(Cite as: 2015 WL 1003879 (W.D.Tex.))
United States District Court,
W.D. Texas,
El Paso Division.
State of TEXAS, Plaintiff,
v.
YSLETA DEL SUR PUEBLO, et al., Defendants.
No. EP-99-CV-320-KC.
Signed March 6, 2015.
ORDER
KATHLEEN CARDONE, District Judge.
Table of Contents
I. BACKGROUND 1
A. Procedural History 1
B. The Show Cause Hearing 9
1. Texas's witness testimony 9
2. The Tribe's witness testimony 13
C. The Tribe's Sweepstakes 20
1. The Kiosks 21
2. The Server 22
3. The POS 24
4. Means of entry 24
II. CONTEMPT 25
A. Standard 25
B. Pueblo Defendants are in Contempt 26
for Operating Unapproved Tribal
Sweepstakes
1. The Modified Injunction is not 27
ambiguous
2. The Tribe's sweepstakes are not 31
National Third-Party Vendor Sweepstakes
III. THE TRIBE'S SWEEPSTAKES MAY NOT 35
CONSTITUTE LOTTERY
A. Texas Lottery Law 37
1. Promotional sweepstakes and the 39
element of consideration
a. Case law 40
i. Persuasive value of Knebel 43
b. Texas Attorney General opinions 45
B. Promotional Sweepstakes Are Not Per 52
Se Illegal in Texas
1. The Tribe's product 53
a. Casino-like atmosphere 57
2. Finite pool of predetermined 59
results
3. The Tribe's alternative means of 60
free entry
IV. THE TRIBE'S KIOSKS AS GAMBLING 63
DEVICES
V. THE PUEBLO DEFENDANTS' PROPOSAL AND 67
TEXAS'S RIGHT TO RESPOND
VI. TEXAS'S CLAIM FOR COSTS 70
VII. CONCLUSION 75
*1 On this day, the Court considered Plaintiff State of Texas's ("Texas") Fifth
Amended Motion for Contempt ("Motion for Contempt"), ECF No. 423, in the
above-captioned case (the "Case"). For the reasons set forth below, Texas's Motion
for Contempt is GRANTED. Defendants Ysleta del Sur Pueblo, Tigua Gaming Agency,
Tribal Council, and Tribal Governor Francisco Paiz or his successor (the "Pueblo
Defendants") are operating a tribal sweepstakes without judicial approval in
contempt of the Court's September 27, 2001, injunction as modified by the Court's
May 17, 2002, order.
Within sixty days of this Order, the Pueblo Defendants shall cease all gaming
operations, including all sweepstakes promotions, being offered on the reservation
of the Ysleta del Sur Pueblo. The Pueblo Defendants may, however, receive a
temporary stay from the Court's order to cease gaming operations by submitting,
within sixty days of this Order, a firm and detailed sweepstakes proposal for the
Court's consideration. That stay shall remain in effect while the Court considers
the legality of the proposal. Failure to either cease all gaming operations or
submit the proposal within sixty days of this Order shall result in a civil
contempt penalty of $100,000.00, jointly and severally, for each day the Pueblo
Defendants remain in violation of this Order.
Furthermore, the Pueblo Defendants shall pay Texas's costs of investigation as
well as attorney's fees, as described in more detail below.
I. BACKGROUND
A. Procedural History
The Motion for Contempt is only the most recent tangle in a protracted saga
between Texas and the Ysleta del Sur Pueblo of the Tigua Indian tribe (the "Tribe
"). For nearly fifteen years the Tribe has sought to institute various forms of
gaming on its reservation, while Texas has sought to enjoin those operations as
violations of Texas gaming laws. To state in full the story of this litigation is
beyond the scope of this opinion. The Court lays out below only the facts and
orders relevant to the instant Motion for Contempt.
