POM of PA, LLC v. BLCE ( 2023 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
POM of Pennsylvania, LLC, :
Petitioner :
: No. 222 M.D. 2022
v. :
: Argued: June 6, 2023
Bureau of Liquor Control Enforcement; :
Scott Miller; James Jones; Scott :
Berdine; and Pennsylvania Gaming :
Control Board, :
Respondents :
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE LORI A. DUMAS, Judge
HONORABLE STACY WALLACE, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE McCULLOUGH FILED: July 10, 2023
This is an action filed in our original jurisdiction by Petitioner POM of
Pennsylvania, LLC (POM) against Respondents the Pennsylvania State Police,
Bureau of Liquor Control Enforcement (Bureau), Scott Miller (Miller), James Jones
(Jones), Scott Berdine (Berdine) (collectively, Bureau Respondents), and the
Pennsylvania Gaming Control Board (Board) (all together, Respondents). POM
brings claims for alleged injury to its reputation in violation of article I, section 1 of
the Pennsylvania Constitution.1 Now before this Court for disposition are the Bureau
Respondents’ and the Board’s preliminary objections to POM’s Second Amended
Petition for Review in the Nature of a Complaint (Second Amended PFR). For the
reasons that follow, we sustain the first of the Bureau Respondents’ preliminary
1
Pa. Const. art. I, § 1.
objections, defer ruling on any other preliminary objections, and stay this action as
set forth below.
I. FACTS AND PROCEDURAL HISTORY
A. This Action
POM initiated this action by filing original and first amended petitions
for review in April 2022 against only the Bureau Respondents. After the Bureau
Respondents filed preliminary objections to POM’s First Amended Petition for
Review, POM filed its Second Amended PFR on June 9, 2022, adding the Board as
a respondent. Therein, POM alleges the following material facts.
POM is a Pennsylvania distributor of electronic games marketed with
the trade name “Pennsylvania Skill” games (POM Games or Games). The POM
Games offer players the ability to win on every play at least 105% of the player’s
paid consideration for playing the game. Through in-state operators, POM places
the Games in businesses like bars, restaurants, convenience stores, and fraternal
organizations, many of which also sell or serve alcohol. (Second Amended PFR ¶¶
9-10, 17.)
Regarding the Bureau Respondents specifically, POM alleges that,
beginning in 2018, the Bureau Respondents “began a program of targeted
harassment towards POM and its business partners.” (Second Amended PFR ¶ 34.)
The alleged harassment included making private and public statements asserting the
illegality of the POM Games to businesses, fraternal organizations, and other
establishments that might house the POM Games for use by patrons. (Id. ¶¶ 35-40.)
POM also alleges that the Bureau Respondents have made “openly false statements”
concerning the Games in legal proceedings and documents, have maligned the
Games to local district attorneys’ offices, and have acted in concert with casino
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lawyers and lobbyists to disparage the Games and tortiously interfere with POM’s
business. (Id. ¶¶ 42-67.) POM contends that the Bureau Respondents have taken
these actions without having ever “articulated a factual or legal basis for maintaining
that the [Games] [are] [ ] illegal gambling device[s].” (Id. ¶ 71.) According to POM,
the Bureau Respondents in fact believe that the Games are legal in Pennsylvania,
and their ongoing assertions that the Games are per se illegal are designed only to
destroy POM’s business reputation. (Id. ¶¶ 73-74.)
Regarding the Board, POM contends that although the Board
historically has taken the position that the Games are not predominantly games of
chance and, therefore, are not illegal gambling devices, the Board changed its legal
position “due to pressure and lobbying” from several Pennsylvania casinos. (Id. ¶¶
81-82.) Having changed its legal position, the Board now allegedly “steers grant
money to district attorneys and assists in coordinating the training of county
detectives from those district attorney[s’] offices who agree to seize the [POM
Games] and prosecute the locations lawfully possessing the [Games].” (Id. ¶ 87.)
POM further alleges that the Board has “explicitly maligned POM and the [Games]
as a basis to argue for denial of gaming licenses.” (Id. ¶ 90.) Accordingly, POM
argues that the Board not only changed its legal position regarding the Games, but
also now “goes out of its way to attack POM and the [Games] as a way to threaten
potential [Board] applicants who might also do business with POM.” (Id. ¶ 96.)
