Unites States v. Pokerstars, et al
Filing
221
MEMORANDUM OF LAW in Support re: 220 MOTION to Stay In Rem Claims As To Domain Defendants.. Document filed by Commonwealth of Kentucky, ex. rel. J. Michael Brown, Secretary, Justice and Public Safety Cabinet. (Attachments: # 1 Exhibit Second Amended Complaint, # 2 Exhibit Order Of Seizure Of Domain Names, # 3 Exhibit Findings Of Fact & Conclusions Of Law, # 4 Exhibit Service Letter to GoDaddy, # 5 Exhibit Service Letter to Network Solutions, # 6 Exhibit Service Letter to Nom-IQ, # 7 Exhibit Service Letter to Register.com, # 8 Exhibit Notice of Filing Registrar Certificate, # 9 Exhibit Opinion & Order, # 10 Exhibit iMEGA I Opinion, # 11 Exhibit iMEGA II Opinion, # 12 Exhibit Order Of Forfeiture Of Domain Defendants)(Lycan, David)
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320 S.W.3d 692
(Cite as: 320 S.W.3d 692)
Supreme Court of Kentucky.
INTERACTIVE MEDIA ENTERTAINMENT
AND GAMING ASSOCIATION, INC., Petitioner,
v.
Hon. Thomas D. WINGATE, Judge, Franklin Circuit
Court; Jack Conway, Attorney General, Commonwealth of Kentucky, Respondents.
and
Commonwealth of Kentucky, ex rel. J. Michael
Brown, Secretary, Justice and Public Safety Cabinet,
Real Party In Interest,
and
Interactive Gaming Council, a Non-Profit Trade Association, Petitioner,
v.
Hon. Thomas D. Wingate, Judge, Franklin Circuit
Court, Respondent.
and
Commonwealth of Kentucky, ex rel. J. Michael
Brown, Secretary, Justice and Public Safety Cabinet,
Real Party In Interest.
Nos. 2010-SC-000212-TG, 2010-SC-000266-TG.
Sept. 23, 2010.
Background: Commonwealth filed in rem action
seeking transfer of 141 domain names that allegedly
hosted illegal gambling activities. The Circuit Court,
Franklin County, Thomas D. Wingate, J., entered
order for seizure of domain names, and denied motions of alleged domain name owners and gaming
trade associations to intervene and dismiss order.
Alleged owners and associations filed for writ of
prohibition to enjoin forfeiture. The Court of Appeals,
2009 WL 142995, issued writ. Commonwealth appealed. The Supreme Court, 306 S.W.3d 32, reversed
and remanded. Subsequently, associations filed renewed petition for writ of prohibition in the Court of
Appeals. The Court of Appeals granted associations'
motions to recommend transfer.
Holding: The Supreme Court held that associations
were not entitled to file renewed petition in Court of
Appeals.
Transfer accepted; writ denied.
Minton, C.J., also concurred by separate opinion
in which Cunningham, J., joined.
West Headnotes
[1] Prohibition 314
15
314 Prohibition
314I Nature and Grounds
314k15 k. Persons entitled to relief. Most Cited
Cases
In commonwealth's in rem action to seize domain
names that allegedly hosted illegal gambling activities, gaming associations purporting to represent
owners of domain names were not entitled to file a
renewed petition seeking writ of prohibition enjoining
trial court's seizure order, after Supreme Court had
reversed Court of Appeals' prior writ of prohibition on
grounds that associations had failed to establish
standing at trial court level; associations were required
to return to trial court to establish standing, since
appellate courts could not appropriately determine
necessary fact issues involved.
[2] Prohibition 314
15
314 Prohibition
314I Nature and Grounds
314k15 k. Persons entitled to relief. Most Cited
Cases
A party without standing, or a stake, in a lower
court proceeding for which a writ is sought does not
have standing to seek a writ of prohibition against the
lower court.
