McLean v. Reno , 76 F.3d 1294 ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
2-13-1996
McLean v. Reno
Precedential or Non-Precedential:
Docket 95-7137
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 95-7137
___________
PIC-A-STATE PA, INC.,
SCOTT McLEAN,
Appellants
v.
JANET RENO, in her official capacity as
Attorney General of the United States of America;
THE UNITED STATES DEPARTMENT OF JUSTICE;
THE UNITED STATES OF AMERICA
_______________________________________________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil Action No. 94-cv-01490)
___________________
Argued November 13, 1995
Before: BECKER and SCIRICA, Circuit Judges
and COHILL, District Judge*
(Filed February 13, l996)
MICHAEL A. FINIO, ESQUIRE (ARGUED)
Saul, Ewing, Remick & Saul
240 North Third Street, Suite 700
P.O. Box 1291
Harrisburg, Pennsylvania 17101
WILLIAM M. JANSSEN, ESQUIRE
Saul, Ewing, Remick & Saul
3800 Centre Square West
Philadelphia, Pennsylvania 19102
Attorneys for Appellants
1
*The Honorable Maurice B. Cohill, Jr., United States District
Judge for the Western District of Pennsylvania, sitting by
designation.
2
MATTHEW M. COLLETTE, ESQUIRE (ARGUED)
MARK B. STERN, ESQUIRE
United States Department of Justice
Civil Division, Appellate Staff
10th & Pennsylvania Avenue, N.W.
Washington, D.C. 20530-0001
Attorneys for Appellees
__________________
OPINION OF THE COURT
__________________
SCIRICA, Circuit Judge.
Pic-A-State Pa., Inc. brings a Commerce Clause
challenge to the Interstate Wagering Amendment, which amended 18
U.S.C. § 1301 (1994) by prohibiting the transmission in
interstate commerce of information to be used for the purpose of
procuring a lottery ticket. Because the Amendment regulates an
activity affecting interstate commerce and rationally relates to
the goals articulated by Congress, we hold the Amendment was a
constitutional exercise of Congress' power to legislate under the
Commerce Clause.
I. FACTS AND PROCEDURAL HISTORY
Congress has restricted interstate traffic in lottery
tickets for over a century. See generally United States v. Edge
Broadcasting Co., 113 S. Ct. 2696 (1993); see also Act of July
12, 1876, ch. 186, § 2, 19 Stat. 90; Anti-Lottery Act of 1890,
ch. 908, § 1, 26 Stat. 465. Title 18 U.S.C. § 1301, the current
prohibition on interstate traffic in lottery tickets, was enacted
3
by Congress in 1895. Before amendment by the Interstate Wagering
Amendment, § 1301 provided:
Whoever brings into the United States for the
purpose of disposing of the same, or
knowingly deposits with any express company
or any common carrier for carriage, or
carries in interstate or foreign commerce any
paper, certificate, or instrument purporting
to be or to represent a ticket, chance,
share, or interest in or dependent upon the
event of a lottery, gift enterprise, or
similar scheme, offering prizes dependent in
whole or part upon lot or chance, or any
advertisement of, or list of prizes drawn or
awarded by means of, any such lottery, gift
enterprise, or similar scheme; or knowingly
takes or receives any such paper,
certificate, instrument, advertisement, or
list so brought, deposited or transported,
shall be fined not more than $1,000 or
imprisoned not more than two years, or both.
Act of March 2, 1895, 28 Stat. 963; 18 U.S.C. § 1301 (1988).
Pic-A-State Pa., Inc. is a Pennsylvania corporation
that was engaged in the business of taking orders for, and
purchasing, out-of-state lottery tickets on behalf of customers.
Pic-A-State's operations were designed to avoid the longstanding
prohibition on the interstate traffic in lottery tickets by
keeping the tickets themselves in the state of origin and
transferring only a computer-generated "receipt" to the customer.
The Commonwealth of Pennsylvania tried repeatedly to
put a stop to Pic-A-State's operations. In 1993, the
Pennsylvania legislature passed Act 8 of 1993, which prohibited
the sale of any interest in another state's lottery. 72 Pa.