In 1987, Congress passed the Restoration Act, 25 U.S.C. s 1300g et seq.,
granting the Tribe full federal trust status. Under the provisions of the
Restoration Act, the Tribe is restricted from conducting certain gaming operations
on its lands. See id. s 1300g-6. Pertinent to the Court's decision in the present
Order is s 1300g-6(a), which provides that:
All gaming activities which are prohibited by the laws of the State of Texas are
hereby prohibited on the reservation and on lands of the [ T]ribe. Any violation
of the prohibition provided in this subsection shall be subject to the same
civil and criminal penalties that are provided by the laws of the State of
Texas.
Id. s 1300g-6(a).
Though the Restoration Act does not grant Texas civil or criminal regulatory
jurisdiction over the Tribe's gaming activities, See id. s 1300g-6(b), Texas is
not precluded "from bringing an action in the courts of the United States to
enjoin violations of [s 1300g-6(a)]." Id. s 1300g-6(c). Exclusive jurisdiction for
such actions lies in the federal courts of the United States. Id.
*2 In 1993, the Tribe opened the Speaking Rock Casino and Entertainment Center
("Speaking Rock") FN1 on its reservation in El Paso, Texas. See Oct. 20, 2003,
Order, ECF No. 179, at 1. Though Speaking Rock began as a bingo hall, it quickly
expanded to a full-service casino offering a wide variety of gambling activities
played with cards, dice, and balls. See id. at 1-2; Sept. 27, 2001, Order Granting
Summ. J. and Inj. (the "Original Injunction"), ECF No. 115, at 3-5.
FN1. The Court notes that the Tribe ceased operation of Speaking Rock Casino
and Entertainment Center on February 12, 2002. See Texas v. Ysleta del Sur
Pueblo, 220 F.Supp.2d 668, 711 (W.D.Tex.2001). Nonetheless, the Tribe had
subsequently reopened the facility as "Speaking Rock Entertainment Center"
by 2007 at the latest. See Oct. 7, 2014, Tr. of Oral Arg., ECF No. 508, at
195. There is no evidence before the Court indicating that the physical
facility which makes up the Speaking Rock Entertainment Center is different
from the original Speaking Rock Casino and Entertainment Center.
Accordingly, the Court refers to this facility simply as "Speaking Rock." In
doing so, the Court makes no determination whether Speaking Rock
Entertainment Center, as currently operated, is a "casino" or is otherwise
operating illegally.
On September 27, 1999, Texas filed its Original Complaint for Injunctive Relief
("Complaint") seeking to enjoin various agents and agencies of the Tribe from
continuing to operate the gambling activities at Speaking Rock in violation of the
Texas Penal Code and the Restoration Act. See Compl., ECF No. 1, at 1, 11; Texas
v. Ysleta del Sur Pueblo, 220 F.Supp.2d 668, 709 (W.D.Tex.2001) ("Ysleta I" ).
After the parties filed cross-motions for summary judgment, the Court issued its
Original Injunction on September 27, 2001. By the Original Injunction, the Court
found the Tribe was conducting illegal gambling operations in violation of the
Texas Penal Code and the Restoration Act. Original Inj. 1-2. The Court accordingly
enjoined the Ysleta del Sur Pueblo, Tigua Gaming Agency, Tribal Council of the
Ysleta del Sur Pueblo, tribal Governor Albert Alvidrez, tribal Lieutenant Governor
Filbert Candelaria, Gaming Commissioner Francisco Hernandez, and the "officers,
agents, servants, employees, and attorneys of the foregoing persons and parties"
from operating a number of gaming activities played with cards, dice, balls, or
any other gambling device. Id. at 3-5. The Original Injunction had the "practical
and legal effect of prohibiting illegal as well as legal gaming activities by the
[ Tribe]." Ysleta I, 220 F.Supp.2d at 699.
