NCAA v. Governor of New JerseyNCAA v. Governor of New Jersey
PRECEDENTIAL
(Intervenors in District Court)
New Jersey Thoroughbred Horsemen‘s Association, Inc., Appellant
*(Amended pursuant to Clerk‘s Order dated 12/27/18)
On Appeal from the United States District Court for the District of New Jersey (District Court No.: 3-14-cv-06450) District Court Judge: Honorable Michael A. Shipp
Argued on July 2, 2019
Before: McKEE, PORTER and RENDELL, Circuit Judges
(Opinion filed September 24, 2019)
Anthony J. Dreyer Jeffrey A Mishkin (Argued) Skadden Arps Slate Meagher & Flom 4 Times Square New York, NY 10036
Richard Hernandez William J. O‘Shaughnessy McCarter & English 100 Mulberry Street Four Gateway Center, 14th Floor Newark, NJ 07102
Counsel for Appellees
Eliott M. Berman McElroy Deutsch Mulvaney & Carpenter 570 Broad Street Suite 1500 Newark, NJ 07102
Ronald J. Riccio (Argued) McElroy Deutsch Mulvaney & Carpenter 1300 Mount Kemble Avenue P. O. box 2075 Morristown, NJ 07962
Counsel for Appellants
RENDELL, Circuit Judge:
Temporary restraining orders are not always a sure bet.
I.
Although this appeal concerns NJTHA‘s ability to recover on the bond, that is only the last shoe to drop in a lengthy saga that involves other overarching issues, including the constitutionality of PASPA, its interaction with New Jersey‘s attempts to legalize sports gambling, and the several opinions of the District Court, this Court, and the Supreme Court in the two actions litigating these issues among the same parties. Thus, a thorough review of the
A.
In 1992, Congress enacted PASPA, making it “unlawful” for “a government entity” or a person acting at the direction of a government entity “to sponsor, operate, advertise, promote, license, or authorize by law or compact . . . a lottery, sweepstakes, or other betting, gambling, or wagering scheme based . . . on” competitive sporting events.
The National Collegiate Athletic Association and four professional sports leagues1 (collectively, “Appellees” or “the Leagues“), initiated an action in federal court (“Christie I“) against the New Jersey Governor and other state officials (collectively, the “State Defendants“), seeking to enjoin the 2012 Act as violative of PASPA and arguing that they would be irreparably injured unless an injunction was issued. Because it intended to offer sports gambling at Monmouth Park racetrack, NJTHA intervened.2 The defendants did not dispute that the 2012 Act violated PASPA and instead argued, among other things, that PASPA unconstitutionally commandeered the states’ sovereign authority. The District Court disagreed, held that PASPA was constitutional, and enjoined the implementation of the 2012 Act. See Nat‘l Collegiate Athletic Ass‘n v. Christie, 926 F. Supp. 2d 551, 573, 578-79 (D.N.J. 2013). We affirmed, reasoning that PASPA does not affirmatively command the states to act and consequently did not prohibit them from repealing any existing bans on sports wagering. See Nat‘l Collegiate Athletic Ass‘n v. Christie, 730 F.3d 208, 231-32 (2013). The Supreme Court denied certiorari. Christie v. Nat‘l Collegiate Athletic Ass‘n, 573 U.S. 931 (2014).
B.
In response to our reasoning that PASPA does not prohibit states from repealing any existing bans on sports gambling, the New Jersey legislature enacted a law repealing certain state law provisions that prohibited gambling at horserace tracks and casinos (the “2014 Act“). See 2014 N.J. Sess. Law Serv. Ch. 62 (codified at
In response, the defendants relied on our reasoning in Christie I that the federal law allowed a repeal of state sports gambling prohibitions. The State Defendants specifically asserted that a grant of Appellees’ request would again raise the issue of PASPA‘s constitutionality. See A. 240-41 (“[E]ither PASPA permits States to repeal their prohibitions against sports wagering in whole or in part, as does the 2014 Act, or PASPA unconstitutionally commandeers states[‘] authority by forcing States to maintain unwanted prohibitions.“). Additionally, NJTHA argued, among other things, that the Leagues’ assertion that sports gambling would harm them was false, since they “support, participate in, and significantly profit from betting on the outcomes of their games as well as the performances of the players in their games.” Br. in Opp‘n to Pls.’ Appl. for a TRO at 35, Nat‘l Collegiate Athletic Ass‘n v. Christie, No. 3:14-cv-06450 (D.N.J. Oct. 24, 2014), ECF No. 21. NJTHA also complained that the Leagues had not posted a bond, as required by
The District Court granted the requested TRO and, in doing so, relied on our holding in Christie I that PASPA is constitutional. The Court ordered Appellees to post a $1.7 million bond, which it believed was “on the high side to avoid any potential loss to defendants.” A. 64. Shortly thereafter, it extended the TRO for an additional two weeks and increased the bond amount to a total of $3.4 million.