[3] Prohibition 314
15
314 Prohibition
314I Nature and Grounds
314k15 k. Persons entitled to relief. Most Cited
Cases
Writ of prohibition actions are not available to
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320 S.W.3d 692
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any party that might claim to have an interest in underlying litigation; such a party must have demonstrated a real and justiciable stake in the lower court
proceeding, which in turn gives rise to a stake in the
concomitant writ action.
[4] Prohibition 314
30
314 Prohibition
314II Procedure
314k30 k. Scope and extent of relief. Most
Cited Cases
Supreme Court would grant transfer from Court
of Appeals of proceedings on gaming associations'
consecutive petition for writ of prohibition, after Supreme Court had reversed Court of Appeals' prior
grant of writ of prohibition on grounds that associations had failed to establish standing in Commonwealth's underlying in rem action seeing seizure of
domain names that allegedly hosted illegal gambling
activities; transfer was appropriate only to correct
imprecise language contained in Supreme Court's
reversal of prior writ.
[5] Prohibition 314
4
314 Prohibition
314I Nature and Grounds
314k4 k. Discretion as to grant of writ. Most
Cited Cases
The decision whether to grant a writ of prohibition lies in the sound discretion of the reviewing court.
*693 OPINION AND ORDER GRANTING
TRANSFER AND DENYING PETITION
The Petitioners, Interactive Media Entertainment
and Gaming Association (IMEGA) and Interactive
Gaming Council (IGC), both seek to have their writ
actions in the Court of Appeals transferred to this
Court. The Court of Appeals recommended transfer of
both actions. Since writ actions are original filings
before the Court of Appeals, an appeal of its decision
regarding the writ is the proper procedural mechanism
to reach this Court, not a motion for transfer. However, given that this Court views this writ action as an
attempt to bypass the procedural and substantive jurisdiction of the trial court, and since we and the Court
of Appeals have already reviewed the record in this
case on a previous writ action, we grant transfer.
However, we deny the writ.
I. Background
This matter originated with an action by the
Commonwealth in Franklin Circuit Court to seize 141
domain names, which the Commonwealth alleged to
be hosting illegal internet gambling. The action was
styled and conducted as an in rem proceeding because
the Commonwealth was not suing anyone, but was
instead trying to seize property-the intangible domain
names. The trial court found that there was probable
cause to believe that the websites were violating
Kentucky gambling laws, and ordered seizure of the
domain names. After learning of the seizure, several
parties claiming an interest in the domain names came
forward, through counsel. They sought to intervene in
the action and to contest the seizure. Several of these
parties purported to be the gambling domain names
themselves, while others were gambling associations
claiming an associational interest in contesting the
seizure. The trial court denied standing to any of these
parties to contest the seizure because they were not
owners or registrants of the domain names, and
therefore, did not have a legal interest in the matter.
Without any adverse claimants, the trial court then set
a forfeiture hearing to allow the actual registrants and
owners of the domain names to come forward and
contest the forfeiture. Denied at the trial court, the
same parties seeking to intervene filed an original
action at the Kentucky Court of Appeals, seeking a
writ of prohibition. They claimed the trial court, by
ordering seizure of the domain names, was acting
outside its jurisdiction, which is one of the grounds for
granting a writ. The Court of Appeals granted the writ
in a 2-to-1 decision on the merits that the trial court did
not have jurisdiction to order the seizure of the gambling domain name because they were not gambling
devices. The opinion, as well as the concurrence and
dissent, failed to adequately address *694 that the
parties' standing was also at issue in the writ action, as
raised by the Commonwealth.
In March, 2010, this Court reversed the Court of
Appeals. See Commonwealth ex rel. Brown v. Interactive Media Entertainment and Gaming Ass'n, Inc.,
306 S.W.3d 32, 34 (Ky.2010). In so doing, this Court
agreed with the trial court that neither the domain
names themselves nor the gambling associations had
established standing to contest the seizure. The domain names were the actual properties seized, so they
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320 S.W.3d 692
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could not contest their own seizure. Meanwhile, the
gambling associations had not made any showing that
they actually represented owners or registrants of the
seized property, so they could not have associational
standing. However, that opinion did not clearly delineate that by agreeing with the trial court's view of the
standing of the Petitioners, this Court viewed standing
to take a writ action as derivative of a party having a
stake in the underlying action. That Opinion merely
denied standing to proceed in that writ action.