On October 12, 2001, Defendants Ysleta del Sur Pueblo, Tigua Gaming Agency, the
Tribal Council, Tribal Governor Albert Alvidrez, Tribal Lieutenant Governor
Filbert Candelaria, and Gaming Commissioner Francisco Hernandez (the "Pueblo
Representatives") filed their Motion for New Trial and Motion to Amend Judgment
("Motion to Amend the Injunction"),FN2 ECF No. 118, asserting that the Original
Injunction was overly broad for "enjoin[ing] all gaming activities regardless of
their legality under Chapter 47 [of the Texas Penal Code.]" Id. at 9. On November
2, 2001, the Court denied the Motion to Amend the Injunction, concluding that
"[a]fter the illegal operations cease and the nuisance is fully abated, the
defendants are, of course, free to petition the Court for a modification of any of
the terms of the [Original Injunction] that they believe might limit their ability
to participate in any legal gaming activity for which they have qualified under
Texas law." Nov. 2, 2001, Order, ECF No. 126, at 3-4. After an unsuccessful appeal
of the Court's refusal to modify the Original Injunction, the Tribe ceased
operation of the prohibited gambling activities at Speaking Rock on February 12,
2002. Ysleta I, 220 F.Supp.2d at 711.
FN2. Throughout the fifteen years of this protracted litigation, the parties
named in the numerous motions submitted to the Court have been inconsistent
at best. The Court therefore refers to the parties who filed the Motion to
Amend the Injunction in 2001 as the "Pueblo Representatives," while the
Court refers to the parties whom Texas seeks to hold in contempt by the
instant Motion for Contempt as the "Pueblo Defendants."
*3 Less than a month after ceasing operations at Speaking Rock, the Pueblo
Representatives submitted their Emergency Motion for Clarification of Order
Granting Summary Judgment and Injunction ("First Clarification Request"), ECF No.
160, on March 1, 2002.FN3 By the First Clarification Request, the Pueblo
Representatives "request[ed] a clarifying declaration that" the use of certain
electronic gaming devices and third-party sweepstakes would not violate the
Original Injunction. Id. at 3-5. Specifically, the Pueblo Representatives sought a
declaration that third-party sweepstakes conducted at the Tribe's stores by
vendors such as Mobil 1, Nestle Crunch, M & Ms, Corn Nuts, 7UP, Pepsi, Doritos,
Cheerios, and Coca-Cola would not violate the Original Injunction. Id. at 4-5.
Further, the Pueblo Representatives proposed that the Tribe itself be permitted to
conduct sweepstakes "in compliance with the provisions of Chapter 43, of the Texas
Business and Commerce Code." Id. at 5.
FN3. By the time of the March 1, 2002, filing, current Defendant Carlos Hisa
had replaced Mr. Filbert Candelaria as the listed Tribal Lieutenant
Governor. See First Clarification Req. 1.
On May 17, 2002, the Court issued its Order Modifying September 27, 2001,
Injunction ("May 17, 2002, Order"), ECF No. 165. In relation to the third-party
contests offered at the Tribe's stores, the Court noted that, though the Pueblo
Representatives had not included specific information about the third-party
contests, the Court "presume[d] that they [were] of a type that are common at fuel
stations and grocery stores across the country." Id. at 13. "For [that] reason,"
the Court modified the Original Injunction "to permit these and other
like-national third party vendor contests" ("National Third-Party Vendor
Sweepstakes"), "provided that no specific contest violates Texas gaming law." Id.
The Court refers to the Original Injunction, as modified by the May 17, 2002,
Order, as the "Modified Injunction." FN4
FN4. The Court notes that the full text of the Modified Injunction can be
found at Ysleta I, 220 F.Supp.2d 668.
Nonetheless, the Court rejected the Pueblo Representatives' request for the
Tribe to be permitted to conduct its own sweepstakes ("Tribal Sweepstakes")
because the Pueblo Representatives provided "no description of the proposed Tribal
[S]weepstakes, nor any rules or regulations for such a proposal." Id. The Court
therefore declined to "modify the [Original Injunction] to permit the Tribe to
conduct a [ Tribal Sweepstakes] absent a firm and detailed proposal showing that
said sweepstakes would be in compliance with Texas law." Id. at 14.