Just before the TRO was set to expire, the District Court converted the scheduled hearing on the Leagues’ request for a preliminary injunction into a final summary judgment hearing. The Court granted summary judgment to Appellees, holding that the 2014 Act was “invalid as preempted by PASPA.” Nat‘l Collegiate Athletic Ass‘n v. Christie, 61 F. Supp. 3d 488, 506 (D.N.J. 2014). It also entered a permanent injunction against the State Defendants, enjoining them “from violating PASPA through giving operation or effect to the 2014 [Act] in its entirety.”4 Id.
On appeal, this Court first affirmed the District Court‘s order. See Nat‘l Collegiate Athletic Ass‘n v. Governor of New Jersey, 799 F.3d 259, 261 (3d Cir. 2015). We then granted NJTHA‘s petition for rehearing en banc and again affirmed the grant of summary judgment. See Nat‘l Collegiate Athletic Ass‘n v. Governor of New Jersey, 832 F.3d 389, 392 (3d Cir. 2016) (en banc). In doing so, we determined that the 2014 Act, like its predecessor, “authorize[d]” sports gambling in violation of PASPA. Id. at 396. We explicitly rejected our reasoning in Christie I that a repeal is not an “affirmative authorization.” Id. at 396-97. Instead, we looked to “what the provision actually does” and held that, “[w]hile artfully couched in terms of a repealer, the 2014 [Act] essentially provides that, notwithstanding any other prohibition by law, casinos and racetracks shall hereafter be permitted to have sports gambling,” which “is an authorization.” Id. at 397. We then went on to again reiterate PASPA‘s constitutionality. Id. at 399.
The Supreme Court granted certiorari and reversed our en banc judgment. See Murphy v. Nat‘l Collegiate Athletic Ass‘n, 138 S. Ct. 1461, 1485 (2018). Although the Court agreed with one aspect of our ruling, namely, that a repeal of a law banning an activity constitutes an “authoriz[ation]” of that activity, id. at 1474, the Court concluded that PASPA‘s prohibition of sports gambling violated the Constitution‘s anticommandeering principle because “state legislatures are [still] put under the direct control of Congress,” id. at 1478.
C.
After prevailing in the Supreme Court, NJTHA filed a motion in the District Court for judgment on the bond.5 The Court ordered briefing on whether NJTHA was “wrongfully enjoined,” whether NJTHA was entitled to recover the full bond amount as a matter of law without proving actual loss, and whether NJTHA‘s claim for damages greater than the bond amount could be decided as a matter of law. There was no discovery on the actual loss amount.
The District Court denied NJTHA‘s motion. First, it determined that NJTHA was not “wrongfully enjoined” per
authorization, into a bond that assured any and all possibilities.” A. 19.
The District Court also held that, even if NJTHA had been wrongfully enjoined, good cause existed to deny NJTHA‘s motion. In doing so, the Court relied on Coyne-Delany Co. v. Capital Development Board, in which the Seventh Circuit held that “a prevailing defendant is entitled to damages on the injunction bond unless there is a good reason for not requiring the plaintiff to pay in the particular case” and listed factors to be considered in determining whether good reason exists. 717 F.2d 385, 391-392 (7th Cir. 1983). The District Court considered one factor that had been relied upon by the Court in Coyne, namely, a change in the law. The District Court here reasoned that the law in this case had changed, characterizing PASPA as “constitutionally valid” in 2014, when the TRO was entered, and invalid in 2018. A. 20. NJTHA timely appealed the District Court‘s order.