Stat. Ann. § 3761-9(c) (1995). Pic-A-State challenged this
legislation in federal court on dormant Commerce Clause grounds,
4
and the statute was struck down by the district court. Pic-A-
State Pa. v. Pennsylvania, No. 93-0814 (M.D. Pa. July 23, 1993).
On appeal, we reversed citing an intervening change in federal
law, the Interstate Wagering Amendment, which made the
Pennsylvania statute fully consistent with federal law and not
unduly burdensome on interstate commerce. Pic-A-State Pa. v.
Pennsylvania, 42 F.3d 175, 178-80 (3d Cir. 1994) ("Pic-A-State
I").
The Interstate Wagering Amendment amended 18 U.S.C.
§1301 by providing that, in addition to § 1301's extant
prohibition on the transfer in interstate commerce of any lottery
ticket, any person who:
being engaged in the business of procuring
for a person in 1 State such a ticket,
chance, share, or interest in a lottery,
gift, enterprise or similar scheme conducted
by another State (unless that business is
permitted under an agreement between the
States in question or appropriate authorities
of those States), knowingly transmits in
interstate or foreign commerce information to
be used for the purpose of procuring such a
chance, share or interest; . . . shall be
fined not more than $1,000 or imprisoned not
more than two years, or both.
Violent Crime Control and Law Enforcement Act of 1994, Pub. L.
No. 103-322, § 320905, 108 Stat. 2126, 2147 (emphasis added).
This Amendment was explicitly intended to prohibit Pic-A-State's
line of business.
Senator Arlen Specter of Pennsylvania was the primary
sponsor of the Interstate Wagering Amendment. He explained that
"current law prohibit[s] interstate transfer of lottery
tickets . . . . However, due to advances in communication
5
technologies, current law does not accomplish its intended
goals." 139 Cong. Rec. S15247. He also noted the district
court's decision in Pic-A-State Pa. v. Pennsylvania, No. 93-0814
(M.D. Pa. July 23, 1993), allowed "the sale of interests in out-
of-state lottery tickets via computer transaction with no paper
crossing state lines." Id. The Amendment was designed to close
this "loophole." Id.
Senator Specter identified two other purposes for the
Interstate Wagering Amendment. First, that the Amendment was
necessary to preserve "the right of a State to regulate lottery
[sic] and gambling within its borders." Id. He stated, "Federal
laws should continue to limit the proliferation of interstate
gambling to preserve the sovereignty of States that do not permit
certain forms of gambling." Id. Second, that businesses such as
Pic-A-State's would "undermine [the states'] ability to realize
projected revenues." Id. Senator Joseph Biden echoed Senator
Specter's concerns, noting the interstate sale of interests in
lottery tickets "hurts the operation of lotteries in smaller
States." Id.
Three days after the Interstate Wagering Amendment was
signed into law, Pic-A-State filed this suit seeking injunctive
relief and a declaratory judgment that the Amendment was
unconstitutional. The district court dismissed Pic-A-State's
complaint, finding no merit in any of its arguments. Pic-A-State
Pa. v. Reno, No. 94-1490 (M.D. Pa. Feb. 23, 1995). Since passage
of the Amendment, Pic-A-State has terminated its business.
6
We have jurisdiction to review the district court's
final judgment dismissing the action under 28 U.S.C. § 1291
(1988). "Our standard of review is plenary." Juzwin v. Asbestos
Corp., 900 F.2d 686, 689 (3d Cir.), cert. denied, 498 U.S. 896
(1990).
II. RIPENESS, STANDING AND EQUITABLE RELIEF
As an initial matter, the Government disputes whether
the district court had jurisdiction to hear this case under 28
U.S.C. § 1331 (1988). Article III, section 2 of the United
States Constitution requires an actual "controversy" for a
federal court to have jurisdiction. U.S. Const. art. III, § 2.
The Government argues no justiciable controversy exists because
Pic-A-State has never been threatened with prosecution under
amended § 1301. It asserts the controversy is not ripe, Pic-A-
State lacks standing, and Pic-A-State is not entitled to
equitable relief.0 We will examine each of these contentions in
turn.
