MEMORANDUM AND ORDER
Plaintiffs, licensors and manufacturers of sports and entertainment trading cards (collectively “licensors and manufacturers”), bring this consolidated action for a declaratory judgment and an injunction against a defendant class of alleged sports and entertainment trading card purchasers (the “card purchasers”). The licensors and manufacturers seek a declaration that the card purchasers lack standing to sue for violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1964(c), because no card purchaser has shown that he has been “injured in his business or property by reason of’ acts allegedly in violation of RICO, 18 U.S.C. § 1962(c), committed by licensors and manufacturers by engaging in a “pattern of racketeering activity” through acts of gambling “chargeable under State law and punishable by imprisonment for more than one year.” 18 U.S.C. § 1961(1)(A).
The card purchasers have moved to dismiss the complaint under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) or, alternatively, to transfer or stay this action.
I
The licensors own or have the right to license the names, symbols, and other marks of their respective sports leagues and member teams for use in the design and manufacture of sports trading cards. The manufacturers make, market, and distribute the cards.
Trading cards, when sold in retail stores, generally come in sealed packages containing between five and twelve cards. The identity of the cards is unknown until the package is opened. Some packages contain randomly placed limited edition cards, also known as “insert” cards, that have attributes, such as more colorful designs or depictions of more notorious persons, making those cards generally more attractive to card purchasers. The odds of receiving an insert card are printed on the packaging.
Collectors actively buy, sell, and trade sports cards in a secondary market consisting primarily of card stores, card conventions, and the Internet. Insert cards, because of their appeal, often, but not always, possess a higher value in this secondary market.
For the last three years, the card purchasers, represented chiefly by the attorneys in this case, have shopped around to find a forum “friendly” to their claims in order to induce a financial settlement. Card purchasers have brought thirteen virtually identical class action lawsuits in four different forums against numerous li-censors and manufacturers of entertainment and sports trading cards, including, among others, the licensors and manufacturers in this case, claiming that the marketing and placement of insert cards constitute an unlawful gambling activity in violation of RICO.
From July 1996 through September 1996, the attorneys filed seven suits in the Eastern District of New York against li-censors and manufacturers of trading cards, seeking treble damages, costs and attorneys’ fees for “injury” to the card purchasers’ “property” under RICO, 18 U.S.C. § 1964(c).
The attorneys also filed one suit in the Southern District of California against The *49 Upper Deck Co., one suit in the Northern District of Texas against Pinnacle Brands, Inc. (“Pinnacle”), and one suit in the District of New Jersey against The Score Board, Inc. Each of these three defendants make, market, and distribute trading cards and are not parties to the present action.
All seven suits in the Eastern District of New York and the one suit in the Northern District of Texas were dismissed for lack of standing under RICO. The Fifth Circuit affirmed the Texas District Court’s dismissal.
See Price v. Pinnacle Brands, Inc.,
The suit in the District of New Jersey was dismissed as to two of its claims and was dismissed as to a third claim without prejudice. The attorneys in that case subsequently filed an amended complaint. Its present status is unknown.
Meanwhile the card purchasers’ attorneys brought a similar action in the United States District Court for the Southern District of California. That court dismissed the original complaint with leave to amend,
see Schwartz v. The Upper Deck Co.,
After the California District Court’s decision denying the motion to dismiss, the attorneys filed two more class action suits there against Pacific Trading Cards and Pinnacle, manufacturers of trading cards not parties in this action. Pinnacle had just obtained a dismissal in the Texas district.
On September 16, 1998, counsel for the card purchasers sent copies of a draft complaint to the licensors and manufacturers in this case and threatened to file new suits against them in the Southern District of California unless they agreed to pay a financial settlement. On September 22, 1998, and September 29, 1998, the li-censors and manufacturers responded by filing the present declaratory judgment actions against the defendant class of card purchasers. The actions were later consolidated.
The attorneys for the card purchasers then followed through on their threat by filing suits in the California District Court against various licensors and manufacturers, including, among others, those sued in this District. These California actions are currently stayed pending the outcome of this declaratory judgment action.
Consistent with its earlier decisions, the California District Court denied motions to dismiss other complaints asserting substantially the same allegations as were contained in the previous cases.
