Eugene J. Kopecky v. Iowa Racing and Gaming Commission , 891 N.W.2d 439 ( 2017 )

IN THE SUPREME COURT OF IOWA
No. 16–1146
Filed March 10, 2017
EUGENE J. KOPECKY,
Appellant,
vs.
IOWA RACING AND GAMING COMMISSION,
Appellee.
Appeal from the Iowa District Court for Linn County, Ian K.
Thornhill, Judge.
A citizen appeals a district court judgment affirming the Iowa
Racing and Gaming Commission’s declaratory order. AFFIRMED.
Eugene J. Kopecky of Ackley, Kopecky & Kingergy, L.L.P., Cedar
Rapids, pro se appellant.
Thomas J. Miller, Attorney General, David M. Ranscht and
Jeffrey C. Peterzalek, Assistant Attorneys General, for appellee.
2
WIGGINS, Justice.
A citizen appeals from the district court’s ruling on judicial review.
The district court affirmed the Iowa Racing and Gaming Commission’s
declaratory order in which the Commission used its rules to conclude
that its authority under Iowa Code chapter 99F permits it to consider the
economic effect of a new gaming operation on existing gaming facilities
when deciding whether to issue a new gaming license. On appeal, we
hold the rule allowing the Commission to consider the economic effect of
a new gaming operation on existing gaming facilities when deciding
whether to issue a new gaming license is not “[b]eyond the authority
delegated to the agency by any provision of law or in violation of any
provision of law” under section 17A.19(10)(b) (2015).
I. Background Facts and Proceedings.
In March 2013, the citizens of Linn County approved a referendum
to permit gambling games in the county. Soon thereafter, an
organization in Linn County applied to the Commission for a license to
operate a new gambling structure. The Commission ordered two
independent market feasibility studies, and both studies concluded the
casino market in Iowa was not underserved, and a new casino would
cannibalize revenue from existing gambling facilities. Relying on the
market studies and citing the significant economic impact granting a new
gambling license could have on existing facilities, the Commission denied
the organization’s application in April 2014.
On March 9, 2015, Eugene Kopecky, a resident of Linn County,
filed a petition for declaratory order with the Commission. Kopecky was
not associated with the organization whose application for a license was
denied in 2014. In his petition, he stated he “plans to file an application
with the [Commission] to secure a gambling license to conduct gambling
3
games in a licensed gambling structure in Linn County, Iowa.” However,
he believed it would “serve no purpose for [him] to file an application for
a license” because the Commission denied a previous application due to
“the negative impact on existing license holders in other Iowa counties.”
Kopecky contended the Commission’s consideration of that factor
in denying an application is “contrary to Chapter 99F of the Iowa Code”
and that it is necessary to determine the proper meaning and
construction of the Code as it relates to issuing a gaming license when
the residents of a county have approved a gambling referendum. Thus,
Kopecky asked the Commission to answer two questions:
Question Number One:
Whether or not the [Commission] can use the
existence of a gambling license in one county, or the
impact on an existing gambling license in one Iowa
county, when considering whether or not to issue a
gambling license in another (different) Iowa county?
Question Number Two:
If the [Commission] has adopted administrative rules
that are contrary to Chapter 99F of the Iowa Code are
those administrative rules null and void?
He asserted the answer to question one is no, and the answer to question
two is yes.
On April 9, the Iowa Gaming Association (IGA), an association
comprised of eighteen existing gambling licensees, intervened in the
declaratory order proceedings because the answers to Kopecky’s
questions would affect the existing licensees. In its brief in support of its
petition for intervention, the IGA asserted that the Commission has
broad powers to regulate all gambling operations under Iowa Code
chapter 99F and that Kopecky misinterpreted the Code as well as the
4
Commission’s rules. After hearing oral argument from Kopecky and the
IGA at its June meeting, the Commission announced its decision.
The Commission answered Kopecky’s first question in the
affirmative, concluding Iowa Code chapter 99F and the administrative
rules “allow and/or require” it to consider the impact on an existing
casino in one county when considering whether or not to issue a
gambling license in another county. With respect to Kopecky’s second
question, the Commission determined it did not have jurisdiction to
answer the question, as it is within the court’s purview to determine
whether an administrative rule is null and void. The Commission
subsequently filed a written declaratory order memorializing the decision
it announced at the meeting.
Kopecky sought judicial review. He requested the district court
find the Commission’s ruling regarding the criteria it may consider in
licensure decisions was in error. Kopecky also requested the district
court hold any administrative rule of the Commission that is contrary to
chapter 99F null and void. The district court affirmed the Commission’s
declaratory order in its entirety. On this appeal, Kopecky only challenges
the district court ruling regarding question one.
II. Issue.
We must decide whether the Commission can enact a rule allowing
it to consider the economic effect of a new gaming operation on existing
gaming facilities when deciding whether to issue a new gaming license.