Based on these allegations, POM asserts a single count each against the
Bureau Respondents and the Board, arguing that their conduct violates and infringes
upon POM’s fundamental right to reputation under article I, section 1 of the
Pennsylvania Constitution, which right POM contends is self-executing. (Id. ¶ 100-
01, 107-08.) POM seeks the following relief against both the Bureau Respondents
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and the Board: (1) a declaration that they have violated POM’s rights under article
I, section 1; (2) a permanent injunction enjoining all Respondents from “publicly
and privately declaring the [Games] to be per se illegal, unless the [Games are] so
determined judicially or by statute”; and (3) a permanent injunction enjoining them
from “targeting POM” with selective prosecutions, in licensure applications, or “in
any other manner.” (Id., pp. 26-27, 28-29.)
The Bureau Respondents filed their preliminary objections on July 5,
2022, and the Board filed its preliminary objections on July 14, 2022. By order
exited on July 15, 2022, the Court stayed discovery pending disposition of both sets
of preliminary objections.
B. Other POM Actions
In 2018, POM filed two other relevant actions in our original
jurisdiction. See POM of Pennsylvania, LLC v. Department of Revenue (Pa.
Cmwlth., No. 418 M.D. 2018) (2018 Revenue Case), and POM of Pennsylvania,
LLC v. Pennsylvania State Police, Bureau of Liquor Control Enforcement (Pa.
Cmwlth., No. 503 M.D. 2018) (2018 Bureau Case) (collectively, 2018 Cases). In
both 2018 Cases, POM seeks declarations that the Games are not per se illegal
gambling devices pursuant to Section 5513 of the Crimes Code, 18 Pa. C.S. § 5513.
It also seeks preliminary and permanent injunctive relief precluding the respondents
in both actions from seizing the POM Games as illegal gambling devices or
maintaining adverse actions against POM regarding the Games. Certain respondents
in both 2018 Cases (the Department of Revenue and the Bureau) filed counterclaims
asserting that the Games fall under the regulatory framework of the Pennsylvania
Race Horse Development and Gaming Act, 4 Pa. C.S. §§ 1101-1904 (Gaming Act).
In en banc decisions filed November 20, 2019, we concluded in both 2018 Cases
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that the Games do not fall under the regulatory framework of the Gaming Act and,
accordingly, are not subject to regulation by the Board. See POM of Pennsylvania,
LLC v. Department of Revenue, 221 A.3d 717 (Pa. Cmwlth. 2019); POM of
Pennsylvania, LLC v. Pennsylvania State Police, Bureau of Liquor Control
Enforcement (Pa. Cmwlth., No. 503 M.D. 2018, filed November 20, 2019) (together,
POM I).
Soon after our decisions in POM I, on December 12, 2019, POM filed
in the 2018 Bureau Case its Emergency Application for Preliminary Injunction in
which it argued that the Bureau instituted a retaliatory “intimidation campaign” of
targeting and raiding establishments that host the Games in an attempt to damage
POM’s business reputation (Emergency Application). In the Emergency
Application, POM sought to enjoin the Bureau from seizing any Games or
commencing, continuing, instituting, or maintaining any adverse actions or
proceedings against POM regarding the Games under the auspices of Section 5513
of the Crimes Code. POM asserted that the Bureau’s seizures of the Games were
part of the Bureau’s efforts to irreparably harm POM’s reputation and that the
Bureau’s conduct was, in fact, causing reputational harm and loss of good will in
violation of POM’s constitutional rights to property and reputation. (Emergency
Application, No. 503 M.D. 2018, filed December 12, 2019, at 9-10, 12, 19, 21-22.)
After hearing and briefing, this Court, by a single-Judge memorandum and order
authored by Judge Ceisler, denied the Emergency Application. In pertinent part,
Judge Ceisler opined as follows:
This Court recognizes that unless, or until, [the POM
Games] are considered to be illegal gambling devices
under the Crimes Code, POM may suffer harms to its
reputation and property interests as a result of [the
Bureau’s seizures of the Games.] However, . . . as long as
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POM is not specifically targeted, this Court finds no
improper conduct by the [Bureau] that warrants the
imposition of an injunction at this time.
POM of Pennsylvania, LLC v. Pennsylvania State Police, Bureau of Liquor Control
Enforcement (Pa. Cmwlth., No. 503 M.D. 2018, Memorandum and Order filed
January 21, 2020) (Ceisler, J.), slip op. at 7.