A. Ripeness
In Abbott Lab. v. Gardner, 387 U.S. 136, 149 (1967),
overruled on other grounds, Califano v. Sanders, 430 U.S. 99, 105
(1977), and Pacific Gas & Elec. Co. v. State Energy Resources
Conservation & Dev. Comm'n, 461 U.S. 190, 201 (1983), the Supreme
0
The concepts of standing and ripeness require related but
distinct inquiries. "The ripeness doctrine is often confused
with the standing doctrine. Whereas ripeness is concerned with
when an action may be brought, standing focuses on who may bring
a ripe action. Although these doctrines are analytically
distinct, both have evolved from Article III's case or
controversy requirement." Armstrong World Indus. v. Adams, 961
F.2d 405, 411 n.13 (3d Cir. 1992) (citations omitted).
7
Court held that ripeness turns on "the fitness of the issue for
judicial decision" and "the hardship to the parties of
withholding court consideration." For declaratory judgments, we
have refined this test because declaratory judgments are
typically sought before a completed injury has occurred. In
determining whether to engage in pre-enforcement review of a
statute in a declaratory judgment action, we look, among other
factors, to (1) the adversity of the parties' interests, (2) the
conclusiveness of the judgment, and (3) the utility of the
judgment. Freehold Cogeneration Assocs. v. Bd. Reg. Comm'rs, 44
F.3d 1178, 1188 (3d Cir.), cert. denied, 116 S. Ct. 68 (1995);
Step-Saver Data Systems, Inc. v. Wyse Technology, 912 F.2d 643,
647 (3d Cir. 1990). After considering these factors, we believe
this case presents a controversy ripe for resolution.
1. Adversity of Interest
"For there to be an actual controversy the defendant
must be so situated that the parties have adverse legal
interests." Step-Saver, 912 F.2d at 648 (quoting 10A Charles
Wright, Arthur Miller & Mary Kane, Federal Practice and Procedure
§ 2757, at 582-83 (2d ed. 1983)). Although Pic-A-State has not
been prosecuted under the Interstate Wagering Amendment, the
impact of the Amendment is sufficiently direct and immediate to
create an adversity of interest between Pic-A-State and the
Government. Not only has Pic-A-State terminated its business and
suffered economic loss in response to the passage of the
Amendment, but any further attempt to pursue its line of business
8
would risk serious criminal penalties.0 "Where the legal issue
presented is fit for judicial resolution, and where a regulation
requires immediate and significant change in the plaintiffs'
conduct of their affairs with serious penalties attached to
noncompliance, access to the courts . . . under the Declaratory
Judgment Act must be permitted, absent a statutory bar or some
other unusual circumstances." Abbott Lab. v. Gardner, 387 U.S.
at 153.0
0
At oral argument, the Government suggested that review of the
Interstate Wagering Amendment was inappropriate because the
federal government was unlikely to prosecute Pic-A-State. Even
if Pic-A-State were to resume its business, the Government
asserted, any prosecution would be brought by the Commonwealth of
Pennsylvania under Act 8 of 1993. Although a prosecution by
state authorities would raise serious prudential concerns that
might call for our abstention, see Younger v. Harris, 401 U.S. 37
(1971), we need not address this eventuality now. Furthermore,
whether Pennsylvania has threatened to prosecute Pic-A-State is
irrelevant to a possible federal prosecution under the amended 18
U.S.C. § 1301.
The Government's argument would also place Pic-A-State
in an untenable position. The district court found Act 8 to be
unconstitutional under the dormant Commerce Clause in Pic-A-State
Pa. v. Commonwealth of Pennsylvania, No. 93-0814 (M.D. Pa. July
23, 1993). We reversed because the intervening passage of the
Interstate Wagering Amendment made Act 8 consistent with federal
law. Pic-A-State I, 42 F.3d 175, 178-80 (3d Cir. 1994). If the
Interstate Wagering Amendment is unconstitutional, our decision
in Pic-A-State I is of doubtful vitality and prosecution of Pic-
A-State by Pennsylvania under Act 8 of 1993 would be suspect on
dormant Commerce Clause grounds. Thus, regardless of whether
Pic-A-State is prosecuted by state or federal authorities, the
central issue in this case is the constitutionality of the
Interstate Wagering Amendment. Yet the Government seeks to bar
adjudication of this issue at this time.