On appeal, NJTHA urges that the District Court was wrong on both counts. Specifically, NJTHA argues that the Court erred in holding that it was not “wrongfully enjoined” because (1) entry of the TRO was premised on the constitutionality of PASPA, which the Supreme Court ultimately held was unconstitutional, and (2) the District Court incorrectly considered the law at the time it entered the TRO, as opposed to the law at the time of the Supreme Court‘s final judgment, in making that determination. NJTHA also urges
II.
The District Court had jurisdiction pursuant to
III.
Federal Rule of Civil Procedure 65(c) states, in relevant part:
The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.
The Rule itself only implies “that when a party has been wrongfully enjoined, it may collect some or all of the security.” Global Naps, Inc. v. Verizon New England, Inc., 489 F.3d 13, 20 (1st Cir. 2007). It does not explicitly address when an enjoined party may recover on a bond, nor does it indicate whether and to what extent a district court has discretion to deny damages. Although these issues have been considered by a number of other circuits, they are matters of first impression in our Court.
A.
We first consider the meaning of “wrongfully enjoined” and whether NJTHA was wrongfully enjoined by the TRO issued in Christie II. We join the other circuits that have explicitly interpreted this term and hold that a party is wrongfully enjoined when it turns out that that party had a right all along to do what it was enjoined from doing. See Global Naps, 489 F.3d at 22 (“[A] party is wrongfully enjoined when it had a right all along to do what it was enjoined from doing.“); Slidell, Inc. v. Millennium Inorganic Chems., Inc., 460 F.3d 1047, 1059 (8th Cir. 2006) (“[A] party has been wrongfully enjoined if it is ultimately found that the enjoined party had at all times the right to do what it was enjoined from doing.“); Nintendo of Am. v. Lewis Galoob Toys, 16 F.3d 1032, 1036 (9th Cir. 1994) (“[A] party has been wrongfully enjoined within the meaning of
The parties disagree on the application of this standard to the case at hand. NJTHA urges that, because the Supreme Court ultimately held that PASPA is unconstitutional, it “turned out” that it had a right all along to conduct sports gambling and was, therefore, “wrongfully enjoined.” Appellees disagree, claiming that we should consider both the state of the law and the specific issue before the District Court at the time the TRO was granted.
Appellees’ arguments are flawed for three reasons. First, Appellees read the procedural history, as the District Court did, a bit too narrowly. One might ask, if Christie II involved only the discrete issue of “authorization” and had nothing to do with the constitutionality of PASPA, how could the Supreme Court, in granting certiorari from Christie II (after having denied it from Christie I), address the issue of the constitutionality of PASPA and declare it unconstitutional? The answer is: because the constitutionality of PASPA was inexorably intertwined with the issues in Christie II. Indeed, the State Defendants specifically urged that “either PASPA permits States to repeal their prohibitions against sports wagering in whole or in part, as does the 2014 Act, or PASPA unconstitutionally commandeers states[‘] authority by forcing States to maintain unwanted prohibitions.” And we addressed the issue of PASPA‘s constitutionality in Christie II in much more than cursory fashion, although noting that it had been specifically ruled upon in Christie I. Even though the case before the Supreme Court emanated from two discrete actions, the Supreme Court clearly considered the cases to be the proverbial “whole ball of wax.” That the District Court parsed the issues based upon the limited nature of the subject matter it believed it addressed in the TRO order does not control the fact that the constitutionality of PASPA was imbedded in that subject matter by virtue of our opinion in Christie I.7
Second, Appellees’ view conflates whether NJTHA was “wrongfully enjoined” with whether the District Court abused its discretion in issuing the TRO. In Sprint Communications Co. v. CAT Communications International, Inc., we made clear that “wrongfully enjoined” “does not necessarily [mean] that the district court abused its discretion in granting the relief in the first place.”8 335 F.3d 235, 242 n.9 (quoting Blumenthal, 910 F.2d at 1054) (internal quotation marks omitted) (alteration in original). Instead, as noted above, whether a party is wrongfully enjoined depends
Perhaps one could plausibly read
of a past tense verb phrase—found to have been—is important. See U.S. v. Wilson, 503 U.S. 329, 333 (1992) (“Congress’ use of a verb tense is significant in construing statutes.“). It suggests that we look back at the propriety of the injunction from the vantage point of the conclusion of the litigation, rather than stepping into the shoes of the District Court at the time the injunction was issued. If “wrongfully enjoined” concerned only the propriety of the issuance of an injunction, then
much to X and Y‘s surprise, finds that the district court‘s discussion of Exception B is irrelevant because Y does not violate the general terms of Statute A. Was Y wrongfully enjoined? Yes. While the district court‘s reasoning may have been correct, i.e., that Y‘s conduct does not fit within the terms of Exception B, and the court may have correctly interpreted the legal issue that was pressed by the parties, nevertheless, Y was still wrongfully enjoined, because it turned out that Y had a right to do all along what he was enjoined from doing.
