NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, an unincorporated association; NATIONAL BASKETBALL ASSOCIATION, a joint venture; NATIONAL FOOTBALL LEAGUE, an unincorporated association; NATIONAL HOCKEY LEAGUE, an unincorporated association; OFFICE OF THE COMMISSIONER OF BASEBALL, an unincorporated association doing business as MAJOR LEAGUE BASEBALL
GOVERNOR OF THE STATE OF NEW JERSEY; DAVID L. REBUCK, Director of the New Jersey Division of Gaming Enforcement and Assistant Attorney General of the State of New Jersey; *JUDITH A. NASON, Acting Executive Director of the New Jersey Racing Commission; NEW JERSEY THOROUGHBRED HORSEMEN'S ASSOCIATION, INC.; NEW JERSEY SPORTS & EXPOSITION AUTHORITY STEPHEN M. SWEENEY, President of the New Jersey Senate; *CRAIG J. COUGHLIN, Speaker of the New Jersey Assembly (Intervenors in District Court) New Jersey Thoroughbred Horsemen's Association, Inc., Appellant *(Amended pursuant to Clerk's Order dated 12/27/18)
on July 2, 2019
Appeal from the United States District Court for the District
of New Jersey (District Court No.: 3-14-cv-06450) District
Court Judge: Honorable Michael A. Shipp
Anthony J. Dreyer Jeffrey A Mishkin, Skadden Arps Slate
Meagher & Flom, Richard Hernandez William J .
O'Shaughnessy McCarter & English Counsel for
M. Berman McElroy Deutsch Mulvaney & Carpenter, Ronald J.
Riccio, McElroy Deutsch Mulvaney & Carpenter Counsel for
Before: McKEE, PORTER and RENDELL, Circuit Judges
restraining orders are not always a sure bet. Federal Rule of
Civil Procedure 65(c) requires the party seeking a TRO to
"give security in an amount that the court considers
proper to pay the costs and damages sustained by any party
found to have been wrongfully enjoined or restrained."
In this case, Appellees moved for, and the District Court
entered, a TRO that, among other things, barred the New
Jersey Thoroughbred Horsemen's Association
("NJTHA") from conducting sports gambling on the
basis that New Jersey's "authorization" of
sports gambling violated the federal Professional and Amateur
Sports Protection Act ("PASPA"), and required
Appellees to post a bond as security. On appeal, NJTHA and
the other defendants successfully challenged the
constitutionality of PASPA in the Supreme Court, and, on
remand, NJTHA sought to recover on the bond that Appellees
had posted. The District Court denied the motion for judgment
on the bond. Because we conclude that NJTHA was
"wrongfully enjoined" within the meaning of Rule
65(c) and no good cause existed to deny bond damages in this
case, we will vacate and remand.
this appeal concerns NJTHA's ability to recover on the
bond, that is only the last shoe to drop in a lengthy saga
that involves other overarching issues, including the
constitutionality of PASPA, its interaction with New
Jersey's attempts to legalize sports gambling, and the
several opinions of the District Court, this Court, and the
Supreme Court in the two actions litigating these issues
among the same parties. Thus, a thorough review of the unique
procedural history underlying this dispute is warranted.
1992, Congress enacted PASPA, making it "unlawful"
for "a government entity" or a person acting at the
direction of a government entity "to sponsor, operate,
advertise, promote, license, or authorize by law or
compact . . . a lottery, sweepstakes, or other betting,
gambling, or wagering scheme based . . . on" competitive
sporting events. 28 U.S.C. § 3702 (emphasis added). At
that time and for the following nineteen years, New Jersey
law paralleled PASPA, prohibiting sports gambling by its
Constitution and by statute. See, e.g., N.J. Const.
art. IV, § 7, para. 2; N.J. Stat. Ann. §
2C:37–2; N.J. Stat. Ann. § 2A:40–1. However,
in 2011, New Jersey constituents voted to amend the
state's Constitution to allow the legislature to
authorize sports gambling, N.J. Const. art. IV, § 7,
para. 2(D), (F), and the legislature did so by enacting the
Sports Wagering Act in 2012 (the "2012 Act"), N.J.
Stat. Ann. §§ 5:12A–1 et seq.