On September 9, 2003, Defendants Ysleta del Sur Pueblo, Tigua Gaming Agency,
and the Tribal Council submitted their Second Emergency Motion for Clarification
of Order Granting Summary Judgment and Injunction ("First Proposal"), ECF No. 177,
seeking approval for a Tribal Sweepstakes promotion "in compliance with the
provisions of Chapter 43 of the Texas Business and Commerce Code." Id. at 3.
Specifically, the First Proposal sought permission to conduct a "Running Bear
Prepaid Phone Card Sweepstakes," which centered around sweepstakes entries granted
in connection with the purchase of prepaid phone cards, as well as the related use
of those cards in "sweepstakes validation terminal[s]." See id. at 3-4.
*4 On October 20, 2003, the Court rejected the First Proposal on the grounds
that the phone cards were "geared towards inducing purchasers to participate in
the sweepstakes contest so that the Tribe will receive financial gain." Oct. 20,
2003, Order 12.
Undaunted by the Court's rejection, the Tribe began operating electronic gaming
devices at Speaking Rock as early as 2008. See Aug. 3, 2009, Mem. Op. and Order
Granting Mot. for Contempt ("Second Contempt Order"), ECF No. 281, at 4. The
electronic devices resembled traditional eight-liner gambling devices and were
operated by a card purchased with cash. Id. The Tribe issued any prizes won in the
form of Visa debit cards. Id. at 5. In response, on March 14, 2008, Texas filed
its Motion for Contempt for Violation of the September 27, 2001 Injunction, ECF
No. 204.
On August 3, 2009, the Court issued its Second Contempt Order. After finding
that a Visa debit card was the "equivalent of money" under the Texas Penal Code,
the Court found Ysleta del Sur Pueblo, Tigua Gaming Agency, the Tribal Council,
Tribal Governor Francisco Paiz, and Lieutenant Governor Carlos Hisa in contempt
for operation of illegal "gambling devices" in violation of the Modified
Injunction. Second Contempt Order 5, 7-8.
Simultaneous to the 2008 contempt proceedings, on May 30, 2008, Defendants
Ysleta del Sur Pueblo, Tigua Gaming Agency, and the Tribal Council filed their
Third Emergency Motion for Clarification of Order Granting Injunction ("Second
Proposal"), ECF No. 241. The Second Proposal sought a declaration that the Tribe's
"Texas Reel Skill" sweepstakes would not violate the Modified Injunction. Id. at
2-3. The Texas Reel Skill sweepstakes offered participants the ability to purchase
a card containing Internet access minutes. Id. at 3. With that purchase,
participants additionally obtained entries to a sweepstakes that could be played
on electronic gambling simulators. Id. Sweepstakes entries were also available
without purchase. Id.
Prior to the Court's ruling on the Second Proposal, the Tribe informed the
Court that "representations of value" redeemable for "non purchasable products" at
the Tribe's stores had replaced the Visa debit cards as prizes in the Tribe's
sweepstakes. See Aug. 4, 2009, Order Regarding Defs.' Third Mot. for Clarification
("Aug.4, 2009, Order"), ECF No. 282, at 2.
On August 4, 2009, the Court rejected the Second Proposal. See id. The Court
first found that the Tribe's "representations of value" were "indistinguishable"
from the Visa debit cards, and therefore did not purge the illegality of the
Tribe's gaming devices. Id. The Court next found that the Texas Reel Skills
sweepstakes was distinguished from the First Proposal primarily "by the
substitution of prepaid internet access cards for prepaid phone cards." Id. at 4.
This substitution was a "distinction without a legal difference" and the Court
accordingly refused the Tribe permission to carry out the sweepstakes. Id. at 4-5.
*5 Less than a week later, on August 10, 2009, Defendants Ysleta del Sur Pueblo
, Tigua Gaming Agency, the Tribal Council, and Carlos Hisa filed their Notice of
Filing Defendants' Proposal as Requested in this Court's Order Granting Motion for
Contempt ("Third Proposal"), ECF No. 284. The Third Proposal sought approval for
the Tribe to conduct a sweepstakes in which participants obtained entries through
"various free methods or through a donation to the Tribe." Third Proposal Attach.