Similarly, in Nintendo, the enjoined defendant introduced defenses at trial that it had not asserted at the preliminary injunction stage. 16 F.3d at 1034. The defendant ultimately prevailed. Id. That the new defenses were not considered when the TRO was entered but may have affected the final outcome of the case did not preclude a holding that the defendant had been
In their final argument, Appellees assert that accepting NJTHA‘s argument would require us to retroactively apply the Supreme Court‘s holding that PASPA is unconstitutional. Indeed, in the mine-run of cases where a statute has been held to be unconstitutional, the issue of its retroactive application to invalidate previous final orders necessarily arises. See Chicot Cty. Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 374 (1940) (instructing that “[q]uestions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application” be considered when determining whether a new rule applies retroactively). But that body of caselaw, and indeed retroactivity itself, is not implicated when we are asked to determine whether a party was “wrongfully enjoined.”11 Did it turn out that NJTHA had the right all along to do what they were enjoined from doing? There is no way that the answer to that question could be “no.” That answer would render the bond provision, indeed the concept of “wrongfully enjoined,” entirely meaningless. The lookback that is envisioned in the Rule is not an issue of retroactivity, or applying a ruling to undo or affect previous rulings; instead, it requires a simpler inquiry as to whether, if we knew then what we know now, should NJTHA have been restrained? This does not require the court at the bond hearing to ask, as the dissent seems to urge, whether the TRO was wrongfully issued, or to nullify any
intervening action as invalid. See, e.g., Dissenting Op. at 5 n.3. Here the “full deliberation” urged by the dissent came with the Supreme Court‘s consideration of the case as a whole, and its declaration of PASPA‘s unconstitutionality. Because the answer to that question is “no,” the answer to whether it was wrongfully restrained must be “yes.”
Here, PASPA provided the only basis for enjoining NJTHA from conducting sports gambling, and the Supreme Court ultimately held that that law is unconstitutional. Therefore, NJTHA had a right to conduct sports gambling all along. We conclude that NJTHA was wrongfully enjoined and should be able to call on the bond.
B.
We next evaluate whether and to what extent a district court has discretion to deny bond damages and whether doing so was proper in this case. A clear majority of our sister circuits have held that there is a rebuttable presumption that a wrongfully enjoined party is entitled to recover provable
Appellees, however, urge us to adopt the approach espoused by the Fifth Circuit in H&R Block, Inc. v. McCaslin, which provides, “The awarding of damages pursuant to an injunction bond rests in the sound discretion of the court‘s equity jurisdiction.” 541 F.2d 1098, 1099 (5th Cir. 1976) (per curiam). But the Fifth Circuit stands alone on this issue,12 and
the viability
Although it relied on Coyne in its analysis on this issue, the District Court failed to apply the presumption in favor of recovery that the Court in Coyne applied. Nor did the District Court note the main thrust of the Seventh Circuit‘s reasoning in that case, namely, that a district court is required to “consider and evaluate the full range of factors . . . that would be relevant under the proper standard.” Coyne, 717 F.2d at 392. These include, but are not limited to, a defendant‘s failure to mitigate damages, Nokia Corp., 645 F.3d at 559, the reasonableness of the damages sought, id., the outcome of the underlying suit, Coyne, 717 F.2d at 392, and the parties’ resources, id.13
Only after listing and discussing these factors did the Court in Coyne reference the factor relied upon by the District Court here to deny damages, namely, a change in the law. See id. at 392. The Court there stated, “We do not believe that a change in the law is always a good ground for denying costs and injunction damages to a prevailing party, but it is a legitimate consideration, perhaps especially where the prevailing party is a state agency that benefited from a change in the law of its state.” id. at 392-93.