Soon after the filing of POM I and Judge Ceisler’s decision, several
Pennsylvania casinos (Casinos) and the Board sought leave to intervene in both 2018
Cases. Significant litigation followed, and the intervention petitions remain pending
to date. Then, in February 2023, POM discontinued the 2018 Revenue Case. The
Department of Revenue, the Board, and the Casinos filed appeals to the
Pennsylvania Supreme Court challenging POM I’s determination that the Gaming
Act does not apply to the Games. Those appeals remain pending. Thus, at present,
only the 2018 Bureau Case remains active in this Court. The pending petitions to
intervene (a third was filed by the City of Philadelphia in April 2023) were scheduled
for hearing on June 9, 2023, but upon request for a continuance by the Bureau, the
hearing is now scheduled for July 19, 2023. A merits hearing will occur sometime
thereafter.
POM also is litigating numerous other state court actions (chiefly return
of property and forfeiture cases), all of which involve the status of the Games under
the Crimes Code. Several of those cases have been decided (in POM’s favor) at the
trial court level, and two of the decisions are now on appeal to the Pennsylvania
Superior Court. See POM’s Application to Compel, 2018 Bureau Case, filed May
15, 2023, ¶ 8 & n.1. If those appeals proceed, the Superior Court presumably will
render Commonwealth-wide decisions adjudicating whether the POM Games are
per se illegal under the Crimes Code.
6
II. PRELIMINARY OBJECTIONS
A. The Bureau’s Preliminary Objections
The Bureau Respondents lodge five preliminary objections to the Second
Amended PFR:
(1) This action must be dismissed, or at least stayed,
pending disposition of the 2018 Bureau Case (lis pendens)
(Pa. R.Civ.P. 1028(a)(6));
(2) POM cannot establish all of the elements necessary
for injunctive relief (demurrer) (Pa. R.Civ.P. 1028(a)(4));
(3) POM cannot assert, pursuant to the Declaratory
Judgments Act, 42 Pa. C.S. §§ 7531-7541, a claim for
damage to reputation under article I, section 1 of the
Pennsylvania Constitution (demurrer) (Pa. R.Civ.P.
1028(a)(4));
(4) POM has a full, complete, and adequate non-
statutory remedy at law in its ability to litigate return of
property and forfeiture actions involving the Games (Pa. R.
Civ.P. 1028(a)(8)); and
(5) The Second Amended PFR contains scandalous and
impertinent matter that should be stricken (Pa. R.Civ.P.
1028(a)(2)).
B. The Board’s Preliminary Objections
The Board lodges six preliminary objections to the Second Amended PFR:
(1) POM may not assert a claim pursuant the
Declaratory Judgments Act for damage to reputation in
violation of article I, section 1 of the Pennsylvania
Constitution (demurrer) (Pa. R.Civ.P. 1028(a)(4));
(2) POM cannot establish all of the necessary elements
for injunctive relief (demurrer) (Pa. R.Civ.P. 1028(a)(4));
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(3) POM has not established that the Board is
“targeting” POM (demurrer) (Pa. R.Civ.P. 1028(a)(4));
(4) This Court lacks subject matter jurisdiction because
POM failed to exhaust available administrative remedies
by failing to seek intervention in the Board’s licensure
proceedings (Pa. R.Civ.P. 1028(a)(1));
(5) POM has a full, complete, and adequate non-
statutory remedy at law in seeking to intervene in the
Board’s licensure proceedings (Pa. R.Civ.P. 1028(a)(8));
and
(6) POM’s Second Amended PFR contains scandalous
and impertinent matter (Pa. R.Civ.P. 1028(a)(2)).
III. DISCUSSION
A. Lis Pendens
The Bureau Respondents first assert that this action should be
dismissed, or at least stayed, pending final adjudication of the 2018 Bureau Case
because the underlying legal issue in that case, the Games’ legality under the Crimes
Code, controls the disposition in this action. We agree that a stay is appropriate in
these circumstances.
We have described the doctrine of lis pendens as follows:
The doctrine of lis pendens, [i.e.,] pendency of a prior
action, applies when, in the previously filed case, the
parties are the same, the rights are the same and the
requested relief is the same. The doctrine of lis pendens
protects defendants from the harassment of having to
defend several suits on the same cause of action at the same
time.
The application of lis pendens is purely a question of law.
The [C]ourt must determine whether the causes of action
arose from the same transaction or occurrence, that is,
8
whether the claims involve a common factual background
or common legal question.
