Filed: Sep. 25, 2014
Latest Update: Mar. 02, 2020
Summary: Case: 13-50900 Document: 00512782820 Page: 1 Date Filed: 09/25/2014 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED September 25, 2014 No. 13-50900 Lyle W. Cayce Clerk CHURCHILL DOWNS INCORPORATED; CHURCHILL DOWNS TECHNOLOGY INITIATIVES COMPANY, doing business as TwinSpires.Com, Plaintiffs – Appellants v. CHUCK TROUT, In His Official Capacity as Executive Director of the Texas Racing Commission; GARY P. ABER, In His Official Capacity
Summary: Case: 13-50900 Document: 00512782820 Page: 1 Date Filed: 09/25/2014 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED September 25, 2014 No. 13-50900 Lyle W. Cayce Clerk CHURCHILL DOWNS INCORPORATED; CHURCHILL DOWNS TECHNOLOGY INITIATIVES COMPANY, doing business as TwinSpires.Com, Plaintiffs – Appellants v. CHUCK TROUT, In His Official Capacity as Executive Director of the Texas Racing Commission; GARY P. ABER, In His Official Capacity ..
More
Case: 13-50900 Document: 00512782820 Page: 1 Date Filed: 09/25/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 25, 2014
No. 13-50900
Lyle W. Cayce
Clerk
CHURCHILL DOWNS INCORPORATED; CHURCHILL DOWNS
TECHNOLOGY INITIATIVES COMPANY, doing business as
TwinSpires.Com,
Plaintiffs – Appellants
v.
CHUCK TROUT, In His Official Capacity as Executive Director of the Texas
Racing Commission; GARY P. ABER, In His Official Capacity as a Member of
the Texas Racing Commission; SUSAN COMBS, in Her Official Capacity as a
Member of the Texas Racing Commission; RONALD F. EDERER, In His
Official Capacity as a Member of the Texas Racing Commission; GLORIA
HICKS, In Her Official Capacity as a Member of the Texas Racing
Commission; MICHAEL F. MARTIN, In His Official Capacity as a Member of
the Texas Racing Commission; ALLAN POLUNSKY, In His Official Capacity
as a Member of the Texas Racing Commission; ROBERT SCHMIDT, In His
Official Capacity as a Member of the Texas Racing Commission; JOHN T.
STEEN, III, In His Official Capacity as a Member of the Texas Racing
Commission; VICKI SMITH WEINBERG, In Her Official Capacity as a
Member of the Texas Racing Commission,
Defendants – Appellees
Appeal from the United States District Court
for the Western District of Texas
No. 1:12-CV-880
Before SMITH, DeMOSS, and HIGGINSON, Circuit Judges.
Case: 13-50900 Document: 00512782820 Page: 2 Date Filed: 09/25/2014
No. 13-50900
PER CURIAM:*
Churchill Downs Incorporated and Churchill Downs Technology
Initiatives Company, doing business as TwinSpires.Com, (“Plaintiffs”) sued
the executive director and the board members of the Texas Racing Commission
(“the Commission”) alleging that certain provisions of the Texas Racing Act
that require bets on horse races to be placed in-person 1 violate the dormant
Commerce Clause of the United States Constitution. After briefing by the
parties and a hearing, the district court found that the challenged provisions
did not violate the dormant Commerce Clause and dismissed the case. For the
reasons stated below, we affirm.
“A district court’s judgment concerning a statute’s constitutionality is
reviewed de novo. To the extent relevant to the constitutional question,
subsidiary facts are reviewed for clear error.” Allstate Ins. Co. v. Abbott, 495
F.3d 151, 160 (5th Cir. 2007) (internal citations omitted).
Plaintiffs assert that the in-person betting requirements of the Texas
Racing Act violate the dormant Commerce Clause. 2 In Allstate Insurance Co.
v. Abbott, we explained the dormant Commerce Clause analysis:
A statute violates the dormant Commerce Clause where it
discriminates against interstate commerce either facially, by
purpose, or by effect. If the statute impermissibly discriminates,
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
1 See TEX. REV. CIV. STAT. ANN. art. 179e, §§11.01, 11.011, 11.04, 11.05.
2 On the other hand, the Commission makes the preliminary argument that the
dormant Commerce Clause is completely inapplicable because, in the Interstate Horseracing
Act, Congress expressly authorized the states to pass statutes that would otherwise violate
the dormant Commerce Clause. Interstate Horseracing Act, Pub. L. No. 95-515, 92 Stat.
1811 (1978) (codified at 15 U.S.C. §§ 3001, et seq.). Because the challenged statutes do not
violate the dormant Commerce Clause in the first instance, we need not determine the effect
of the Interstate Horseracing Act in this case.
2
Case: 13-50900 Document: 00512782820 Page: 3 Date Filed: 09/25/2014
No. 13-50900
then it is valid only if the state “can demonstrate, under rigorous
scrutiny, that it has no other means to advance a legitimate local
interest.” If the statute does not discriminate, then the statute is
valid unless the burden imposed on interstate commerce is “clearly
excessive” in relation to the putative local benefits.