None of the factors cited in Coyne rebut the presumption that NJTHA is entitled to recover bond damages in this case. Appellees have not claimed that NJTHA has failed to mitigate its damages or that the bond amount is unreasonable,14 and the underlying suit resulted in a judgment in NJTHA‘s favor. And, as to a change in the law, this case does not involve the type of “change in law” contemplated by Coyne. There, the district court, in issuing the preliminary injunction, had relied on an intermediate state appellate court decision holding that an indirect bidder had a property right in being allowed to bid on a public contract. See Coyne, 717 F.2d at 389. While the suit was pending, the state Supreme Court
reversed course and held that no such property right existed. See id. Here, there was no change in the state of the law while the case was in the federal court. Instead, the defendants in this case successfully challenged the constitutionality of PASPA on appeal, such
IV.
We will vacate the denial of NJTHA‘s motion for judgment on the bond and damages, and remand for the District Court to determine the amount to be collected.15
PORTER, Circuit Judge, dissenting.
I disagree with the majority‘s holding that the New Jersey Thoroughbred Horsemen‘s Association (“NJTHA“) was wrongfully enjoined for two reasons. First, the Supreme Court invalidated the Professional and Amateur Sports Protection Act (“PASPA“) on constitutional grounds, but the temporary restraining order was not based on PASPA‘s constitutionality. Instead, the District Court considered whether New Jersey law complied with PASPA itself. And even in striking down PASPA, the Supreme Court agreed with the District Court on that statutory question. Second, I disagree that the Supreme Court‘s decision holding PASPA unconstitutional necessarily means that the NJTHA was wrongfully enjoined under the PASPA-based TRO issued four years earlier. This holding requires indulging the fiction—not available to the District Court that issued the TRO—that PASPA never existed at all.
I
There were two proceedings involving these parties. The first one, Christie I, involved a straight-on constitutional challenge. The second one, Christie II, presented a much narrower statutory question. The majority ably recites this procedural history, but the different issues involved in the two proceedings deserve highlighting.
Christie I started when the major professional sports leagues (collectively, the “Leagues“) banded together to oppose a 2012 New Jersey law allowing sports betting at horse racetracks and casinos. The Leagues argued that the law violated PASPA. In response, the defendants directly challenged “PASPA‘s constitutionality; specifically, whether it violated the Commerce Clause, the Tenth Amendment, the Due Process Clause and related Equal Protection principles, or the Equal Footing Doctrine.” Nat‘l Collegiate Athletic Ass‘n v. Christie, No. CV146450MASLHG, 2018 WL 6026816, at *1 (D.N.J. Nov. 16, 2018). In early 2013, the district court denied the defendants’ constitutional challenge. 926 F. Supp. 2d 551, 579 (D.N.J.). It upheld PASPA and permanently enjoined New Jersey officials from enforcing the 2012 law. Id. We affirmed and the Supreme Court denied certiorari. 730 F.3d 208, 215 (3d Cir. 2013); 573 U.S. 931 (2014).
The second proceeding—Christie II—started in 2014, when New Jersey enacted a revised law to repeal restrictions on gambling. Soon after the 2014 law passed, the Leagues again sued, seeking to enjoin implementation of the 2014 law. The District Court granted the Leagues’ TRO request but required them to post a security bond under
In November 2014—after the TRO had been in place for 28 days the District Court granted summary judgment for the Leagues. 61 F. Supp. 3d 488, 491 (D.N.J. 2014). Properly applying our Christie I decision, it held that the 2014 law authorized sports betting, which violated PASPA. Id. at 505. The District Court rejected the characterization of the 2014 law as a more limited, permissible successor:
While styled as a partial repeal, the 2014 Law would have the same primary effect of the 2012 Law—allowing sports wagering in New Jersey‘s casinos and racetracks for individuals age twenty-one and over but not on college sporting events that take place in New Jersey or on New Jersey college teams. This necessarily results in sports wagering with the State‘s imprimatur, which goes against the very goal of PASPA—to ban sports wagering pursuant to a state scheme.