Swift v. Radnor Township, 983 A.2d 227, 234 (Pa. Cmwlth. 2009) (internal citations
and quotations omitted). “The party raising the defense of [lis pendens] can ask that
the action in which the defense is being raised be abated, that it be stayed pending
the outcome of the prior litigation, or that the actions be consolidated.” Virginia
Mansions Condominium Association v. Lampl, 552 A.2d 275, 277 (Pa. Super. 1988).
Where a party seeks dismissal of a claim or action based on lis pendens, the three-
pronged “identity” test must be applied strictly. Hillgartner v. Port Authority of
Allegheny County, 936 A.2d 131, 137-38 (Pa. Cmwlth. 2007).
Here, only the Bureau Respondents preliminarily object to the Second
Amended PFR on the ground of lis pendens. Nevertheless, although the complained-
of actions of the Bureau Respondents and the Board are different, POM alleges the
same reputational injury and seeks the same substantive relief against all
Respondents. Thus, if lis pendens applies, it applies to the entire action and requires
either its dismissal or stay.
1. Identity of Parties
This element is substantially met. POM is the petitioner in both this
and the 2018 Bureau Case, and the Bureau is a named respondent in both cases.
Although POM also brings this action against several individual Bureau officers and
the Board, those additional Respondents do not destroy the necessary identity of
parties. The claims against both the Board and the individual Bureau Respondents
are based on the same asserted constitutional rights, and both turn on the same legal
question, namely, whether the POM Games are illegal gambling devices under the
Crimes Code. The Board also has sought to intervene in the 2018 Bureau Case and
has appealed (as a potential intervenor) this Court’s decisions in POM I. Thus,
9
although the parties in these two cases are not strictly identical, they are substantially
identical to a degree that justifies a lis pendens stay.
2. Identity of Rights
This element also is substantially met. Again, although the 2018
Bureau Case involves the single question of whether the POM Games are per se
illegal gambling devices and this action involves an alleged injury to reputation
under article I, section 1 of the Pennsylvania Constitution, both cases turn on the
question of the Games’ legality and the alleged harm that the Bureau’s (and the
Board’s) conduct allegedly is inflicting on POM’s business and reputation interests.
Thus, although styled differently, the claims in both cases involve similar legal
questions and seek to preserve the same rights and interests.
3. Identity of Requested Relief
Although POM argues that it has not filed an action pursuant to the
Declaratory Judgments Act, it nevertheless seeks both declaratory and injunctive
relief under article I, section 1 of the Pennsylvania Constitution. The claims are
based on alleged conduct by both the Bureau and the Board in which they directly
or implicitly have stated or publicized that the Games are per se illegal. The relief
POM requests is broad and all-encompassing and extends far beyond a mere
declaration that a violation of article I, section 1 has occurred. POM also requests
that the Bureau and the Board permanently be enjoined from (1) “publicly and
privately declaring” the Games to be per se illegal unless they are judicially or
legislatively so determined to be, (2) “targeting” POM in selective prosecutions
(Bureau), and (3) targeting POM in any manner, including in the processing of
licensure applications (Board). (Second Amended PFR at 26-27, 28-29.) All of this
relief centers on the legality of the POM Games and the Respondents’ suggestions
10
or “declarations,” by words or conduct, that the Games are per se illegal. In its
petition for review in the 2018 Bureau Case, POM seeks declarations that the Games
are legal and that the Bureau lacks any authority to seize, or initiate any criminal or
administrative proceedings regarding, the Games. POM also requests injunctive
relief precluding the Bureau from taking those actions.
Thus, both actions necessarily require this Court to determine whether
the Games are per se illegal. Again, although POM styles the relief in the two
actions differently, the underlying legal question and the declarations and injunctive
relief that will follow are, in substance, the same.
4. Application
If strictly applied, the three-part identity test for the application of lis
pendens might not be satisfied here. But, the three required identities have been
established sufficiently to justify staying this action until the 2018 Bureau Case is
resolved on the merits. After the issue of the Games’ legality is decided (either in
that action or in one of the other cases now on appeal to the Superior Court), this
Court may proceed to decide the remainder of the preliminary objections and, if
necessary, the merits of POM’s claims. Proceeding to decide even the parties’
remaining preliminary objections at this point would be premature given that, if the
Games are determined to be illegal gambling devices, the entire action likely will be
rendered moot. See Bureau Br. at 18. If the POM Games are determined to be legal,
we would then first dispose of the remaining preliminary objections to determine if
POM has stated viable claims for relief under article I, section 1.