Upon our reversal of the granting of the writ, the
two gambling associations-IMEGA and IGC-filed
subsequent writ petitions at the Court of Appeals.
They claimed to have cured their standing defects by
naming some of their members and including affidavits that these members are owners or registrants of
some of the domain names. The Court of Appeals
granted the associations' motions to recommend
transfer of the case to this Court because the Court of
Appeals had already ruled on the merits. We accept
transfer and now deny the writ without further proceedings.
II. Discussion
A. Standing
[1][2][3] The controlling point that was perhaps
not clear in Commonwealth ex rel. Brown v. Interactive Media Entertainment and Gaming Ass'n, Inc. is
that a party without standing, or a stake, in the lower
court proceeding for which a writ is sought simply
does not have standing to seek a writ against the lower
court. Writ actions are not available to any party that
might claim to have an interest in underlying litigation: such a party must have demonstrated a real and
justiciable stake in the lower court proceeding, which
in turn gives rise to a stake in the concomitant writ
action.
At the point when the first writ action was filed in
the Court of Appeals, the trial court had determined
that the Petitioners were not the actual owners or registrants of the domain names, and therefore had no
standing to intervene. Having been denied intervention, the Petitioners were not proper parties in the
underlying action, and obviously had no standing to
challenge, by writ action or otherwise, anything other
than the lower court's standing determination. In the
first writ action, instead of addressing the jurisdictional issues that had been raised at and addressed by
the Court of Appeals, this Court reviewed the trial
court's decision that the Petitioners had no standing.
We agreed with the trial court's findings in this regard
and overruled the Court of Appeals, which had prematurely addressed the merits of the trial court's jurisdiction to seize the domain names. Since Petitioners
had no standing to challenge that jurisdiction, and
instead could only challenge whether the trial court
was correct in its determination as to their standing in
the lower court, this Court denied the writ both substantively on the standing issue and procedurally on the
jurisdiction issue.
However, in conclusory dicta, this Court created
some confusion when it stated,
*695 If a party that can properly establish standing
comes forward, the writ petition giving rise to these
proceedings could be re-filed with the Court of
Appeals. The Court of Appeals could then properly
proceed to the merits of the issues raised, or upon a
proper motion, this Court could accept transfer of
the case, as the merits of the argument have already
been briefed and argued before this Court.
Interactive Media Entm't & Gaming Ass'n, Inc.,
306 S.W.3d at 40.
While this Court believes it should have been
apparent that it was referring to a potential writ action
after the question of standing was heard and decided
by the trial court on a renewed motion to intervene,
the language can be subject to the interpretation implicit in the Petitioners' decision to proceed directly to
the Court of Appeals after identifying an alleged domain name owner. No doubt, the Petitioners' interpretation was driven in part by this Court's statement
that proof of standing “may be done by reference to
the facts in the underlying litigation or a verified assertion, such as in an affidavit, attached to the petition.” Id. However, as the record demonstrates, neither
of these options is workable at this point.
The Petitioners have attempted to proceed under
the second option, specifically by filing with their
renewed writ petition several affidavits claiming to
identify members who own domain names subject to
the seizure order. For example, IMEGA has included
affidavits that purport to show that Yatahay, Ltd.-the
lone member that group has identified-actually owns a
seized domain. Yet, the Commonwealth takes issue
with IMEGA's assertion and questions the adequacy
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of the affidavits, pointing to an unconventional and
arguably improper notarization. Moreover, the
Commonwealth has presented contrary evidence of
another entity's ownership of the domain name. Of
course, whether Yatahay actually owns the domain
name is critical to IMEGA's assertion of standing.
While this preliminary factual dispute may be a relatively simple one, it involves a fact finding mission
that an appellate court, even one facing a writ petition,
is not well suited to undertake.
