserts that SF 2330 also "cannot satisfy rational basis review" under
the Due Process Clause. The burden is on Hawkeye "to establish that the legislature
has acted in an arbitrary or irrational way." Koster v. City of Davenport, 183 F.3d
762, 768 (8th Cir. 1999). As discussed, SF 2330 is neither arbitrary nor irrational, and
serves a legitimate public purpose. Hawkeye's due process argument fails.
V.
On April 5, Hawkeye sued for a permanent injunction against SF 2330, before
it took effect May 4. Hawkeye asked the district court to "schedule oral argument on
the instant Motion for Preliminary Injunctive Relief on the earliest date available . .
.." During an April 6 teleconference, Hawkeye learned that Dr. Edward J. Stanek, the
Lottery president since 1985, could not testify at trial on April 12. Hawkeye
mentioned the possibility of his testifying by affidavit or video, but at trial presented
no testimony from Dr. Stanek. Two weeks later, Hawkeye moved to add his
deposition to the record. The next day (April 26), the district court denied Hawkeye's
motion, and issued its decision and order. Hawkeye appeals.
The "motion to reopen to submit additional proof is addressed to [the trial
judge's] sound discretion." Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S.
321, 331 (1971). This court reviews for abuse of discretion. Gathright v. St. Louis
Teacher's Credit Union, 97 F.3d 266, 268 (8th Cir. 1996).
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Hawkeye requested an expedited trial, knowing one week in advance that Dr.
Stanek would be unavailable on the trial date. His deposition does not contain
"testimony on the critical contract interpretation issues then pending before the court,"
as Hawkeye claims. He would add no significant information to the record, which
already contained his extensive testimony in the form of "Answers to TouchPlay
Questions posed by Oversight Committees" of the Legislature. The district court did
not abuse its discretion by denying Hawkeye's motion to re-open.
VI.
The judgment of the district court is affirmed.
______________________________
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