The Kentucky Supreme Court today reversed the Kentucky Appeals court’s decision that tossed out the seizure order issued on 141 gambling domain names.
The 17 page ruling by the Supreme Court today (pdf) was really on a technical issue, that none of the parties that brought the suit against the Commonwealth had “standing”.
Standing is a legal term that means in very simple terms the only one that can object to a law or join a suit are the parties effected by the law or suit.
While non-parties are sometime invited to file “friends of the court briefs” with appellate courts they cannot appear before the court as they are not a party to the suit.
In this situation, none of the domain owners of the 141 seized domains appeared in person or were represented by counsel.
Instead this action was brought by Interactive Media Entertainment & Gaming Association (iMEGA) and the Interactive Gaming Council (IGC) trade Associations on behalf its membership.
The associations tried to represent the domain names themselves, without identifying who owned the domain names. The Supreme Court found that Domain Names like real estate cannot be represented, only the owners can be represented and they were not named by the trade groups.
The Supreme Court said:
“”Instead of owners, operators, or registrants of the website domain names, the lawyers opposing the Commonwealth claimed to represent two types of entities : (1) the domain names themselves and (2) gaming trade associations who profess to include as members registrants of the seized domains, though they have yet to reveal any of their identities.”
“The various groups of domain names and gaming associations sought to intervene in the case and dismiss the seizure.”
“The court specifically noted in its order that only the domain name owners, operators, and registrants had a legal interest in the domain names and only they or their representatives could defend against forfeiture.”
“Upon the denial of their motions, the groups and associations sought a writ of prohibition from the Court of Appeals to enjoin the impending forfeiture.”
“The Court of Appeals issued the writ, reasoning that the trial court acted beyond the jurisdiction”
“Although all such arguments may have merit, none can even be considered unless presented by a party with standing. No such party has appeared at the original proceedings in Franklin Circuit Court, the writ petition at the Court of Appeals, or on the appeal here to this Court.”
“iMEGA refuses to reveal which registrants it represents, or even how many. It simply claims to have members who registered some, but not all, of the seized domains. ”
“”Thus, the associations must specifically identify some of the affected registrants they represent. ”
“Through their unwillingness to identify any of their members, Interactive Media Entertainment & Gaming Association (iMEGA) and the Interactive Gaming Council (IGC) failed to meet this burden.
“As such, iMEGA and IGC lack standing and, therefore, their writ petition should have been denied. ”
So the case now goes back to the court of Appeals.
At this point one or more of the actual domain owners, subject to the seizure order, are going to have to come forward, hire counsel and then make the same attack on the original order which was successful in the Appeals court, that domain names are not gambling devices within the meaning of the Kentucky statute.
The requirement of standing may also be meet if either iMEGA or IGC produces the name of the owner of one or more of the seized domain names and have that owner agree that one of those organizations represent the owner.
Maybe one of our attorney readers can contribute their thoughts.
Although the Kentucky Supreme Court did not deal with the real issues involved in this case, it IS correct in its holding if not one Registrant of the seized domains was actually represented in court. The Gambling Association did a disservice to its members by refusing to identify owner members.
Hopefully, they’ll get the message and one or more owners will come forward and acknowledge the representation.
Not being an attorney, I will speak as a layman. I do know if at least one domain owner is identified and represented, and the Kentucky appeals court reissues the writ, it means the equal protections clause is likely to kick in where the other domains are concerned. Either MHB or HMN will have to verify this.
The issue of transparency is now paramount, it seems, with the domain industry wanting transparency in online business. It stands to reason our best support for the domain owners, in a case like this, is for those domain owners to identify themselves, first.
Kentucky certainly went far beyond its jurisdictional border when it seized the domains, making this kind of transparency all the more vital if a sound legal precedent is to emerge from this, one favorable to the industry.
Mr. Neu is quite correct; Mr. Pryor’s comment is very insightful for a non-attorney. If I were to argue this issue, in a Federal Circuit Court where it belongs, I would state the case analysis as this.