1, ECF No. 284-1, at 2. Sweepstakes entries could be "revealed through the use of
various game terminals," though "customers" could also "redeem their winning
entries without engaging in a game should they so desire." Id. "The sweepstakes
[would] be administered by a third party vendor through a central database server
which [would] hold the [predetermined] sweepstakes prizes." Id. This "third party
vendor" would "initiate a sweepstakes 'series' by generating a [predetermined]
number of entries and corresponding prizes in the aforementioned database." Id.
On October 18, 2010, the Court issued its Order Regarding Defendants' Motion to
Approve Sweepstakes Proposal ("October 18, 2010, Order"), ECF No. 337, refusing
permission to conduct the sweepstakes described in the Third Proposal. Though the
Court rejected Texas's argument that the Third Proposal would necessarily violate
the Texas Penal Code, the Court nonetheless refused permission to conduct the
proposed sweepstakes because the Third Proposal lacked sufficiently detailed
information regarding the proposed use of electronic gaming devices. Id. at 4-5.
Nonetheless, and in spite of the October 18, 2010, Order, the Tribe did not
cease sweepstakes operations at Speaking Rock, and at some time between 2010 and
2012,FN5 the Tribe opened a second sweepstakes operation at the Socorro
Entertainment Center ("Socorro"). See Oct. 6, 2014, Tr. of Oral Arg. ("Oct.6,
2014, Transcript"), ECF No. 507, at 95 (Lt. Loper indicating that Texas first
learned Socorro was operating in 2012), 209 ( Pueblo Defendants' attorney
indicating that Socorro did not exist in 2010).
FN5. The Court notes that neither party presented evidence at the Hearing
indicating the exact date Socorro began operations.
Nearly three years later, on September 24, 2013, Texas filed its Second Motion
for Contempt for Violation of the September 27, 2001 Injunction, ECF No. 356; and,
after a protracted series of three amendments spanning a period of six months,
Texas filed the instant Motion for Contempt on March 17, 2014. Through a
disjointed array of bullet points, the Motion for Contempt asserts that the Pueblo
Defendants are in violation of the Modified Injunction in three respects: (1) for
operating an unauthorized Tribal Sweepstakes; (2) for operating illegal lotteries
under Texas law; and (3) for operating illegal gambling devices under Texas law.
Mot. for Contempt 9, 11-13.
On March 10, 2014, the Court held a hearing in an attempt to resolve the
contempt issue; however, neither party was prepared to present evidence at that
time. Instead, the Court used that hearing as a status conference to schedule the
future contempt hearing.
*6 On September 24, 2014, the Court issued its Order to Show Cause, ECF No.
483. By the Order to Show Cause, the Court ordered the Pueblo Defendants to appear
and show cause that they are not in contempt of the Modified Injunction. Id. at
35-36.
B. The Show Cause Hearing
On October 6 and 7, 2014, the Court held the Show Cause Hearing (the
"Hearing"). At the Hearing, the Court admitted into evidence sixty-one separate
exhibits totaling over a million and a half pages. See Pl.'s Exs., ECF No. 503;
Defs.' Exs., ECF No. 504. In addition to the parties' exhibits, the Court heard
testimony from a total of fifteen witnesses. See Am. List of Witnesses, ECF No.
505. The Court discusses the relevant testimony and evidence below.
1. Texas's witness testimonyFN6
FN6. In addition to the witnesses discussed below, Texas called Mr.
Christopher Dobbs and Officer James Greg Dewees. At the hearing, the Court
sustained objections to Mr. Dobbs's testimony on relevance grounds, thus
rendering it largely inadmissible. See Oct. 6, 2014, Tr. 187. Officer
Dewees, on the other hand, testified to his observations during a 2010
inspection of Speaking Rock. Id. at 209. However, Officer Dewees later
conceded on cross-examination that he has no personal knowledge of the
Tribe's gaming operations since 2010. Id. Thus, although Officer Dewees's
testimony was received without objection, the Court finds the testimony of
Lt. Loper and Lt. Ferguson, who testified to similar facts based on personal
knowledge from 2012-2014, more relevant. Accordingly, the Court does not
discuss Mr. Dobbs's or Officer Dewees's testimony here.