0
Pic-A-State argues that under Babbitt v. United Farm Workers
Nat'l Union, 442 U.S. 289 (1979), and Steffel v. Thompson, 415
U.S. 452 (1974), "it is not necessary that petitioner first
expose himself to actual arrest or prosecution to be entitled to
challenge a statute that he claims deters the exercise of his
constitutional rights." Steffel, 415 U.S. at 459. While this
statement is undoubtedly true, we note both Babbitt and Steffel
9
Moreover, courts have found sufficient adversity
between parties to create a justiciable controversy when suit is
brought by the only plaintiff subject to regulation by an
enactment. See, e.g., Illinois v. General Elec. Co., 683 F.2d
206, 210 (7th Cir. 1982) ("as the Act has only one conceivable
target . . . it is extremely unlikely that the state would
overlook the violation," and the controversy is therefore ripe),
cert. denied, 461 U.S. 913 (1983); Entertainment Concepts, III v.
Maciejewski, 631 F.2d 497, 500 (7th Cir. 1980) (same), cert.
denied, 450 U.S. 919 (1981). In introducing the Interstate
Wagering Amendment, its sponsors were motivated by the desire to
halt the operations of Pic-A-State specifically. See 139 Cong.
Rec. S15247. Its chief sponsor mentioned the district court's
decision in Pic-A-State Pa. v. Pennsylvania, No. 93-0814 (M.D.
Pa. July 23, 1993), and explained the Amendment would close the
"loophole" in the statute that allowed Pic-A-State to run its
business. Id.
Under these circumstances, we believe the likelihood of
prosecution under the Interstate Wagering Amendment is so strong
that a justiciable issue is presented.0 We also note that the
involved challenges to statutes that criminalized the exercise of
First Amendment rights. Pic-A-State's claim does not involve
these rights, and so we do not rely on Babbitt or Steffel in
finding adversity between the parties.
0
Moreover, as a policy matter, strong reasons counsel against
requiring Pic-A-State to engage in illegal conduct before its
challenge can be heard.
Fear that courts may find the statute valid
will deter many from risking violation;
defense of criminal proceedings on
constitutional grounds simply is not an
10
Government, although it has stated that a federal prosecution is
unlikely, has not expressly disavowed an intent to prosecute. See
Presbytery of the Orthodox Presbyterian Church v. Florio, 40 F.3d
1454, 1463-68 (3d Cir. 1994) (failure of state to disavow intent
to prosecute sufficient to create adversity between the parties);
Salvation Army v. Department of Community Affairs, 919 F.2d 183,
192 (3d Cir. 1990) (no adversity where state gives "express
assurance that there will be no enforcement").
2. Conclusiveness
We next examine whether the issue raised here is "based
on a `real and substantial controversy admitting of specific
relief through a decree of conclusive character, as distinguished
from an opinion advising what the law would be on a hypothetical
state of facts.'" Step-Saver, 912 F.2d at 649 (quoting Aetna
Life Ins. Co. v. Haworth, 300 U.S. 227, 241 (1937)) (emphasis
added).
Where the question presented is "predominantly legal,"
a factual record is not as important as in fact-sensitive
inquiries. Compare Pacific Gas & Elec. Co. v. State Energy
Resources Conservation & Dev. Comm'n, 461 U.S. at 201 (question
adequate remedy. In addition to this
practical fact, more abstract principles
suggest that a citizen should not be required
to sacrifice his wish to conform to valid
social prescriptions in order to test his
belief of invalidity; citizens should be
allowed to prefer official adjudication to
private disobedience.
13A Charles Wright, Arthur Miller & Mary Kane, Federal Practice
and Procedure § 3532.5, at 183-84 (2d Ed. 1984).
11
of federal preemption is "predominantly legal" and need not await
development of factual record); Abbott Lab. v. Gardner, 387 U.S.
at 149 (declaratory judgment challenge to regulations presented
purely legal issues fit for resolution even before prosecution
instituted); with Hodel v. Virginia Surface Mining & Reclamation
Ass'n, 452 U.S. 264, 294-95 (1981) ("actual factual setting" is
"particularly important in cases raising allegations of an
unconstitutional taking of private property."). Because Pic-A-
State brings a facial challenge to the constitutionality of the
Interstate Wagering Amendment, further development of the factual
record by the prosecution of Pic-A-State would not inform our
legal analysis. Both parties have approached this case as one
presenting the purely legal question of the scope of Congress'
power to legislate under the Commerce Clause. The Government has
made no attempt to justify the Interstate Wagering Amendment in
factual terms. Accordingly, we believe the legal issues
presented may be conclusively resolved even before the
prosecution of Pic-A-State.