See Dumas v. Fleer/Skybox Int’l, LP,
No. 99cv1739-B, slip op. (S.D.Ca. Dec. 21, 1999);
Dumas v. Major League Baseball Properties, Inc.,
II
In order to put in context the basic difference between the New York courts’ holdings with the contrary holdings of the California District Court, it is useful to set forth the reasoning of both sides as to whether the card purchasers have suffered a “property injury” within the meaning of RICO, 18 U.S.C. § 1964(c).
Congress enacted RICO “to combat organized crime, not to provide a federal cause of action and treble damages” for personal injuries.
Oscar v. University Students Co-operative Assoc.,
“Racketeering activity” means, among other things, “any act ... involving ... gambling ... which is chargeable under State law and punishable by imprisonment for more than one year.” 18 U.S.C. § 1961(1). A “pattern of racketeering activity” must include “at least two acts of racketeering activity_” 18 U.S.C. § 1961(5).
To enforce RICO the statute provides for extensive fínes and other criminal penalties for violations of § 1962, including the forfeiture of property and imprisonment of up to a maximum of life. See 18 U.S.C. § 1963. RICO also enables the United States Attorney General to institute civil proceedings to restrain violations of § 1962 and to obtain orders requiring offenders to divest themselves of any interest in any enterprise. See 18 U.S.C. § 1964(a),(b).
In addition to the harsh and sweeping criminal and civil sanctions obtainable by federal officials, RICO provides in § 1964(c) that “[a]ny person injured in his business or property by reason of a violation of section 1962 ... may sue therefore in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee....” 18 U.S.C. § 1964(c) (emphasis added). To have standing to sue under this civil RICO provision, the plaintiff must adequately allege an “injury” from a racketeering act to his “business or property.”
The distinguished Senior Judge in the California District case held that the card purchasers stated a claim under RICO because the manufacture and sale of packs of trading cards, some containing insert cards, amounted to a “pattern of racketeering activity” employed in violation of 18 U.S.C. § 1962(c).
See Schwartz II,
The California District Court held that the card purchasers satisfied § 1964(c)’s “injury” requirement because the li-censors’ and manufacturers’ illegal lottery schemes caused injury to the card purchasers’ “property.” As the court explained, the price paid for a pack of cards contained two components: a portion was for “regular” cards and a portion was for the chance to receive an insert card.
Schwartz II,
The California court’s theory seems to be that the New York statutory right of a card purchaser to recover gambling losses renders the consideration paid for the chance “lost property,” and that this creates a RICO “property injury.” Apparently without such a New York statutory right, card purchasers would lack the necessary standing.
See Schwartz I,
In fact, no statutory provision in New York law penalizes the individual sale to a “person” of a pack of trading cards with “imprisonment for more than one year.” The only provision that might apply to a sale to a “person” of a pack of trading cards is Penal Code section 225.05, which makes someone guilty of the misdemeanor offense of “promoting gambling in the second degree when he knowingly advances or profits from unlawful gambling activity.” But such activity is not “racketeering activity” under section 1961(1) of RICO because it constitutes a misdemeanor and not a felony, and so is not “punishable by imprisonment for more than one year.”
New York Penal Code section 225.10, which the California District Court cites, makes a person guilty of the felony offense of “promoting gambling” in the first degree, but only when he knowingly advances or profits from unlawful gambling activity by (1) “engaging in bookmaking to the extent that he receives or accepts in any one day more than five bets totaling more than five thousand dollars” or (2) receives in connection with a “lottery” (a) money from a person “other than a player whose chances or plays are represented by such money,” or (b) “more than five hundred dollars in any one day of money played in such scheme or enterprise.” New York Penal Code § 225.10.
Though “promoting gambling” in the first degree is a felony and therefore “punishable by imprisonment for more than one year,” there is nothing in New York Penal Code § 225.10 that would on its face punish a manufacturer or licensor for the sale of a pack of cards to a single “person” unless such a pack of cards were sold for more than five hundred dollars. In the pleadings of the card purchasers no claim of an individual card purchaser asserts that the price for a pack, let alone the “price” for the “chance” of obtaining an insert card, was more than five hundred dollars.
In short, a sale in New York of such a pack to an individual card purchaser does not meet the RICO definition of an “act” of “racketeering activity”. 18 U.S.C. § 1961 and 1962(c). It follows that in New York no card purchaser has been “injured” in his or her “business or property” as defined in section 1964(c) of RICO.