Texas's first witness, Lieutenant James Ferguson ("Lt.Ferguson") of the Texas
Attorney General's office, testified regarding inspections conducted at Speaking
Rock and Socorro (collectively the "Entertainment Centers") in 2013 and 2014. See
Oct. 6, 2014, Tr. 19-20. According to Lt. Ferguson, Speaking Rock was "probably as
big as a Wal-Mart," and contained "rows and rows" of electronic gaming kiosks. Id.
at 21-22, 43. Socorro, likewise, contained "an outer room [with] a few dozen
machines" and "an interior room maybe the size of a basketball gymnasium that
appeared to have hundreds of machines." Id. at 40. Speaking Rock contained "very
little light," id. at 26, while Socorro was well lit, but lacked windows. Id. at
50. The atmosphere in both Socorro and Speaking Rock was "very much ... like
casinos." Id. at 58.
Every gaming kiosk Lt. Ferguson witnessed contained a prominently displayed
placard stating "No Donation Required." Id. at 43; Pl.'s Ex. 1.22. Nonetheless,
Lt. Ferguson was unable to solicit a response from the kiosks without inserting
cash. Oct. 6, 2014, Tr. 22. Upon insertion of cash, a message displayed informing
Lt. Ferguson of the charitable nature and use of the donations. Id. The kiosk then
asked Lt. Ferguson if he agreed to make a donation. Id. If Lt. Ferguson declined
to donate, the kiosk printed a cash-out ticket returning the money inserted. Id.
When Lt. Ferguson agreed to donate, the kiosks displayed a series of buttons
allowing him to either "max," "donate," or "play." Id. at 40. The exact language
on the buttons differed by kiosk. Id. at 40, 61-62. "[W]henever the button was
pushed to place a bet or to play, ... a recording started playing much like a
cartoon-type sound[ ]." Id. at 59. At other times, the kiosks produced the sounds
of bells and whistles. Id. These sounds would "conclude when the roulette stopped
turning or the cards stopped turning over." Id. at 59-60. Distinctive bells and
whistles sounded when the kiosks produced a winning result. Id. at 60. Lt.
Ferguson won cash prizes during his engagement with the kiosks. Id. at 23-24; see
also Pl.'s Exs. 1.3, 1.5, 1.6.
*7 Prior to conducting the inspection, Lt. Ferguson did not review any of the
Case's materials or the Court's prior orders. Oct. 6, 2014, Tr. 53. Nor did Lt.
Ferguson consult any authorities regarding what constituted a legal sweepstakes in
Texas. Id. Lt. Ferguson did not, and does not, know what makes a sweepstakes legal
under Texas law. Id. at 53-54.
During his visits to the Entertainment Centers, neither Lt. Ferguson, nor
anyone from his team, inspected either the computer servers or the software
running the gaming kiosks. Id. at 4748. Furthermore, despite signs stating that no
donation was necessary to play, Lt. Ferguson made no effort to obtain free entries
at either Socorro or Speaking Rock. Id. at 57-58. Lt. Ferguson additionally "did
not read the [sweepstakes] rules," id. at 49, and does not know what was in the
Tribe's records because he only looked at them briefly. Id. at 57.
Texas next called Tom Loper, a lieutenant with the Criminal Investigation
Division of the Texas Attorney General's Office ("Lt.Loper"). Lt. Loper's
testimony regarded a 2012 inspection of the Entertainment Centers and was largely
consistent with Lt. Ferguson's testimony. Specifically, Lt. Loper estimated that
he observed nearly one thousand gaming kiosks at Speaking Rock and close to four
hundred kiosks at Socorro. Id. at 85. Lt. Loper further testified that the
Entertainment Centers promoted a similar "environment" to legal casinos, including
low lighting, participants rubbing the gaming kiosks in superstitious ways, and
the distinctive sounds of bells, whistles, and coins falling into trays. Id. at
83-84, 102.