Id. at 160 (internal citations omitted).
Moreover, “discrimination does not include all instances in which a state
law burdens some out-of-state interest while benefitting some in-state interest.
Rather, a state statute impermissibly discriminates only when a [s]tate
discriminates among similarly situated in-state and out-of-state interests.”
Int’l Truck & Engine Corp. v. Bray, 372 F.3d 717, 725 (5th Cir. 2004) (internal
quotation marks and citations omitted) (alteration in original). Courts
evaluate whether a statute discriminates between “substantially similar
entities.” Gen. Motors Corp. v. Tracy,
519 U.S. 278, 298 (1997).
The Commission does not argue that the in-person betting requirements
would survive strict scrutiny. On the other hand, Plaintiffs have repeatedly
disclaimed any intention to make a Pike argument. Therefore, if we conclude
this is a “discriminatory effects” case, Plaintiffs will prevail, but if we
determine that this is an “incidental burdens” case, the Commission will
prevail. This abbreviated analysis is a direct result of the parties’ “all-or-
nothing” litigation strategies.
We note that the jurisprudence in the area of the dormant Commerce
Clause is, quite simply, a mess. It has failed to produce a readily discernable
standard for distinguishing between statutes that have discriminatory effects
and those that merely create incidental burdens. The Supreme Court has
3
Case: 13-50900 Document: 00512782820 Page: 4 Date Filed: 09/25/2014
No. 13-50900
acknowledged the muddled state of its dormant Commerce Clause
jurisprudence 3 as has the academy. 4
Plaintiffs argue that the in-person requirement is discriminatory in its
effect. 5 In making this argument Plaintiffs place great weight on Cherry Hill
Vineyards, LLC, v. Lilly, 553 F.3d 423 (6th Cir. 2008). In Lilly, the Sixth
Circuit considered the constitutionality of Kentucky’s law that allowed both in-
state and out-of-state wineries to ship directly two cases of wine to Kentucky
customers, but only if the wine was purchased in-person at the winery.
Id. at
427-28. After considering the evidence of discrimination presented by the
plaintiffs, the Sixth Circuit determined:
Kentucky’s in-person requirement makes it economically and
logistically infeasible for most consumers to purchase wine from
out-of-state small farm wineries. It is impractical for customers to
travel hundreds or thousands of miles to purchase wine in-person,
and out-of-state wineries are clearly burdened by Kentucky’s
regulatory scheme.
....
Because of the economic and logistical barriers caused by the in-
person requirement, small Kentucky wineries benefit from less
competition from out-of-state wineries, especially from wineries in
states such as Oregon, which are located a great distance from
3 See Gen. Motors Corp. v. Tracy, 519 U.S. 278, 298 n.12 (1997).
4 See ERWIN CHEMERINSKY, CONSTITUTIONAL LAW 444-45 (4th ed. 2011) (internal
citations omitted) (“The Court has on many occasions found facially neutral state and local
laws to be discriminatory based on their purpose and/or effect. Unfortunately, the Court has
never articulated clear criteria for deciding when proof of a discriminatory purpose and/or
effect is sufficient for a state or local law to be deemed discriminatory. Indeed, the cases in
this area seem quite inconsistent.”).
5In the district court, Plaintiffs made a discriminatory purpose argument. On appeal
it unclear whether Plaintiffs are making a discriminatory purpose argument that is
independent of their discriminatory effect argument. To the extent that Plaintiffs are
arguing that the in-person betting requirement was motivated by a discriminatory purpose,
we agree with the district court that Plaintiffs have failed to produce sufficient evidence of a
discriminatory purpose.
4
Case: 13-50900 Document: 00512782820 Page: 5 Date Filed: 09/25/2014
No. 13-50900
Kentucky and whose wine may be deemed distinct or preferable by
consumers.
....
Accordingly, this Court concludes that Plaintiffs have
demonstrated that the challenged statutes discriminate against
interstate commerce in practical effect.
Id. at 433.
Lilly appears to support Plaintiffs’ position that Texas’s in-person
betting requirement has a discriminatory effect, but Lilly represents the zenith
for the argument that courts should take a broad view of discriminatory effects.
More importantly, the Supreme Court has yet to endorse the broad view of
discriminatory effects that the Sixth Circuit employed in Lilly.
For Supreme Court authority, Plaintiffs rely on Granholm v. Heald, 544
U.S. 460 (2005). In Granholm, the Supreme Court struck down state laws that
allowed in-state wineries to ship wine directly to their customers, but either
completely banned out-of-state wineries from doing so or placed additional
requirements on those out-of-state wineries.
Id. at 473-74, 493. Although
Granholm addressed discriminatory effects,
id. at 474, it did so in the context
of statutes that explicitly differentiated in-state and out-of-state wineries. The
statutes in Granholm are distinguishable from the facially neutral statutes
Plaintiffs are challenging in this case, and Granholm does not control this case.