Though this Court has on occasion noted that
fact-finding by an appellate court may be required in
the course of resolving a writ petition, see, e.g., Newell
Enterprises, Inc. v. Bowling, 158 S.W.3d 750, 758 n.
13 (Ky.2005) (noting that “because [an appellate
court] acts as the trial court in original actions, such
findings are necessary”), such claims have been made
in an attempt to delineate when the various standards
of review are to be used in a writ action and are arguably dicta. It is difficult to imagine a scenario where
it would actually be appropriate for an appellate court
to decide questions of fact where the relevant facts are
disputed, especially when the court is faced with the
type of limited record found in a writ action. As this
Court has more recently noted, writ decisions are
inherently difficult in large part because they “necessitate[ ] an abbreviated record,” which “magnifies the
chance of incorrect rulings that would prematurely
and improperly cut off the rights of litigants.” Cox v.
Braden, 266 S.W.3d 792, 795 (Ky.2008). “As such,
the specter of injustice always hovers over writ proceedings, which explains why courts of this Commonwealth are-and should be-loath to grant the extraordinary writs unless absolutely necessary.” Id.
Thus, any claims about the appropriateness of
fact-finding by an appellate court in writ actions in this
Court's prior decisions were therefore at least slightly
overstated.
The necessity for fact-finding in this case is underscored by the fact that this *696 case presents novel
questions of law related to standing and jurisdiction
that can only be addressed after the factual complexities of the case have been clarified, such as who is
actually the owner of a given domain name and the
applicability of associational representation in an in
rem proceeding.
One method of showing standing recited in the
previous writ action, “by reference to the facts in the
underlying litigation,” is inapplicable in this case.
Though perhaps inartfully stated, this language was
intended as a reference to factual findings that have
been made by the trial court. But the Petitioners have
not yet returned to the circuit court to even present the
theories of standing discussed in our earlier decision
denying the requested writ in this case, much less
asked that court to resolve the apparent factual disputes upon which their standing claims depend.
Most telling about this case is the fact the Petitioners have developed their factual proof of standing
further in this writ proceeding than at the underlying
trial, where they have continued to conceal the identity
of their members and the domain names that those
members own. Rather than returning immediately to
the appellate courts, the Petitioners could have more
expediently reacted to the standing defect by returning
to the Franklin Circuit Court and addressing the matter
there.
Unfortunately, the Petitioners appear to want to
skip several important procedural requirements to
reach the substantive determination on the jurisdiction
question, and perhaps this is understandable. Yet, if
they were to demonstrate standing to the trial court,
which in turn would allow that court to address their
jurisdictional claims, the Petitioners might not even
need to turn to the appellate courts, either for a writ or
a direct appeal. There is certainly nothing so extraordinary about this case that it requires ignoring the very
real questions about Petitioners' standing to proceed
any more so than all the other parties who have been
required to show standing in every other court case.
At this point, this Court cannot justify granting a
writ against the Franklin Circuit Court when that body
has acted and ruled correctly thus far in this case regarding standing issues. The fundamental standing
decision the court has made to this point is that neither
the domain names themselves, nor the associations
purporting to represent anonymous owners, had
standing to contest the Commonwealth's seizure. This
Court employed the same logic in initially denying the
writ of prohibition for lack of standing. Interactive
Media Entm't & Gaming Ass'n, 306 S.W.3d 32.
The circuit court has not yet had the opportunity
to rule on the merits of the seizure (or the question of
jurisdiction related to the seizure) because it has not
heard from a party that could properly contest it. Nor
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has that court had a chance to address the question of
standing in light of this Court's prior decision addressing the possibility of showing associational
standing and the associations' most recent disclosures
regarding their members' ownership of some of the
domain names. Allowing the trial court to fully develop the facts and applicable law is the best way to
develop an adequate record for review by a higher
court.