III. Scope of Review.
Iowa Code section 17A.19(10) governs judicial review of an agency
action. Renda v. Iowa Civil Rights Comm’n, 784 N.W.2d 8, 10 (Iowa
2010). “The district court may grant relief if the agency action has
prejudiced the substantial rights of the petitioner and if the agency
5
action meets one of the enumerated criteria contained in section
17A.19(10)(a) through (n).” Id. In reviewing the decision of the district
court, we must apply the standards set forth in Iowa Code section
17A.19(10) to determine whether we reach the same result as the district
court. Auen v. Alcoholic Beverages Div., 679 N.W.2d 586, 589 (Iowa
2004).
Although the legislature has granted the Commission broad
rulemaking authority, we are not firmly convinced the legislature vested
the Commission with the authority to interpret our statutes when it
enacts its rules. See Renda, 784 N.W.2d at 13. Accordingly, we will
overturn the Commission’s rule allowing it to consider the economic
effect of a new gaming operation on existing gaming facilities when
deciding whether to issue a new gaming license if the rule is “[b]eyond
the authority delegated to the agency by any provision of law or in
violation of any provision of law.” Iowa Code § 17A.19(10)(b).
IV. Discussion and Analysis.
The Iowa legislature has vested the Commission with broad
authority to regulate gambling operations in our state. Alfredo v. Iowa
Racing & Gaming Comm’n, 555 N.W.2d 827, 831 (Iowa 1996) (“The
legislature has empowered and obligated the commission to regulate all
gambling operations governed by Iowa Code chapter 99F . . . and to
adopt rules pursuant to that mandate.”); see also Iowa Code § 99F.4.
The Commission has supervisory authority and “full jurisdiction over” all
gambling operations governed by chapter 99F. Iowa Code § 99F.4.
At issue in this case are two specific powers the legislature
conferred on the Commission: first, the power “[t]o license qualified
sponsoring organizations,” and second, the power “[t]o investigate
applicants and determine the eligibility of applicants for a license and to
6
select among competing applicants for a license the applicant which best
serves the interests of the citizens of Iowa.” Id. § 99F.4(1)–(2). To enforce
these powers, the Commission must “adopt rules pursuant to chapter
17A.” Id. § 99F.4. It also has the power “[t]o take any other action as
may be reasonable or appropriate to enforce [chapter 99F and the
Commission’s rules].” Id. § 99F.4(13).
Under chapter 99F, the Commission has the exclusive authority to
issue licenses. The Code contains several criteria applicants must meet
to demonstrate eligibility for a license. See, e.g., id. §§ 99F.6, .7(8). The
Commission “shall issue a license for a period of not more than three
years” only if it is “satisfied that this chapter and its rules . . . have been
or will be complied with.” Id. § 99F.7(1). The Commission has also
adopted a rule containing seven criteria it considers when granting a
license. Iowa Admin. Code r. 491—1.7. Ultimately, the legislature gave
the Commission the authority to “decide the number, location, and type of
gambling structures and excursion gambling boats licensed under this
chapter.” Iowa Code § 99F.7(1) (emphasis added).
Kopecky first asserts the Code confers duties on the Commission
to “assure that every Iowa county that does not want gambling is free
from gambling,” and “assure that every Iowa county that wants to have
gambling shall have gambling . . . under the direct supervision and
regulation of the commission.” In other words, he contends that once
voters approve a gambling games referendum, the Commission must
issue a license to a qualified applicant and cannot enact a rule with other
criteria to deny a license to an applicant. However, the clear and
unambiguous language of section 99F.7(11) makes Kopecky’s assertion
untenable. See ABC Disposal Sys., Inc. v. Dep’t of Nat. Res., 681 N.W.2d
596, 603 (Iowa 2004) (“If the statute’s language is clear and
7
unambiguous, we apply a plain and rational meaning consistent with the
subject matter of the statute.”).
Prior to the Commission issuing a license for a gambling structure
in a particular county, the electorate must approve a referendum to
permit gambling games in the county. The Iowa Code provides,
A license to conduct gambling games in a county shall be
issued only if the county electorate approves the conduct of
the gambling games as provided in this subsection. . . . If a
majority of the county voters voting on the proposition favor
the conduct of gambling games, the commission may issue
one or more licenses as provided in this chapter. If a
majority of the county voters voting on the proposition do not
favor the conduct of gambling games, a license to conduct
gambling games in the county shall not be issued.
Iowa Code § 99F.7(11)(a) (emphasis added).
“When the term ‘shall’ appears in a statute, it generally connotes
the imposition of a mandatory duty.” Ramirez-Trujillo v. Quality Egg,
L.L.C., 878 N.W.2d 759, 771 (Iowa 2016). When the legislature uses the
term “may” in a statute, it is usually permissive. Iowa Nat’l Indus. Loan
Co. v. Iowa State Dep’t of Revenue, 224 N.W.2d 437, 440 (Iowa 1974).
Additionally, the Iowa Code contains rules of statutory construction,
which provide that in statutes enacted after July 1, 1971, the word
“shall” imposes a duty, and the word “may” confers a power, unless
otherwise specified by the legislature. Iowa Code § 4.1(30).
Given the proximity of the words “may” and “shall” in section
99F.7(11)(a), we conclude the intent of the legislature could not have
been for “may” to mean the same thing as “shall.” If the legislature
intended to impose a duty on the Commission to issue a license following
an affirmative referendum, it would have used the word “shall,” as it did
to impose a duty on the Commission to not issue a license to conduct
8
gambling games in a county in which the majority of voters disapprove a
referendum for gambling games.
