971 F.3d 1021
9th Cir.2020Background
- Arizona permits pari‑mutuel wagering only at live tracks and licensed off‑track betting sites (OTBs); simulcasts are telecasts of live races used for pari‑mutuel wagering and are regulated by state agencies.
- A.R.S. § 5‑112(U) (2019) requires any simulcast originating outside Arizona that is offered in the state to be offered to each Arizona live‑racing permittee and OTB and bars anticompetitive or deceptive practices by simulcast providers.
- Monarch Content Management (a simulcast purchaser/sales agent) and Laurel Park (an out‑of‑state racetrack) declined to provide simulcasts to Arizona Downs’ OTBs; Monarch supplies simulcasts to other Arizona permittees.
- Monarch and Laurel Park sued state regulators, arguing § 5‑112(U) is preempted by the Interstate Horse Racing Act (IHA) and violates the First and Fourteenth Amendments, the dormant Commerce Clause, and the Contracts Clause; they sought a preliminary injunction.
- The district court denied the preliminary injunction; the Ninth Circuit affirmed, holding plaintiffs were unlikely to succeed on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Federal preemption under the IHA | § 5‑112(U) conflicts with IHA by effectively forcing simulcast access and interfering with host track/commission consent required for interstate off‑track wagering | IHA preserves states’ primary regulatory role over gambling; Arizona law regulates simulcast distribution (not the IHA’s consent veto) and does not make compliance with both laws impossible | No preemption: statutes govern different actors; state law does not frustrate IHA objectives or negate IHA veto rights |
| First Amendment (commercial speech/content) | § 5‑112(U) regulates expressive simulcast content and is a content‑based restriction | The statute regulates commercial conduct (offers to sell simulcasts), not the expressive content; any speech impact is incidental | No First Amendment violation: regulation is of conduct/offers, not content of simulcasts |
| Fourteenth Amendment (vagueness) | Terms like "anticompetitive or deceptive practice" are impermissibly vague | Economic regulations get relaxed vagueness review; statute supplies definitional factors and clearly proscribes obvious conduct (refusing to offer simulcasts to some customers) | Not facially vague under less strict test for economic regulation |
| Dormant Commerce Clause | State rule burdens interstate commerce and discriminates against out‑of‑state interests | IHA preserves state authority over gambling; Arizona treats in‑state and out‑of‑state simulcast providers the same and does not regulate extraterritorially | No dormant Commerce Clause violation: statute regulates even‑handedly and is authorized by federal law's preservation of state power |
| Contracts Clause | § 5‑112(U) substantially impairs contracts (e.g., Monarch’s arrangements) | Statute regulates offers to do business in Arizona; it does not alter parties’ termination rights or directly impair contractual obligations | No substantial impairment shown; Contracts Clause claim fails |
Key Cases Cited
- Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363 (establishes impossibility and obstacle as conflict‑preemption tests)
- Chae v. SLM Corp., 593 F.3d 936 (presumption against preemption for state police powers)
- Wyeth v. Levine, 555 U.S. 555 (requires a clear and manifest purpose to preempt state regulation of traditional state powers)
- Horseman’s Benevolent & Protective Ass’n v. DeWine, 666 F.3d 997 (IHA protects host parties’ veto rights; state laws that negate veto conflict with IHA)
- Gulfstream Park Racing Ass’n v. Tampa Bay Downs, 479 F.3d 1310 (state simulcast access rules held consistent with the IHA)
- Expressions Hair Design v. Schneiderman, 137 S. Ct. 1144 (distinguishes regulation of conduct/offers from regulation of speech)
- Vill. of Hoffman Estates v. Flipside, 455 U.S. 489 (vagueness standards are relaxed for economic regulation)
- Pike v. Bruce Church, 397 U.S. 137 (dormant Commerce Clause balancing test for even‑handed state regulation)
- Northeast Bancorp, Inc. v. Bd. of Governors, 472 U.S. 159 (federal authorization can defeat dormant Commerce Clause challenges)
- Allied Structural Steel Co. v. Spannaus, 438 U.S. 234 (context for Contracts Clause analysis)