3. Utility
Finally, we focus on the utility of the present
resolution of this dispute. We consider "whether the parties'
plans of action are likely to be affected by a declaratory
judgment." Step-Saver, 912 F.2d at 649 n.9. Unlike our cases in
which we have concluded that a judgment would not have a
significant effect, see Armstrong World Indus. v. Adams, 961 F.2d
405, 423-24 (3d Cir. 1992); Step-Saver, 912 F.2d at 649-50, we
believe resolution of this case will materially affect the
12
parties. Pic-A-State has abandoned its line of business because
of the passage of the Interstate Wagering Amendment. Were the
Amendment to be declared unconstitutional, Pic-A-State would
promptly resume its activities. Accordingly, we believe this
case is ripe at this time.
B. Standing
The Government also attacks Pic-A-State's standing to
bring this suit, asserting no harm is imminent because no
prosecution is pending. As the Supreme Court has stated, "there
is no question in the present case that petitioners have
sufficient standing as plaintiffs: the regulation is directed at
them in particular; it requires them to make significant changes
in their everyday business practices; if they fail to observe the
. . . rule they are quite clearly exposed to the imposition of
strong sanctions." Abbott Lab. v. Gardner, 387 U.S. at 154.
Accordingly, we find no merit in the Government's argument.
C. Equitable Relief
Finally the Government asserts equitable injunctive
relief is unavailable because Pic-A-State is threatened with no
immediate harm. The Government relies on Younger v. Harris, 401
U.S. 37 (1971), and the line of cases that holds federal courts
should not enjoin pending state criminal prosecutions. See,
e.g., Douglas v. City of Jeannette, 319 U.S. 157, 163 (1943);
Watson v. Buck, 313 U.S. 387, 400 (1941). Here there is no state
prosecution, a federal statute is at issue, and there are no
grounds for federal courts to abstain from hearing the challenge.
Therefore, we will reach the merits.
13
III. THE COMMERCE CLAUSE
The Commerce Clause of the United States Constitution
provides that "Congress shall have Power . . . To regulate
commerce with foreign Nations, and among the several States, and
with the Indian Tribes." U.S. Const. art. I, § 8, cl. 3. This
power is "complete in itself, may be exercised to its utmost
extent, and acknowledges no limitations, other than are
prescribed in the constitution." Gibbons v. Ogden, 9 Wheat. 1,
196 (1824). Accordingly, "[t]he task of a court that is asked to
determine whether a particular exercise of congressional power is
valid under the Commerce Clause is relatively narrow." Hodel v.
Virginia Surface Mining & Recl. Assn., 452 U.S. at 276. "The
court must defer to a congressional finding that a regulated
activity affects interstate commerce, if there is any rational
basis for such a finding." Id. This established, the only
remaining question for judicial inquiry is whether the means
chosen by Congress are "reasonably adapted" to the asserted goals
of the legislation. Id.; Heart of Atlanta Motel, Inc. v. United
States, 379 U.S. 241, 258 (1964). "The judicial task is at an
end once the court determines that Congress acted rationally in
adopting a particular regulatory scheme." Hodel, 452 U.S. at
276; see also United States v. Pozsgai, 999 F.2d 719, 733 (3d
Cir. 1993) ("We will uphold application of the law if there is a
`rational basis' for the congressional determination that the
regulated activity `affects interstate commerce,' and if the
means chosen to regulate the activity are reasonable."), cert.
denied, 114 S. Ct. 1052 (1994); United States v. Frame, 885 F.2d
14
1119, 1126 (3d Cir. 1989) ("It is well settled that Congress will
have validly exercised its power to regulate interstate commerce
if the activity being regulated affects commerce, and if there is
a rational connection between the regulatory means selected and
the asserted ends."), cert. denied, 493 U.S. 1094 (1990).