In cases where the challenged statutes are facially neutral, the Supreme
Court has evinced a reluctance to take an expansive view of the concept of
“discriminatory effects.” In Exxon Corp. v. Governor of Maryland, 437 U.S.
117, 119-20 (1978), the Supreme Court considered a challenge to a statute that
provided: “a producer or refiner of petroleum products (1) may not operate any
retail service station within the State, and (2) must extend all ‘voluntary
allowances’ uniformly to all service stations it supplies.” In upholding the
statute, the Supreme Court stated:
5
Case: 13-50900 Document: 00512782820 Page: 6 Date Filed: 09/25/2014
No. 13-50900
Plainly, the Maryland statute does not discriminate against
interstate goods, nor does it favor local producers and refiners.
Since Maryland’s entire gasoline supply flows in interstate
commerce and since there are no local producers or refiners, such
claims of disparate treatment between interstate and local
commerce would be meritless. Appellants, however, focus on the
retail market arguing that the effect of the statute is to protect in-
state independent dealers from out-of-state competition. They
contend that the divestiture provisions “create a protected enclave
for Maryland independent dealers . . . .” As support for this
proposition, they rely on the fact that the burden of the divestiture
requirements falls solely on interstate companies. But this fact
does not lead, either logically or as a practical matter, to a
conclusion that the State is discriminating against interstate
commerce at the retail level.
As the record shows, there are several major interstate
marketers of petroleum that own and operate their own retail
gasoline stations. These interstate dealers, who compete directly
with the Maryland independent dealers, are not affected by the Act
because they do not refine or produce gasoline. In fact, the Act
creates no barriers whatsoever against interstate independent
dealers; it does not prohibit the flow of interstate goods, place
added costs upon them, or distinguish between in-state and out-of-
state companies in the retail market. The absence of any of these
factors fully distinguishes this case from those in which a State
has been found to have discriminated against interstate commerce.
Id. at 125-26 (internal citations omitted). The majority in Exxon reached its
decision in part by narrowly defining substantially-similar entities. But in his
dissent, Justice Blackmun took a very different view of the evidence and made
a strong argument that the challenged statute actually discriminated between
substantially-similar in-state and out-of-state entities.
Id. at 137-145
(Blackmun, J., dissenting). Thus, Exxon illustrates the Court’s reluctance to
find that a facially neutral statute has discriminatory effects. 6
6 See CHEMERINSKY, supra note 4, at 446-47 (highlighting Justice Blackmun’s dissent
in observing that Exxon is a case where a facially neutral statute was upheld despite its
“discriminatory impact”).
6
Case: 13-50900 Document: 00512782820 Page: 7 Date Filed: 09/25/2014
No. 13-50900
Similarly, in Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 458
(1981), the Supreme Court upheld a facially neutral statute that prohibited
retail distribution of milk in certain disposable plastic containers. The main
alternatives to disposable plastic containers were disposable paper containers.
Id. at 468-70. The Supreme Court applied Pike balancing and concluded: “Even
granting that the out-of-state plastics industry is burdened relatively more
heavily than the Minnesota pulpwood industry, we find that this burden is not
‘clearly excessive’ in light of the substantial state interest in promoting
conservation of energy and other natural resources and easing solid waste
disposal problems.”
Id. at 473. Again, the Supreme Court refused to find that
a facially neutral statute had a discriminatory effect. 7
Turning to the in-person betting requirements, we acknowledge that the
requirements may result in Texas bettors’ placing more bets at Texas tracks
than at tracks in distant states. But plaintiffs have the burden of showing
discriminatory effects, not merely illustrating that discriminatory effects could
plausibly exist. See Hughes v. Okla., 441 U.S. 322, 336 (1979) (“The burden to
show discrimination rests on the party challenging the validity of the
statute . . . .”). Contrastingly, the district court found that the record was
“devoid of any evidence” that “the in-person requirement disproportionately
affects out-of-state companies.” Our review of the controlling authorities leads
us to conclude that Plaintiffs’ assertion without concrete record evidence
alleges “effects on interstate commerce [that] are only incidental” and the in-
person requirements “regulate[] even-handedly.”
Pike, 397 U.S. at 142. We
are unpersuaded on this record that in-person betting requirements create
“discriminatory effects” which would trigger strict scrutiny analysis.
7 See CHEMERINSKY, supra note 4, at 447 (citing Clover Leaf as an additional example
of a case where a “discriminatory impact” did not invalidate a facially neutral statute).
7
Case: 13-50900 Document: 00512782820 Page: 8 Date Filed: 09/25/2014
No. 13-50900
Because this is an incidental-burden case, the relevant analytical rubric
for evaluating the challenged in-person betting requirements is the balancing
test set forth in Pike. As we explained above, we need not conduct a Pike-
balancing analysis because Plaintiffs have expressly stated that they are not
asserting a Pike challenge. In light of Plaintiffs’ failure to advance an
argument under the applicable authority, we affirm the district court’s
judgment in favor of the Commission.
AFFIRMED.
8