Our decision to stay this action is further justified by the fact that POM
already has had an opportunity to seek injunctive relief for alleged harm to its
reputation. In its Emergency Application filed in the 2018 Bureau Case, POM
11
asserted that the Bureau’s seizure of the Games and “intimidation campaign” was
driven by a directed and concerted effort by the Bureau and others to damage POM’s
reputation and business interests in the Commonwealth. POM therefore sought
injunctive relief against the Bureau precluding it not only from seizing the Games
based on their alleged illegality, but also from “commencing, continuing, instituting,
or maintaining” any adverse actions or proceedings against POM based on the
Games’ illegality, in part to preserve POM’s reputational interests. Judge Ceisler
denied the application and determined that any incidental injury inflicted on POM’s
reputational interests by the non-targeted seizure of the POM Games did not justify
preliminary injunctive relief. Here, POM seeks similar relief: enjoining both the
Bureau and the Board from “declaring” publicly or privately that the games are per
se illegal until otherwise determined by legislative or judicial pronouncement.2
Given that several cases now are pending in which such a “pronouncement” will be
made, we conclude that a stay of this action is the best course to prevent duplicative
litigation.
IV. CONCLUSION
The disposition now of any preliminary objections other than that
identified above would be premature given the pendency of several actions that will
decide the underlying and controlling question of the POM Games’ legality. We
accordingly sustain the Bureau Respondents’ first preliminary objection based on lis
pendens, defer ruling on any of Respondents’ remaining preliminary objections, and
stay this action until the POM Games’ legality is adjudicated either in the 2018
2
There also will be little to no practical prejudice to any of the parties if this action is
stayed. Discovery already has been stayed until after disposition of Respondents’ preliminary
objections. The pendency of the 2018 Bureau Case also provides a forum in which any of the
parties may seek (and have sought) any necessary interim relief.
12
Bureau Case or one of the several cases on appeal in the Superior Court. We hasten
to add, however, that nothing in this opinion should be construed to sanction any of
Respondents’ alleged conduct. To the extent that such conduct continues and the
POM Games ultimately are determined to be legal, Respondents proceed at their
own risk subject to any remedies to which POM might be entitled in this action.3
Finally, we note that the Bureau Respondents filed a motion to stay
discovery on June 10, 2022. POM filed an answer opposing the motion on June 27,
2022. On July 5, 2022, POM filed an application to submit an amended answer to
the motion. The Court granted the Bureau Respondents’ motion to stay discovery
on July 15, 2022, but did not otherwise rule on POM’s application to submit an
amended answer. Although the Court already has granted the Bureau Respondents’
motion to stay discovery, we nevertheless herein grant POM’s application to submit
its amended answer to ensure the accuracy and completeness of the record.
________________________________
PATRICIA A. McCULLOUGH, Judge
3
Additionally, nothing in this opinion and the corresponding stay should be construed to
prevent the parties from executing a stipulated status quo order in which they agree to mutually-
acceptable terms and conditions that will govern their conduct pending final disposition on the
merits.
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IN THE COMMONWEALTH COURT OF PENNSYLVANIA
POM of Pennsylvania, LLC, :
Petitioner :
: No. 222 M.D. 2022
v. :
:
Bureau of Liquor Control Enforcement; :
Scott Miller; James Jones; Scott :
Berdine; and Pennsylvania Gaming :
Control Board, :
Respondents :
ORDER
AND NOW, this 10th day of July, 2023, upon consideration of the
preliminary objections filed by all Respondents, it hereby is ORDERED that the
preliminary objection of Respondents Bureau of Liquor Control Enforcement, Scott
Miller, James Jones, and Scott Berdine based on the doctrine of lis pendens is
SUSTAINED, in part. This action is STAYED in its entirety pending a final
appellate determination of the POM Games’ legality under Section 5513 of the
Pennsylvania Crimes Code, 18 Pa. C.S. § 5513. Thereafter, the Court will proceed
to decide, as appropriate, the remaining preliminary objections of all Respondents.
It further is ORDERED that Petitioner POM of Pennsylvania, LLC’s Application to
Submit Amended Answer filed July 5, 2022, is GRANTED, and the Amended
Answer attached as Exhibit A to POM’s Application shall be deemed to have been
filed as of July 5, 2022.
________________________________
PATRICIA A. McCULLOUGH, Judge
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