Accordingly, we disagree with Kopecky and conclude the
Commission has the power to issue a license following an affirmative
gambling games referendum, but is not required to do so.
Kopecky’s second assertion is the Commission could not enact a
rule allowing it to consider the economic effect of a new gaming operation
on existing gaming facilities when deciding whether to issue a new
gaming license. The rule the Commission uses to decide whether it
grants or denies a gaming license lists seven criteria the Commission
considers. Iowa Admin. Code r. 491—1.7.
One criterion of the rule requires the Commission to consider the
economic impact a new gambling operation might have on existing
gambling facilities. Id. r. 491—1.7(3). The rule provides, in relevant
part,
Economic impact and development. The commission will
consider:
a. The amount of revenue to be provided by the
proposed facility to the state and local communities through
direct taxation on the facility’s operation and indirect
revenues from tourism, ancillary businesses, creation of new
industry, and taxes on employees and patrons. The
commission may engage an independent firm proficient in
market feasibility studies in the industry for specific analysis
of any application to determine the potential market of any
proposed facility as well as the impact on existing licensees.
....
c. The viability and overall net benefit of the proposed
operation to the state gaming industry, taking into
consideration:
....
9
(2) Impact on existing operators’ adjusted gross
revenue versus existing operators’ ratio of adjusted gross
revenue to investment.
....
(4) Percent of projected adjusted gross revenue from
underserved markets.
(5) Percent of projected adjusted gross revenue from
existing Iowa operators.
....
d. The benefits to Iowa tourism.
e. The number and quality of employment
opportunities for Iowans.
f. The development and sale of Iowa products.
Id. We disagree with Kopecky’s second assertion.
In our review of chapter 99F, we find it replete with provisions
indicating the legislature’s intent that the Commission can consider the
economic effect of a new gaming operation on existing gaming facilities
when deciding whether to issue a new gaming license. First, the
Commission issues licenses to qualified sponsoring organizations to
conduct gambling games. Iowa Code § 99F.5(1). The legislature requires
a qualified sponsoring organization to distribute “at least three percent of
the adjusted gross receipts for each license year” “for educational, civic,
public, charitable, patriotic, or religious uses.” Id. § 99F.5(1). The
legislature’s requirement that the qualified sponsoring organizations
distribute funds back into the community, rather than taking the funds
as profit, evidences a legislative intent that the economic impact and
development on the state is an important function of legalized gambling
in Iowa.
Second, the legislature has recognized that having too many
gambling establishments is not consistent with the intent to provide
10
economic development funds to grow the Iowa economy. One section of
the Code prohibits the establishment of a gaming facility in Polk County.
Id. § 99F.4C. We perceive the purpose of this section was to protect
Prairie Meadows Racetrack and Casino, an established facility in Polk
County. Another provision of the Code protects counties with racetracks
from competition by excursion boats unless the excursion boats can
meet certain legislative conditions. Id. § 99F.7(2)(b). These Code
provisions also evidence a legislative intent that the legislature does not
want a new gambling facility to cannibalize an existing gambling facility
because the economic impact on an existing facility is an important
aspect of furthering economic development in this state.
Third, gambling facilities are required to promote the development
of the Iowa economy. The Code requires an excursion gambling boat to
use “Iowa resources, goods and services in the operation” of the facility.
Id. § 99F.7(5). The Code also mandates “[a]n applicant shall make every
effort to ensure that a substantial number of the staff and entertainers
employed are residents of Iowa” and “[a] section is reserved for promotion
and sale of arts, crafts, and gifts native to and made in Iowa.” Id.
§ 99F.7(6)(a)–(b). Finally, the Code sets a special minimum wage for
gambling facility workers. Id. § 99F.7(7). These sections also indicate a
legislative intent that the economic impact of a new facility on an existing
facility is an important aspect of furthering economic development.
In summary, one of the reasons the gaming industry exists in Iowa
is to further the economic development of the community in which the
facility is located, which in turn affects the state as a whole. In order to
insure the continued economic development of our state, the legislature
and the Commission deem it important to make sure an existing
gambling facility remains viable when the Commission issues a new
11
license. A closed gambling facility, together with a loss of jobs, has an
adverse effect on economic development in our state.
Accordingly, the Commission’s consideration of the economic effect
of a new gaming operation on existing gaming facilities when deciding
whether to issue a new gaming license is not “beyond the authority
delegated to the agency by any provision of law or in violation of any
provision of law” and does not violate Iowa Code section 17A.19(10)(b).
V. Disposition.
We affirm the judgment of the district court affirming the
Commission’s declaratory order in its entirety. We reach this conclusion
because the rule allowing the Commission to consider the economic
effect of a new gaming operation on existing gaming facilities when
deciding whether to issue a new gaming license is not “[b]eyond the
authority delegated to the agency by any provision of law or in violation
of any provision of law” under section 17A.19(10)(b).
AFFIRMED.
All justices concur except Hecht and Zager, JJ., who take no part.