United States District Court, D. Arizona
Honorable John J. Tuchi United States District Judge
issue is Plaintiffs' Application for Temporary
Restraining Order with Notice (Doc. 20, Mot.), to which
Defendants filed a Response (Doc. 46, Resp.) and Plaintiffs
filed a Reply (Doc. 49, Reply). The Court heard oral argument
on Plaintiffs' Application on October 30, 2019, at which
time the Court converted the Application to a Motion for
Preliminary Injunction. (Doc. 64.)
7, 2019, the Arizona Legislature passed, and the Governor
signed into law, House Bill (“HB”) 2547, which
amended A.R.S. § 5-112 and added § 5-118-statutes
related to wagering on horseracing and dog-racing in Arizona.
(Mot. Ex. B.) Newly-enacted § 5-112(U) provides that
any simulcast of live racing into this state that originates
from outside this state . . . must be offered to each
commercial live-racing permittee in this state and additional
wagering facility in this state. Each simulcast agreement
executed pursuant to this subsection is subject to approval
by [Defendant Arizona Racing] Commission. The Commission
shall approve the simulcast agreement if the Commission
determines that the agreement is reasonable and complies with
the requirements of this subsection.
subsection goes on to state that a provider of a simulcast
for the purpose of pari-mutuel wagering “may not
engage in any anticompetitive or deceptive practice” in
offering simulcast contracts by, for example, charging
“excessive or unreasonable fees.” (Mot. Ex. B.)
Monarch Content Management LLC (“Monarch”), a
Delaware LLC, is a purchase and sales agent for more than a
dozen out-of-state horse racetracks, including Plaintiff
Laurel Racing Association, Inc., dba Laurel Park. The
racetracks, including Laurel Park, own the simulcasts of
their races, and Monarch has the right to market and sell
rights to view the simulcasts and associated content. In
Arizona, Monarch has a Simulcast Wagering Contract with TP
Racing LLLP, dba Turf Paradise. Under this contract, Monarch
provides simulcasts of its out-of-state clients' races as
well as access to pari-mutuel pools and real-time betting
odds to Turf Paradise's racetrack and its Off-Track
Betting (“OTB”) sites.
Arizona Department of Gaming issues permits to racetracks and
OTB site operators in Arizona to offer pari-mutuel wagering.
Only two entities in Arizona currently hold such permits:
Turf Paradise and Arizona Downs. Monarch and Arizona Downs
discussed entering into a simulcast wagering contract, but
Monarch decided such an agreement was not in its business
interests. In 2018, Arizona Downs asked the Commission to
consider adopting a rule requiring that all simulcasts
entering Arizona for the purpose of pari-mutuel wagering be
made available to all permittees. After several public
hearings, the Commission took no independent action, but
instead the Arizona Legislature enacted HB 2547.
Legislature established that the statutory provisions of HB
2547 were to go into effect on August 27, 2019. Monarch
maintains that it does not want to enter into a simulcast
wagering contract with Arizona Downs, yet the new statute
requires it to either enter into such a contract or stop
providing any simulcasts for the purpose of pari-mutuel
wagering in Arizona. Monarch filed this lawsuit on August 9,
2019, and filed the present Motion for injunctive relief on
August 13, 2019. In the Complaint, Plaintiffs seek a
declaration that a portion of HB 2547 is unenforceable
because (1) it is preempted by the Interstate Horseracing Act
of 1978 (“IHA”), 15 U.S.C. §§ 3001
et seq. (Compl. ¶¶ 61-62, 73-75); (2) it
compels speech in violation of the First Amendment and
Article 2, Section 6 of the Arizona Constitution (Compl.
¶¶ 71-72); (3) it violates the Contract Clause and
Article 2, Section 25 of the Arizona Constitution (Compl.
¶¶ 63-67); (4) it violates due process rights under
the Fourteenth Amendment by its vagueness and by infringing
on the freedom to contract (Compl. ¶¶ 65, 76); and
(5) it violates the Dormant Commerce Clause (Compl.
obtain a preliminary injunction, a plaintiff must show that
“(1) [it] is likely to succeed on the merits, (2) [it]
is likely to suffer irreparable harm in the absence of
preliminary relief, (3) the balance of equities tips in [its]
favor, and (4) an injunction is in the public
interest.” Garcia v. Google, Inc., 786 F.3d
733, 740 (9th Cir. 2015) (citing Winter v. Nat. Res. Def.
Council, Inc., 555 U.S. 7, 20 (2008)). The Ninth Circuit
Court of Appeals, employing a sliding scale analysis, has
also stated that “‘serious questions going to the
merits' and a hardship balance that tips sharply toward
the plaintiff can support issuance of an injunction, assuming
the other two elements of the Winter test are also
met.” Drakes Bay Oyster Co. v. Jewell, 747
F.3d 1073, 1078 (9th Cir. 2013) cert. denied, 134
S.Ct. 2877 (2014) (quoting Alliance for the Wild Rockies
v. Cottrell, 632 F.3d 1127, 1132 (9th Cir. 2011)).
Court's analysis begins and ends with the first element
of the Winter test, namely, Plaintiffs'
likelihood of success on the merits of their
first allege that certain statutory provisions contained in
HB 2547 are preempted by federal law. The Supremacy Clause of
the United States Constitution makes federal law “the
supreme law of the land.” U.S. Const. art. VI, cl. 2.
Federal preemption of state law can be either express or
implied. Fid. Fed. Sav. & Loan Ass 'n v. de la
Cuesta, 458 U.S. 141, 152-53 (1982). Express preemption
occurs when a federal statute contains an explicit preemption
provision and the challenged state law provision falls within
“the domain expressly preempted by that
language.” Medtronic, Inc. v. Lohr, 518 U.S.
470, 484 (1996) (internal quotation omitted). There are two
types of implied preemption: field preemption and conflict
preemption. Lorillard Tobacco Co. v. Reilly, 533
U.S. 525, 541 (2001). Field preemption occurs where
“the depth and breadth of a congressional scheme . . .
occupies the legislative field” in which the challenged
state law provision exists. Id. Conflict preemption
describes a situation in which “compliance with both
federal and state regulations is a physical impossibility or
where state law stands as an obstacle to the accomplishment
and execution of the full purposes and objectives of
Congress.” Fid. Fed. Sav., 458 U.S. at 152
(internal quotations omitted). An actual, as opposed to
hypothetical or potential, conflict must exist for conflict
preemption to apply. Id.
Court notes that Plaintiffs challenge HB 2547 on its face.
“A facial challenge to a legislative Act is, of course,
the most difficult challenge to mount successfully, since the
challenger must establish that no set of circumstances exists
under which the Act would be valid.” United States
v. Salerno,481 U.S. 739, 745 (1987). After
Salerno, the Supreme Court later observed, in
considering a facial challenge, that “some Members of
the Court have criticized the Salerno formulation,
[but] all agree that a facial challenge must fail where a
statute has a ‘plainly legitimate sweep.'”
Wash. State Grange v. Wash State Republican Party,552 U.S. 442, 449 (2008) (internal quotations omitted). In
deciding a facial challenge, courts “must be careful
not to go ...