Like Lt. Ferguson's subsequent inspection, Lt. Loper was "not tasked with the
job of determining whether or not [he] could play [the] machines without paying."
Id. at 94. Rather, the sole purpose of Lt. Loper's inspection was to determine if
he could insert money into the gaming kiosks and win cash prizes. Id. at 89. In
doing so, Lt. Loper never saw or received free entry options during his
inspection. Id. at 84. Accordingly, neither Lt. Loper nor his officers attempted
to obtain free play vouchers. Id. at 90. Nor did Lt. Loper enter the inspection
with a definition of a legal "sweepstakes" under Texas law. Id. at 99.
Furthermore, neither Lt. Loper nor his team investigated the software underlying
the sweepstakes. Id. at 98. Lt. Loper did, however, successfully insert money into
the gaming kiosks and win cash prizes. Id. at 82-83.
Texas next offered the testimony of Captain Daniel Guajardo ("Cpt.Guajardo") of
the Law Enforcement Division of the Texas Attorney General's Office. Cpt. Guajardo
testified that Texas incurred a total cost of $71,937.27 conducting inspections of
the Tribe's gaming operations during 2012-2014. Id. at 107; Pl.'s Ex. 38. These
expenses, Cpt. Guajardo testified, include the costs of travel, contracts, direct
expenses, meals, hourly wages, and cash used to play the kiosks. Oct. 6, 2014, Tr.
108. According to Cpt. Guajardo, officers based in the Attorney General's offices
in Austin and San Antonio carried out the inspections because the Attorney
General's El Paso-based agents lacked the requisite "experience or knowledge" to
carry out the inspection. Id. at 111, 116. Nonetheless, Cpt. Guajardo conceded
that Texas would have incurred the costs of the Austin and San Antonio-based
officers' salaries regardless of whether those officers were assigned to inspect
the Entertainment Centers in El Paso, or to another inspection elsewhere. Id. at
115.
*8 Texas then called Karl Maahs ("Mr.Maahs"), General Manager at the Ysleta del
Sur Pueblo. Mr. Maahs testified that the Tribe contracts out the current
sweepstakes operation to four third-party vendors. Id. at 120. These vendors are
Blue Stone Entertainment, LLC ("Blue Stone"), Accelerated Marketing Solutions, LLC
("AMS"), XCite Amusement, Inc. ("XCite"), and Winter Sky, LLC ("Winter Sky"). Id.
Mr. Maahs stated that under the terms of the contracts, the third-party vendors
provide the sweepstakes equipment and draft the sweepstakes' rules. Id. at 121,
128. In return, the Tribe remits to the vendors 30% of the total sweepstakes
proceeds, net of the prize money paid out, with the Tribe retaining the remaining
70%. Id. at 120. According to Mr. Maahs, in 2012 and 2013, the Tribe "netted
approximately" $30,000,000.00 each year in income from the sweepstakes, and
remitted $15,000,000.00 to its vendors. Id. at 121. Mr. Maahs stated that this
revenue sharing scheme is not advertised to sweepstakes participants. Id. at 122.
Mr. Maahs further testified that participants may request free entries to the
sweepstakes once per day at each of the Entertainment Centers. Id. at 145. A
request grants free entry to each of the four vendors' sweepstakes. Id. at 145-46.
Mr. Maahs stated that the number of free entry credits provided with each request
varies by promotion from 100 to 5,000, with an average of 800 credits per request.
Id. at 146, 148. Additionally, Mr. Maahs testified that four to five hundred
participants request free entries each day. Id. at 146. Mr. Maahs stated that in
total, between February 2012 and October 2014, the Tribe received over a million
and a half free entry applications. Id. at 147, 156; see also Defs.' Ex. H.
According to Mr. Maahs, each of these free entry applications represents a single
requesting participant, with an average of 800 free entry credits granted. Oct. 6,
2014, Tr. 147-48. In total, this equates to roughly $12,000,000.00 in free entry
credits. Id. at 148.