National Collegiate Athletic Association and four
professional sports leagues (collectively,
"Appellees" or "the Leagues"), initiated
an action in federal court ("Christie I")
against the New Jersey Governor and other state officials
(collectively, the "State Defendants"), seeking to
enjoin the 2012 Act as violative of PASPA and arguing that
they would be irreparably injured unless an injunction was
issued. Because it intended to offer sports gambling at
Monmouth Park racetrack, NJTHA intervened. The defendants
did not dispute that the 2012 Act violated PASPA and instead
argued, among other things, that PASPA unconstitutionally
commandeered the states' sovereign authority. The
District Court disagreed, held that PASPA was constitutional,
and enjoined the implementation of the 2012 Act. See
Nat'l Collegiate Athletic Ass'n v. Christie, 926
F.Supp.2d 551, 573, 578–79 (D.N.J. 2013). We affirmed,
reasoning that PASPA does not affirmatively command the
states to act and consequently did not prohibit them from
repealing any existing bans on sports wagering. See
Nat'l Collegiate Athletic Ass'n v. Christie, 730
F.3d 208, 231–32 (2013). The Supreme Court denied
certiorari. Christie v. Nat'l Collegiate Athletic
Ass'n, 537 U.S. 931 (2014).
response to our reasoning that PASPA does not prohibit states
from repealing any existing bans on sports gambling, the New
Jersey legislature enacted a law repealing certain state law
provisions that prohibited gambling at horserace tracks and
casinos (the "2014 Act"). See 2014 N.J.
Sess. Law Serv. Ch. 62 (codified at N.J. Stat. Ann.
§§ 5:12A-7 to -9 (repealed 2018)). NJTHA
immediately announced its intention to conduct sports
gambling at Monmouth Park. Appellees filed the instant suit
("Christie II") and, at the outset,
requested a TRO and preliminary injunction to enjoin NJTHA
from doing so, again asserting irreparable injury. Appellees
also asked the District Court to restrain the State
Defendants from implementing the 2014 Act and to enforce the
injunction entered in Christie I. They filed their
request on both the Christie I and Christie
response, the defendants relied on our reasoning in
Christie I that the federal law allowed a repeal of
state sports gambling prohibitions. The State Defendants
specifically asserted that a grant of Appellees' request
would again raise the issue of PASPA's constitutionality.
See A. 240–41 ("[E]ither PASPA permits
States to repeal their prohibitions against sports wagering
in whole or in part, as does the 2014 Act, or PASPA
unconstitutionally commandeers states['] authority by
forcing States to maintain unwanted prohibitions.").
Additionally, NJTHA argued, among other things, that the
Leagues' assertion that sports gambling would harm them
was false, since they "support, participate in, and
significantly profit from betting on the outcomes of their
games as well as the performances of the players in their
games." Br. in Opp'n to Pls.' Appl. for a TRO at
35, Nat'l Collegiate Athletic Ass'n v.
Christie, No. 3:14-cv-06450 (D.N.J. Oct. 24, 2014), ECF
No. 21. NJTHA also complained that the Leagues had not posted
a bond, as required by Federal Rule of Civil Procedure 65,
and attached a certification asserting that they would lose
$1, 170, 219 per week if a TRO was granted.
District Court granted the requested TRO and, in doing so,
relied on our holding in Christie I that PASPA is
constitutional. The Court ordered Appellees to post a $1.7
million bond, which it believed was "on the high side to
avoid any potential loss to defendants." A. 64. Shortly
thereafter, it extended the TRO for an additional two weeks
and increased the bond amount to a total of $3.4 million.
before the TRO was set to expire, the District Court
converted the scheduled hearing on the Leagues' request
for a preliminary injunction into a final summary judgment
hearing. The Court granted summary judgment to Appellees,
holding that the 2014 Act was "invalid as preempted by
PASPA." Nat'l Collegiate Athletic Ass'n v.
Christie, 61 F.Supp. 3d 488, 506 (D.N.J. 2014). It also
entered a permanent injunction against the State Defendants,
enjoining them "from violating PASPA through giving
operation or effect to the 2014 [Act] in its
appeal, this Court first affirmed the District Court's
order. See Nat'l Collegiate Athletic Ass'n v.
Governor of New Jersey, 799 F.3d 259, 261 (3d Cir.
2015). We then granted NJTHA's petition for rehearing
en banc and again affirmed the grant of summary
judgment. See Nat'l Collegiate Athletic Ass'n v.