A. Affects Commerce
It is beyond dispute that state lotteries affect
interstate commerce. In the Lottery Case, 188 U.S. 321, 354
(1903), the Supreme Court held that "lottery tickets are subjects
of traffic and therefore are subjects of commerce, and the
regulation of the carriage of such tickets from State to
State . . . is a regulation of commerce among the several
states." Although Pic-A-State does not transport actual lottery
tickets across state lines, but only sells interests in lottery
tickets via computer, its activities may still be regulated by
Congress. The power of Congress to regulate interstate commerce
extends not only to "the exchange and transportation of
commodities, or visible, tangible things, but the carriage of
persons and the transmission by telegraph of ideas, wishes,
orders, and intelligence." Id. at 351-52. Congress' power to
regulate interstate commerce also reaches the transmission of
information by computer for the purpose of purchasing lottery
tickets. Moreover, Pic-A-State itself notes that national
lottery sales exceeded $30 billion in 1993. Brief of the
Appellants at 20 n.5. A business of such enormous economic
impact is a proper subject for congressional regulation under the
Commerce Clause.
15
B. Rational Basis
1.
Accordingly, the task before us is to determine whether
Congress acted rationally in adopting the regulatory scheme of
which the Interstate Wagering Amendment is a part. Hodel, 452
U.S. at 276. Pic-A-State asserts the Interstate Wagering
Amendment cannot survive scrutiny under a "rational basis" review
because it is not "reasonably adapted" to a legitimate end. It
makes three arguments.
First, Pic-A-State argues the historical rationale for
federal regulation of lotteries was Congress' perception that
lotteries were "evils" to be strictly contained, if not
absolutely prohibited. In the wake of the legalization of
lotteries by over thirty states, Pic-A-State contends that
regulation of lotteries as "evils" is no longer rational. Second,
Pic-A-State asserts the protection of the states' ability to
regulate gambling within their own borders is an impermissible
purpose for federal lawmaking. Third, it contends the Interstate
Wagering Amendment will insulate state lotteries from
competition, and this restraint on trade is irrational.
Pic-A-State misapprehends the nature of a "rational
basis" review of legislation under the Commerce Clause. We do
not substitute our judgment for that of Congress. "Where the
legislative judgment is drawn in question," our inquiry "must be
restricted to the issue of whether any state of facts either
known or which could reasonably be assumed affords support for
it." United States v. Carolene Prod. Co., 304 U.S. 144, 154
16
(1938). The Supreme Court's recent decision in United States v.
Lopez, 115 S. Ct. 1624 (1995), does not change the nature of this
inquiry. Lopez asks whether the activity at issue could
rationally be understood to affect commerce. The Court did not
reach the question of whether the legislation itself was
rationally related to its announced goal.0
In introducing the Interstate Wagering Amendment on the
Senate floor, its proponents advanced several justifications,
including the prevention of reductions in state lottery revenues,
the preservation of "the sovereignty of State lottery programs,"
and the enforcement of the federal laws prohibiting interstate
gambling. See 139 Cong. Rec. S15247. The Interstate Wagering
Amendment is rationally related to achieving these goals.
First, Congress could rationally determine that the
sale of interests in lottery tickets across state lines might
cause revenue shortfalls in some lottery states, particularly
smaller states. The Chair of the Pennsylvania Council on Aging
stated in a letter to Senator Specter that the sale of out-of-
state lottery tickets would "have a direct and negative impact on
Pennsylvania lottery sales.0 The final result will be revenue
0
The impetus behind striking down the Gun-Free School Zones Act
under the Commerce Clause in Lopez was a concern for federalism.
See United States v. Lopez, 115 S. Ct. 1624, 1629 (1995). The
Interstate Wagering Amendment supplements and guarantees, not
usurps, the states' power to regulate their own lotteries.
Despite Pic-A-State's arguments, it therefore seems an unsuitable
object for a Commerce Clause challenge under Lopez.
0
The Director of Public Relations and Special Events for the
Pennsylvania Lottery testified that "800,000 to a million
dollars" is an "extremely conservative" estimate of the losses
suffered by the Pennsylvania lottery in 1991-92 due to the
interstate sale of lottery tickets. App. at 213a-215a.