If one who lives in Kentucky, calls a bet in to another who is in Nevada where the bet is placed, neither the casino nor the person in Nevada comes under the jurisdiction of Kentucky’s gaming law. However, the one in Kentucky who made the call does come under the jurisdiction of Kentucky’s law. For Kentucky to rightfully enforce its law, it will have to subpoena the inbound IP addresses and bring actions against those in Kentucky, who use the online gaming service.
Donnie/Danny
The case does not at this point “belong” in federal court since it was a state court that issued the original seizure order, the writ was filed in the state appellate court by the two gaming associations.
It now going back down and someone who is effected by the seizure order, one of the gaming sites which was a member of either of those 2 groups that brought the writ action are going to have to come forward, identify themselves as the owner of one of the domains and state that one or both of those group represent him
Sounds purely procedural at this point, then. Why doesn’t this go to a Federal jurisdiction, though? Doesn’t Kentucky have to show some active solicitation or business activity within its borders before it can go outside its political boundary for this kind of take down?
Danny
I haven’t practiced law in a long time but I think you cannot bring this to federal court, until you exhaust your state court remedies.
Since the auction was brought by the state in state court I think you have to go through that channel first.
interesting. I wonder if the domain owners can bring a lawsuit against the plaintiff for damages or iMEGA for acting on behalf of the domain owners.
interesting. What domains were in the suit anyway? Of course you could counter sue about anything like this, the question is, could you win such a case?
Joseph
You can read our original post on it
http://www.thedomains.com/2008/09/22/kentucky-seizes-gambling-domains/
MHB — Assuming one or more of the domain owners lives in another jurisdiction, wouldn’t that trigger a diversity situation where Federal court would become the proper forum. That’s how I read Donnie’s comment.
Lou
The action was brought by the state in a state court and I’m sure none of the owners of the domains are residents of Kentucky and few probably even live in the US
Thanks for reporting on this Michael. I found this argument interesting:
“The domain names’ assertion of standing hinges on the origination of
this controversy as an in rem proceeding. They claim that since the
Commonwealth named the domain names as the in rem defendants, the names
must have an opportunity to represent themselves .
The domain names’ argument confuses the nature of in rem litigation . It
has long been recognized in Kentucky, as well as elsewhere, that in in rem
litigation, only those with an interest in the property, such as current owners,
have an interest in the litigation.”
I would have thought that if you can sue a domain name itself (the in rem action) ipso fatso (as Archie Bunker used to say..) the domain name should be able to defend itself…
What I am wonder, and maybe someone can proffer an answer, is whether it is now too late for the actual domain owners to appeal, as too much time has passed.
I know nothing about the legal aspects going on here, but I do kinda-sorta understand the world of online gaming a bit (and online poker in particular).
It is probably the single shadiest e-venture going on in the internet today… You’re talking massive (MASSIVE) amounts of money being funneled to persons who are relatively unknown (in some cases- totally unknown) . The industry itself, for the most part, is located in offshore havens and entirely unregulated (unregulated industry + massive sums of money = inevitable shenanigans. Game rigging and cheating on the software end- by the game provider- has already occurred and likely still occurs. Google “Absolute Poker Scandal”. It was even on 60 minutes)
You have persons engaged in profit funneling schemes (ala Full Tilt Poker and Tiltware) where the profits from the ‘gray area’ gaming operations are pumped back into the shareholders of ‘clean’ shell companies under the guise of “software licensing” and ‘consulting’, etc.
It’s an industry totally rotten to it’s core. The best case scenario is regulation and licensing (to ensure game integrity and proper taxation), however, it seems as though Kentucky will be forcing everyone’s hand.
Anon
None of the domains seized were mine, and I do not own any gambling site so I have no big horse in the race.
I would note that some gambling companies are public companies and traded on the London exchange and are not run out of the back of someone’s car.
I would also say the reason that they are “located in offshore havens” and “entirely unregulated” is due to the failure of the US government in violation of many WTO orders to allow, AND regulate the industry.
The US is one of the FEW countries in the world that doesn’t allow online gambling (again in violation of free trade agreements) and thereby misses the chance to regulate the industry. Much of the problems you discuss is related to US policy
Not allowing representation is dangerous, might as well as seize the property and call it a day. This is like how come court works oversea, they don’t allow any representation or defense.