Governor of New Jersey, 832 F.3d 389, 392 (3d Cir. 2016)
(en banc). In doing so, we determined that the 2014 Act, like
its predecessor, "authorize[d]" sports gambling in
violation of PASPA. Id. at 396. We explicitly
rejected our reasoning in Christie I that a repeal
is not an "affirmative authorization." Id.
at 396–97. Instead, we looked to "what the
provision actually does" and held that, "[w]hile
artfully couched in terms of a repealer, the 2014 [Act]
essentially provides that, notwithstanding any other
prohibition by law, casinos and racetracks shall hereafter be
permitted to have sports gambling, " which "is an
authorization." Id. at 397. We then went on to
again reiterate PASPA's constitutionality. Id.
Supreme Court granted certiorari and reversed our en
banc judgment. See Murphy v. Nat'l Collegiate
Athletic Ass'n, 138 S.Ct. 1461, 1485 (2018).
Although the Court agreed with one aspect of our ruling,
namely, that a repeal of a law banning an activity
constitutes an "authoriz[ation]" of that activity,
id. at 1474, the Court concluded that PASPA's
prohibition of sports gambling violated the
Constitution's anticommandeering principle because
"state legislatures are [still] put under the direct
control of Congress, " id. at 1478.
prevailing in the Supreme Court, NJTHA filed a motion in the
District Court for judgment on the bond. The Court ordered
briefing on whether NJTHA was "wrongfully enjoined,
" whether NJTHA was entitled to recover the full bond
amount as a matter of law without proving actual loss, and
whether NJTHA's claim for damages greater than the bond
amount could be decided as a matter of law. There was no
discovery on the actual loss amount.
District Court denied NJTHA's motion. First, it
determined that NJTHA was not "wrongfully enjoined"
per Federal Rule of Civil Procedure 65(c). The Court thought
that "NJTHA's contention that it is entitled to
damages under the injunction bond conflate[d] the issue of
whether the 2014 [Act] authorized sports betting with the
Supreme Court's ultimate holding that PASPA is
unconstitutional." A. 18. The District Court narrowly
characterized the issue before it at the TRO stage as
"whether the 2014 [Act] . . . effectively authorized
sports betting in violation of PASPA" and noted that
both the Third Circuit and the Supreme Court agreed with its
conclusion that the 2014 Act did so. A. 16 (citation and
internal quotation marks omitted). The Court stated,
"That PASPA's constitutionality was introduced on
appeal does not convert the bond, which assured that the 2014
[Act] amounted to an authorization, into a bond that assured
any and all possibilities." A. 19.
District Court also held that, even if NJTHA had been
wrongfully enjoined, good cause existed to deny NJTHA's
motion. In doing so, the Court relied on Coyne-Delany Co.
v. Capital Development Board, in which the Seventh
Circuit held that "a prevailing defendant is entitled to
damages on the injunction bond unless there is a good reason
for not requiring the plaintiff to pay in the particular
case" and listed factors to be considered in determining
whether good reason exists. 717 F.2d 385, 391–392 (7th
Cir. 1983). The District Court considered one factor that had
been relied upon by the Court in Coyne, namely, a
change in the law. The District Court here reasoned that the
law in this case had changed, characterizing PASPA as
"constitutionally valid" in 2014, when the TRO was
entered, and invalid in 2018. A. 20. NJTHA timely appealed
the District Court's order.
appeal, NJTHA urges that the District Court was wrong on both
counts. Specifically, NJTHA argues that the Court erred in
holding that it was not "wrongfully enjoined"
because (1) entry of the TRO was premised on the
constitutionality of PASPA, which the Supreme Court
ultimately held was unconstitutional, and (2) the District
Court incorrectly considered the law at the time it entered
the TRO, as opposed to the law at the time of the Supreme
Court's final judgment, in making that determination.
NJTHA also urges that the District Court erred by exercising
its discretion to deny bond damages and in concluding that
there was good cause to do so. On this front, NJTHA claims
that discretion to deny bond damages under Rule 65(c) does
not exist and the Seventh Circuit case relied upon by the
District Court is not controlling.
District Court had jurisdiction pursuant to 28 U.S.C. §
1331. This Court has jurisdiction under 28 U.S.C. §
1291. Because NJTHA challenges the District Court's
interpretation of Federal Rule of Civil Procedure 65(c), we
review the District Court's order de novo.
Garza v. Citigroup, Inc., 881 F.3d 277, 280 (3d Cir.
Rule of Civil Procedure 65(c) ...