17
losses for programs that assist very vulnerable older citizens of
Pennsylvania."0 139 Cong. Rec. S15247. The Governor of Delaware
also submitted a letter complaining that such sales "have the
potential to negatively affect state revenues from lottery ticket
sales, especially for smaller states." Id. at S15248. As
Senator Specter noted, "[a]ny erosion of revenues due to the sale
of out-of-State lottery tickets is contrary to the purpose of
State lottery programs." Id. at S15247. "State lottery programs
are based on the premise that the revenues derived from the
lottery go toward State programs for the betterment of that
particular State." Id. Congress made a reasonable determination
that the prohibition of interstate sales of lottery tickets would
promote the purposes for which the various states have instituted
lotteries. We will not second-guess this judgment.
Moreover, Congress rationally believed that the
Interstate Wagering Amendment served the purpose of preserving
state sovereignty in the regulation of lotteries. Senator
Specter explained:
the right of a State to regulate lottery
[sic] and gambling within its borders must be
preserved. Federal gambling laws have
traditionally enabled the States to regulate
in-State gambling. Federal laws should
continue to limit the proliferation of
interstate gambling to preserve the
sovereignty of States that do not permit
certain forms of gambling.
0
Proceeds from the Pennsylvania lottery are earmarked for
programs that benefit senior citizens. See 72 Pa. Stat. Ann.
§3761-2 (1995).
18
Id. The Interstate Wagering Amendment furthered these goals by
giving the states the sole right to regulate lottery sales within
their borders. The states need not permit the sale of interests
in out-of-state lottery tickets, but may do so by concluding an
agreement for that purpose with other states. 18 U.S.C. § 1301.
The Interstate Wagering Amendment thus allows the various states
to gauge the economic effects of their own lotteries without out-
of-state interference, to form their own judgments about the
propriety of lotteries, and to regulate the types of state-
sponsored gambling they wish to allow within their borders.
Finally, Congress could rationally conclude that the
Interstate Wagering Amendment was necessary to effectuate the
purposes for which 18 U.S.C. § 1301 was originally enacted. As
Senator Specter stated, the federal gambling laws were clearly
intended to prohibit the interstate transportation and sale of
lottery tickets, but "the development of communications
technology resulted in [a] loophole in the Federal lottery law"
that allowed such transactions to be consummated by computer with
no papers crossing state lines. 139 Cong. Rec. S15247. Both
Pennsylvania Senators believed this loophole "plainly violat[ed]
the spirit and intent of the Federal law" and introduced the
Interstate Wagering Amendment in order to close it. Id. at
S15247-48.
In the context of the one-hundred year history of §1301
and the federal regulation of lotteries, Congress could
rationally conclude the need for an amendment to close a loophole
created by advances in technology unforeseeable at the time the
19
statute was originally drafted. Congress believed that since the
sale of lottery tickets across state lines was illegal, the sale
of interests in tickets across state lines by computer should be
illegal as well. We believe the Commerce Clause requires no more
indication of rationality for us to uphold the statutory scheme
adopted by Congress.0
2.
Even evaluating the rationality of the Interstate
Wagering Amendment on the terms suggested by Pic-A-State, we hold
it was a constitutional exercise of Congress' power to legislate
under the Commerce Clause. Pic-A-State argues that because
lotteries have been legalized by the majority of states, the
interstate sale of lottery tickets may no longer rationally be
prohibited on moral grounds. We disagree. Although many states
have legalized lotteries, some have not. Congress could
rationally decide to legislate in support of the policies of
nonlottery states by placing the regulation of lotteries within
the discretion of each state and prohibiting out-of-state
interference. See United States v. Edge Broadcasting Co., 113 S.
0
Pic-A-State notes Congress did not conduct factfinding or rely
on empirical research in drafting the Interstate Wagering
Amendment and argues that this undermines the Amendment's
rationality. We are unpersuaded, as several of the
justifications advanced by Congress are rational on their face.
Pic-A-State further argues Congress' conclusion that the
Amendment would prevent revenue shortfalls in smaller states is
mistaken as a factual matter. Even were this so, we would uphold
the Interstate Wagering Amendment under rational basis review.
Rational basis review "is not a license for courts to judge the
wisdom, fairness, or logic of legislative choices." FCC v. Beach
Communications, 113 S. Ct. 2096, 2101 (1993)). "Congress need
not make particularized findings in order to legislate." Perez
v. United States, 402 U.S. 146, 156 (1971).