Even if the sale of a pack of cards to an individual “person” were considered “racketeering activity,” this court does not adopt the California District Court’s analysis as to the nature of the actual transaction and the New York statutory right to recover gambling losses.
A card purchaser buying a pack of cards enters into a bargain with the licensors and manufacturers whereby in return for payment the purchaser will receive a random assortment of regular cards and a chance to receive an insert card. This bargain delivers actual value to each party because the chance itself is of value regardless of whether or not the card purchaser later suffers a “loss.”
Cf. In re Chomakos,
The illegality and voidness of the gambling transaction,
see
N.Y. Gen. Oblig. L.
*52
§ 5-411, does not change this fact. The only effect this section has on the exchange is that it prevents the parties from seeking legal enforcement of the bargain. But the unavailability of such enforcement does not mean that the exchange giving rise to the present lawsuits had no economic value to the parties, or that it had a negative economic value to the card purchasers. The purchasers received a benefit regardless of the transactions’ illegality or voidness. The situation might be different if the licensors and manufacturers caused some tangible financial loss by misrepresenting the odds or by some other swindle,
see, e.g., In re Taxable Municipal Bond Securities Litigation,
The recoverability of the money spent means only that card purchasers have a claim under state law. But as the Fifth Circuit stated: “it does not follow@ that any injury for which a plaintiff might assert a state law claim is necessarily sufficient to establish a claim under RICO.”
See Price,
In this case, the New York statutory right to recover gambling losses would create a RICO “property” injury only if that statutory right retroactively transformed into lost property the consideration paid for the chance.
Certainly the statutory right to recover gambling losses does hot mean that any consideration paid for a gambling transaction is inherently injurious. The Constitution of the State of New York authorizes certain “lotteries” and “pari-mutuel betting on horse races” that are “operated by the state” or “prescribed by the legislature,” as well as certain bingo- or lotto-type “games of chance” run by “bona fide religious, charitable or non-profit organizations,” where “no single prize shall exceed two hundred fifty dollars.” N.Y. Const., art: I, § 9.
The New York Court of Appeals explained, in
Intercontinental Hotels Corp. v. Golden,
The
Golden
court answered affirmatively the question of whether gambling debts validly entered into in other jurisdictions were enforceable in New York, even though the same gambling transaction would be illegal in New York.
See Golden,
The
Golden
court explained that the critical distinction between acceptable and unacceptable gambling was whether the activity had any “assurance of fairness or honesty in the operation of the gambling devices.”
Id.
at 15,
*53
A more particular issue is the nature and purpose of the New York statutory right to recover gambling losses and what effect it has on the gambling transaction. At common law, “persons gambling together were considered in
pari delicto
and the law left them to their own remedies,”
Aiello v. Queens County Jockey Club,
To remedy this situation, the legislature enacted the statutory right to recover gambling losses “to discourage the business of selling lottery tickets.”
Grover v. Morris,
What these authorities make clear is that the statutory right to recover gambling losses is directed only toward the purpose of eliminating the lottery promoter’s financial incentive. Such a statutory right does not have any retroactive effect on the card purchaser’s consideration or by itself indicate that gambling transactions are inherently injurious.
Aiello,
While the complaining card purchasers did not find an insert card in the packs' they bought, and while they and their attorneys may have looked forward to harvesting a ripe plum at relatively little cost, they certainly have not been the victims of a nationwide scourge requiring a nationwide remedy.
Ill
The card purchasers argue for dismissal of the action against the class on the grounds that (1) there is no federal question jurisdiction; (2) there is no actual controversy between the parties; (3) plaintiffs cannot receive injunctive relief under the Declaratory Judgment Act; (4) the defendant class is impermissible under the Federal Rules of Civil Procedure; (5) this court should in its discretion decline to hear this declaratory judgment action; and, alternatively, (6) this court should transfer this action to California, or stay this action pending the outcome of the California actions.
Federal Question Jurisdiction
The card purchasers argue that this court lacks subject matter jurisdiction because the declaratory judgment action does not satisfy the federal question requirements of 28 U.S.C. § 1331. They point out that the Declaratory Judgment Act, 28 U.S.C. § 2201, is not a jurisdictional statute and that plaintiffs lack an independent basis for jurisdiction.