Once again, the District Court‘s decision was appealed, and once again, we affirmed in a panel decision. 799 F.3d 259 (3d Cir. 2015). We re-heard the case en banc and once more affirmed the District Court. We explained that although the 2014 law was “artfully couched in terms of a repealer,” it “essentially” legalized gambling. 832 F.3d 389, 397 (3d Cir. 2016) (en banc). Under PASPA, “[t]his is an authorization.” Id.
The losing parties, including the NJTHA, again sought review from the Supreme Court. This time, they got it. In May 2018, the Supreme Court held that PASPA unconstitutionally commandeered state legislatures, violating the Tenth Amendment. Murphy v. Nat‘l Collegiate Athletic Ass‘n, 138 S. Ct. 1461, 1478 (2018). But the Supreme Court agreed with the District Court (and this Court) on the issue litigated in Christie II: “[w]hen a State completely or partially repeals old laws banning sports gambling, it ‘authorize[s]’ that activity.” Id. at 1474 (alteration original).
In the wake of Murphy, the NJTHA asked the District Court to award it the $3.4 million bond. The NJTHA argued that the Supreme Court‘s holding that PASPA was unconstitutional meant that the NJTHA was wrongfully enjoined for 28 days in late 2014. The District Court rejected this request and the NJTHA appealed.
II
Under
The majority opinion aligns our Court with others that have interpreted
That is because here, no court at any point “found” the NJTHA “to have been wrongfully enjoined or restrained.”
Given the unanimity on this statutory point, the NJTHA must rely on a far-reaching view of retroactivity to support its claim that it was wrongfully enjoined. The majority purports to sidestep this point, asserting without any explanation that retroactivity is not implicated in this analysis at all. In its view,
commandeering issue means that PASPA never existed—in other words, the statute was void ab initio. That questionable assumption is the only way to explain the majority‘s assertion that the NJTHA had the right “all along” to conduct sports gambling. Maj. Op. 13. But the Supreme Court has long cautioned against stretching this concept too far. See Chicot Cty. Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 374 (1940) (“The actual existence of a statute, prior to [a determination of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration.“).3 The majority thus commits the “writ-of-erasure fallacy,” or the mistaken “assumption that a judicial pronouncement of unconstitutionality has canceled or blotted out a duly enacted
Such an expansive view of retroactivity in this context is out of step with
That full deliberation separates this case from the usual instances of a party being found to have been wrongfully enjoined. Typically, this finding occurs after the trial court‘s
merits adjudication following the temporary injunction.4 The finding may also be made by an appellate court reversing a temporary injunction. See Div. No. 1, Detroit, Bhd. of Locomotive Engineers v. Consol. Rail Corp., 844 F.2d 1218, 1225 (6th Cir. 1988) (collecting cases). But the majority has not cited any case in which an appellate decision like Murphy—agreeing with the basis for the injunction while invalidating the law on other grounds—has supported a finding that a party was wrongfully enjoined.
*****
In sum, I see little support for holding that a party was wrongfully enjoined when the District Court faithfully followed our precedent—as we and the Supreme Court acknowledged even as the Supreme Court invalidated the underlying law on different grounds. Had the District Court based the TRO on the constitutional question ultimately decided by the Supreme Court, I would view this matter differently. But that is not what happened here. And without an actual finding that a party was wrongfully enjoined,
Notes
In Page we rejected a claim that
Rule 65(c) automatically entitled defendants to recovery on the bond on a showing of damage, regardless of the equities of the case. We clearly regarded those equities as leaning toward the plaintiff; although we spoke loosely of the plaintiff‘s “good faith“, arguably suggesting that that was enough to negate recovery on the bond, we also noted that the injunction might never have been granted if the government defendant had brought a specific study to the court‘s attention in a timely fashion. Accordingly, we do not read Page as adopting a maverick view but rather as in accord with the accepted presumption in favor of recovery. Nat‘l Kidney, 958 F.2d at 1134 (citations omitted), cert. denied, 506 U.S. 1049 (1993).