B. Transfer of the Writ Action
[4] Though this Court has decided to grant the
motion to transfer, it is necessary to note that the decision to do so is limited to the unique circumstances
presented by this case (including the fact that this
Court previously implied that such transfer “could” be
granted, and that both the Court of Appeals and this
Court have *697 previously reviewed the record in
this case). Transfer is appropriate to correct any imprecise language from our prior decision and to set this
case on the correct path as soon as possible. Any further time spent litigating about standing and jurisdiction in the appellate courts at this point will be wasted,
since the indisputable prerequisite that a writ action
can only be taken by a party that has a stake in the
underlying action remains a hurdle for the Petitioners.
Until the circuit court determines that the domain
owners or registrants are properly before the court, no
one has established standing to proceed on a writ
action.
C. This Court's Discretion
[5] Finally, it is worth noting that even if this
Court believed that Petitioners had made a good
showing in support of a finding of standing and had
demonstrated a lack of jurisdiction at the circuit court,
“the decision whether to grant a writ of prohibition lies
in the sound discretion of the reviewing court.” Edwards v. Hickman, 237 S.W.3d 183, 189 (Ky.2007).
Though this Court (and its predecessor) has been loath
to deny a jurisdictional writ based solely on its discretionary power where a failure of subject matter
jurisdiction has been established, see, e.g., Hoskins v.
Maricle, 150 S.W.3d 1, 11 (Ky.2004); Chamblee v.
Rose, 249 S.W.2d 775, 777 (Ky.1952), it has continually asserted that whether to grant the writ is still
discretionary. Even if the prerequisites for either class
of writ are met, the reviewing court has the discretion
to deny the writ, where prudence dictates doing so.
Edwards, 237 S.W.3d at 189.
Even if the concerns outlined above did not require that this Court deny the requested writ, they
would still persuade this Court to exercise its discretion to deny this writ. These considerations illuminate
how this case is not ripe for resolution by this Court,
especially not via the “extraordinary remedy” of a writ
of prohibition. See Newell Enterprises, Inc. v. Bowling, 158 S.W.3d 750, 754 (Ky.2005) (“The writ of
prohibition is such an ‘extraordinary remedy’ that
Kentucky courts ‘have always been cautious and
conservative both in entertaining petitions for and in
granting such relief.’ ”).
III. Conclusion
Given the factual issues needing resolution, this
Court cannot at this time determine IMEGA's and
IGC's standing to pursue this writ action. The circuit
court is best equipped to resolve those factual issues.
The writ actions have been premature, since the
standing questions are a hurdle to addressing the jurisdictional claims that the associations have raised.
And, in turn, the standing questions raised at the trial
court are a hurdle to addressing standing in the writ
action. Having standing in the underlying action is a
prerequisite to having standing in any original actions
related to the underlying action.
Because the trial court has not had the opportunity
to address Petitioners' claims, both as to standing and
jurisdiction, they cannot establish standing to pursue
the writ they seek. For this reason, this Court grants
transfer of the petition for a writ but denies the writ.
All sitting. All concur. MINTON, C.J., also concurs
by separate opinion in which CUNNINGHAM, J.,
joins.
MINTON, C.J., concurring:
This is not an ordinary case for many reasons.
First, the Court of Appeals has recommended transfer.
Second, the Petitioners have requested transfer. Third,
though the Commonwealth asks us to “summarily
deny” the petition, our resolution today does not appear to harm any *698 vital interest it may have in this
matter. Fourth, and most importantly, I feel compelled
to grant transfer because we, unfortunately, invited
this motion to transfer in our earlier opinion in this
matter. I agree with the majority's characterization of
our previous invitation as “conclusory dicta....” And I
cannot fault the Petitioners for responding to our invitation by filing the motion before us today.
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In short, I believe that the truly extraordinary and
unique facts and procedural history of this case do not
preclude us from granting transfer of this writ petition.
So I respectfully concur with the majority's decision
today.
CUNNINGHAM, J., joins this concurring opinion.
ENTERED: September 23, 2010.
/s/ John D. Minton, Jr.
/s/ Chief Justice
Ky.,2010.
Interactive Media Entertainment and Gaming Ass'n,
Inc. v. Wingate
320 S.W.3d 692
END OF DOCUMENT
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