Though § 2201 does not provide federal question jurisdiction,
see West 14th Street Commercial Corp. v. 5 West 14th Owners Corp.,
In this case, the card purchasers threatened to sue the licensors and manufacturers under RICO. Further, they acted on that threat and filed suit in the Southern District of California. Clearly their threat was real. This court has federal question jurisdiction under § 1331.
The card purchasers respond that the threatened suit’s federal character matters only in intellectual property disputes. The cases show otherwise. Federal question jurisdiction is clearly not so limited.
See, e.g., West 14th Street,
Actual Controversy
The card purchasers also argue that the licensors and manufacturers lack standing to sue because they have not alleged an “injury in fact.” According to the card purchasers the licensors and manufacturers “claim that they are being extorted” by the card purchasers in the California actions so as to be “compelled to incur the cost of defending against the pending class actions.” The card purchasers would have the court believe that the licensors and manufacturers claim that their injury is defending against a “preexisting action.”
This characterization is inaccurate. Whether an actual controversy exists depends on whether “ ‘the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’ ”
Kidder, Peabody,
Injunctive Relief
The card purchasers also argue that this court cannot redress the harms alleged in the case because RICO does not authorize injunctive relief. But the action is not brought under RICO. It is brought under the Declaratory Judgment Act. In-junctive relief under that act is available regardless of its unavailability under RICO.
See
28 U.S.C. § 2202;
Powell v. McCormack,
Permissibility of Defendant Class
The card purchasers argue that neither Rule 23(b)(1) or (2) can provide grounds for the defendant class because the injunctive remedy sought could not be enforced against absent class members and because granting declaratory relief without notice and the opportunity to opt *55 out to class members would violate their due process rights.
The Due Process Clause does not require notice or the opportunity to opt out to absent class members in a Rule 23(b)(1) or (2) class action so long as the named defendants adequately represent the class in the suit.
See Marcera v. Chinlund,
Phillips Petroleum Co. v. Shutts,
In any event, there is little doubt whether the named defendants would adequately represent the class. Each class member shares a common interest in his or her standing to sue under RICO. Thus representatives defending their own interests would also protect the class’s interests.
See Monaco v. Stone,
The adequacy of representation also refutes defendants’ other arguments that any injunctive relief would be unenforceable against absent class members. The Second Circuit has clearly stated that “due process permits binding absentees to a judgment with respect to common questions of law if they have been adequately represented in the suit.”
Marcera,
Defendants’ concerns about the defendant class do not provide a basis for dismissal. The court does not reach other issues as to the permissibility of the class. Class certification is not yet at issue.
Discretionary Dismissal and Alternative Request for Transfer or Stay of Action
The card purchasers ask this court to use its discretionary authority to decline to hear this declaratory judgment action. As justifications they say that the California actions will resolve all the issues and that the licensors and manufacturers filed this anticipatory suit to forum-shop. Defendants alternatively request a transfer of this action to California, or a stay pending resolution of the California actions.
Defendants’ requests have been rendered moot in light of the California District Court’s recent decision to stay the California actions pending this court’s resolution of the present action.
Dumas v. Major League Baseball Properties, Inc.,
In any event, the circumstances do not warrant any discretionary declination, transfer or stay order. Almost all of the named parties and many of the relevant witnesses and documents are located in New York. Furthermore, the card purchasers’ lament that they are the victims of forum-shopping can hardly be serious. They initially chose this district to litigate their claims and have not been denied their choice of forum.
More fundamentally, defendants’ onslaught of litigation against licensors and manufacturers of trading cards makes this an important and particularly appropriate case for declaratory judgment. As the Second Circuit put it: “ ‘[A] declaratory judgment action should be entertained
*56
when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and ... when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.’ ”
Kidder, Peabody,
Defendants and their law firms have brought thirteen separate cases in four different forums, at times re-filing suits against opponents previously victorious in other forums, all in an effort to coerce financial settlements. This harassment and intimidation has doubtlessly created uncertainty, insecurity, and controversy. A declaration of the legal relations between the defendant class and plaintiffs would afford relief, both to the plaintiffs and to the federal court system.
The card purchasers first filed their suit in the Eastern District of New York. There is no more appropriate district to try the issues.
IY
Defendants’ motion to dismiss the complaint is denied.
So ordered.