- The N.C. Court of Appeals has denied Gov. Roy Cooper's request for a temporary stay in a Forsyth County video sweepstakes lawsuit.
- Superior Court Judge Todd Burke issued an injunction in the case favoring two companies targeted for a government shutdown.
- Under court rules, names of the three judges who issued the unanimous ruling will remain secret for 90 days.
The N.C Court of Appeals has denied Gov. Roy Cooper’s request to block a trial judge’s ruling temporarily in a Forsyth County video sweepstakes lawsuit. The trial court ruled in favor of two companies targeted for a government shutdown.
A three-judge panel’s unanimous order Monday rejected Cooper’s request for a temporary stay in the case. Appellate judges indicated that they will consider the governor’s request for a “writ of supersedeas” at a later date. The writ also could block the trial judge’s decision from taking effect.
Under Appeals Court rules, the names of the participating judges will remain secret for 90 days.
Lawyers representing plaintiffs BST USA and Victory Vending Company submitted a response Friday to Cooper’s motion on Thursday. The governor and top state law enforcement officials urged the state Appeals Court to block an injunction favoring the plaintiffs.
“Defendants ask the Court to expose Plaintiffs to criminal prosecution for exercising their right to conduct a lawful commercial enterprise,” wrote the plaintiff’s lawyers. “Given the extraordinary relief requested by Defendants, they bear the burden of producing clear, unequivocal evidence that they (1) are likely to prevail on the merits, and (2) will suffer imminent harm if the Superior Court’s preliminary injunction is not immediately stayed.”
Superior Court Judge Todd Burke issued a preliminary injunction on June favoring the plaintiffs. BST manufactures and operates internet kiosks. Victory Vending operates BST kiosks in Forsyth County. The plaintiffs use a video sweepstakes promotion for sale of internet time through the kiosks.
“As found by Judge Burke, Defendants are not likely to prevail on the merits,” according to the plaintiffs. “Nor will Defendants suffer irreparable harms.”
The two companies challenge Cooper’s arguments that ““North Carolina has expressly banned the operation of video sweepstakes machines.” “This is demonstrably false,” according to Friday’s court filing.
There is no ban on video sweepstakes machines in the state law, N.C.G.S. § 14-306.4, according to the plaintiffs. “The appellate courts have long interpreted that statute to find that video sweepstakes are lawful so long as skill predominates over chance,” according to Friday’s brief.
“Defendants cast a statewide net ensnaring all video sweepstakes as unlawful in a clear attempt to avoid the relevant question in this case: whether Plaintiffs’ specific video sweepstakes passes the predominant-factor test. The Superior Court below rightly found that Plaintiffs are likely to succeed on the merits of this question,” plaintiffs’ lawyers wrote.
“Plaintiffs, not Defendants, will suffer serious irreparable harm if the preliminary injunction is stayed,” the document continued. “Plaintiffs will be forced to shutter their lawful business or face criminal prosecution. This Hobson’s choice will force Plaintiffs to suffer economic loss and will violate Plaintiffs’ constitutional right to ‘work and earn a livelihood.’”
“The harm to Defendants is minimal, if any,” plaintiffs’ lawyers argued. “Under Judge Burke’s order, state and local law enforcement may continue enforcing North Carolina’s gambling laws statewide against any and all sweepstakes except the specific version operated by Plaintiffs.”
Cooper, along with leaders of the Department of Public Safety and Alcohol Law Enforcement Division, filed paperwork Thursday with the state’s second-highest court. They sought both the temporary stay and the writ of supersedeas.
Cooper and top officials from DPS and ALE disagree with Burke’s assessment of N.C.G.S. § 14-306.4.
“Since 2010, North Carolina has expressly banned the operation of video sweepstakes machines,” wrote lawyers from N.C. Attorney General Josh Stein’s state Justice Department. “This ban was enacted in response to the attempt of certain gambling interests to circumvent the State’s ban on video poker and similar games through sweepstakes that used those games as marketing tools for purportedly legitimate products. To address this problem, the General Assembly banned sweepstakes that are conducted through all video games of chance, such as video poker and all similar games.”
“Despite this legislative action, sweepstakes operators have repeatedly tried to evade this ban and have regularly sought to enjoin law enforcement officials from enforcing the ban for more than a decade,” according to the document from lawyers representing Cooper. “As a result, over the course of many cases, our Supreme Court has repeatedly heard arguments from sweepstakes operators that have claimed that their games were legal under the statute. In each instance, however, that Court has unanimously ruled against them.”
“Indeed, just last year, the Supreme Court unanimously rejected the arguments of a sweepstakes operator that its games were legal under the sweepstakes statute,” the brief continued. “In doing so, moreover, the Court held that sweepstakes games are illegal under the statute whenever the vagaries of chance can control ‘the relative winnings for which a player is able to play’ on each turn of a sweepstakes game.”
“Flaunting this clear precedent, the superior court in this case issued a preliminary injunction preventing Defendants from enforcing the law against yet another sweepstakes operator,” Justice Department lawyers wrote. “The court did so even though the report that Plaintiffs BST USA, LLC and Victory Vending Company offered … to show how their sweepstakes games work demonstrated that chance can control ‘the relative winnings for which a player is able to play’ on each turn of their games. The superior court’s decision to grant an injunction in these circumstances was unmistakable error.”
Cooper’s lawyers justified their argument by pointing to the history of sweepstakes disputes. “In at least one earlier sweepstakes case, … trial-court injunctions allowed an illegal sweepstakes to operate freely for more than seven years, even though our Supreme Court ultimately held that the games at issue there were unlawful,” according to the document. “Without supersedeas relief, the Plaintiffs here could potentially enjoy immunity from enforcement for a similarly extended period, even though their games are also illegal.”
“So too, moreover, could other sweepstakes operators. Not long after the injunction was issued in this case, another superior court enjoined the enforcement of the sweepstakes statute against another operator offering similar games,” Justice Department lawyers warned. “[I]f stays are not granted in these cases, then other operators may also seek and win similar preliminary injunctions from other superior courts to protect their own games.”
“If that occurs, then the enforcement of a duly enacted statute of the General Assembly will likely come to a standstill,” according to the document. “And it will do so even though our Supreme Court has unanimously and repeatedly reversed all trial courts that have enjoined enforcement of that same statute.”
A unanimous N.C. Supreme Court last ruled against video sweepstakes operators in the February 2022 case Gift Surplus v. State of North Carolina.