20
Ct. 2696, 2703 (1993) ("[T]he Government has a substantial
interest in supporting the policy of nonlottery States, as well
as not interfering with the policy of States that permit
lotteries."); Lottery Case, 188 U.S. at 357 (Congress may
"supplement[ ] the action of those States . . . which, for the
protection of the public morals, prohibit the drawing of
lotteries, as well as the sale or circulation of lottery tickets,
within their respective limits."). Moreover, in arguing that the
Interstate Wagering Amendment is irrational because lotteries are
no longer morally proscribed, Pic-A-State necessarily implies
that all of 18 U.S.C. § 1301, not just the Interstate Wagering
Amendment, is now irrational. As we have noted, § 1301 has been
in the United States Code since 1895 and was upheld by the
Supreme Court against a Commerce Clause challenge. Lottery Case,
188 U.S. 321 (1903). We do not believe that circumstances have
changed so substantially as to render this body of law
unconstitutional.
As for Pic-A-State's argument that the Interstate
Wagering Amendment is contrary to the spirit of the antitrust
laws and therefore irrational, "neither the Sherman Act nor any
other antitrust statute restricts the United States government in
directing action in complete contradiction to antitrust policy."
Hecht v. Pro-Football, Inc., 444 F.2d 931, 935 (D.C. Cir. 1971),
cert. denied, 404 U.S. 1047 (1972) (citations omitted). The
interstate sale of lottery tickets affects commerce and is
contrary to the policy of several states. In these
circumstances, Congress can rationally exercise its enumerated
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powers to prohibit the passage in interstate commerce of lottery
tickets or information relating to them.
IV. DORMANT COMMERCE CLAUSE
Pic-A-State also contends Congress did not have the
power to enact the Interstate Wagering Amendment. Under dormant
Commerce Clause principles, states may not discriminate against
the flow of out-of-state goods in commerce. Pic-A-State asserts
that Congress, in legislating to supplement the states' police
powers, cannot give the states the power to discriminate against
out-of-state goods because such discrimination is forbidden by
the dormant Commerce Clause.
The Supreme Court rejected this argument in Prudential
Ins. Co. v. Benjamin, 328 U.S. 408 (1946). In Benjamin, South
Carolina imposed a three percent tax on foreign insurance
companies as a condition of their doing business in the State. No
similar tax was imposed on South Carolina corporations. By
statute Congress had authorized state regulation and taxation of
the business of insurance. Id. at 412, 429-30. Prudential
challenged the discriminatory tax, contending Congress could not
legislatively override the dormant Commerce Clause's prohibition
on discriminatory state legislation. Rejecting Prudential's
argument, the Supreme Court distinguished between the Commerce
Clause and the dormant Commerce Clause:
The one limitation bounds the power of
Congress. The other confines only the powers
of the states. And the two areas are not
coextensive. The distinction is not always
clearly observed, for both questions may and
indeed at times do arise in the same case and
in close relationship. But to blur them and
22
thereby equate the implied prohibition with
the affirmative endowment is altogether
fallacious. There is no such equivalence.
Benjamin, 328 U.S. at 423. The Supreme Court concluded the
Commerce Clause places no limitations on Congress' affirmative
power to legislate, other than that the regulated activity must
affect commerce. Id. It is now clear that Congress may consent
to state regulation that discriminates against interstate
commerce. Northeast Bancorp, Inc. v. Board of Governors, 472
U.S. 159, 174 (1985) ("When Congress so chooses, state actions
which it plainly authorizes are invulnerable to constitutional
attack under the Commerce Clause."); Pic-A-State I, 42 F.3d 175,
179 (3d Cir. 1994). Congress had the authority to enact the
Interstate Wagering Amendment in order to supplement state
legislation, even though the Amendment enables states to
discriminate against out-of-state lottery tickets.
V. CONCLUSION
The Interstate Wagering Amendment regulates lotteries--
an activity affecting interstate commerce. It rationally relates
to Congress' goals of protecting state lottery revenues,
preserving state sovereignty in the regulation of lotteries, and
controlling interstate gambling. The Amendment was a
constitutional exercise of Congress' power to legislate under the
Commerce Clause. We will affirm.
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