Mr. Maahs also testified that the Entertainment Centers earn profit from the
sale of food, beverages, merchandise, tobacco, and ticketed events, id. at 128,
and in fact, nearly 35-40% of the Entertainment Centers' earnings come from food
and beverage sales. Id. at 132. Mr. Maahs stated that cigarette sales produce an
additional $3,500,000.00 in income. Id.
2. The Tribe's witness testimonyFN7
FN7. In addition to the witnesses discussed below, the Tribe called Mr. Lou
Bright, former General Counsel at the Texas Alcoholic Beverage Commission.
Because Mr. Bright's testimony is not relevant to the instant order, the
Court does not discuss his testimony below.
Linda Austin ("Ms.Austin"), Director of Operations at the Ysleta del Sur Pueblo
, testified regarding the Tribe's annual budget. According to Ms. Austin, the
Tribe uses its annual budget to provide direct services to the Tribe's members.
See Oct. 7, 2014, Tr. of Oral Arg. ("October 7, 2014, Transcript"), ECF No. 508,
at 157. These services include fire safety, border patrol, law enforcement,
elderly care, vaccines, and educational scholarships. Id. at 164-65. Ms. Austin
testified that because state and federal grants do not pay for the full costs of
these programs, the Tribe pays the balance using its "general fund." Id. at 160.
In 2013, the Tribe transferred $12,754,431.00 from the general fund to cover the
costs of direct services. Id. at 163; Defs.' Ex. AS, at 18. Ms. Austin stated that
the largest source of transfers to the general fund is donations from Speaking
Rock and Socorro, which "impact every one of the programs offered by the Pueblo."
Oct. 7, 2014, Tr. 163.
*9 The Pueblo Defendants also called the Tribe's Lieutenant Governor, Carlos
Hisa ("Lt.Gov.Hisa"), to testify regarding the Tribe's governmental expenditures
of the donations earned at the Entertainment Centers. Specifically, Lt. Gov. Hisa
testified that final decision-making authority on how the donations are spent lies
with the Tribal Council. Id. at 193-94. According to Lt. Gov. Hisa, in deciding
how to spend the donations, the Tribal Council prioritizes education, health care,
public safety, and housing. Id. at 194. However, Lt. Gov. Hisa stated that
although the Tribal Council prioritizes certain services over others, there are no
formal restrictions regarding how the donations are spent. Id. at 212. Examples of
programs recently funded by donations, according to Lt. Gov. Hisa, include
services for the elderly, educational scholarships, border patrol services, the
Tribe's police department, mental health care services for tribal veterans, day
care programs, environmental initiatives, and efforts to revitalize the Tigua
language. Id. at 198-204.
The Pueblo Defendants further presented the testimony of Scott Brown
("Mr.Brown"), Production Manager at Speaking Rock and Socorro. Mr. Brown testified
that the Tribe offers non-gaming events such as live music, sports viewing, and
wrestling matches at Speaking Rock and Socorro. Id. at 90. Special events at the
Entertainment Centers can attract crowds as large as 20,000 people, excluding
customers playing the gaming kiosks. Id. at 95, 108. Mr. Brown stated that the
Tribe advertises these non-sweepstakes events through television, radio, and
social media. Id. at 95-97. According to Mr. Brown, the advertisements make no
mention of the sweepstakes, id. at 97-99, and customers wishing to attend
non-sweepstakes events are not required to enter or pass by the rooms containing
the gaming kiosks. Id. at 106.
The Pueblo Defendants also presented two expert witnesses. First, the Pueblo
Defendants questioned Russell Autry ("Mr.Autry"), an expert on public opinion
research. Mr. Autry testified regarding the findings of a market research survey
he conducted at Speaking Rock on March 10-12, 2014. Id. at 71, 73; Market Research
Survey ("Autry Report"), Defs.' Ex. C. The Autry Report is the result of 763
questionnaires distributed to a random selection of customers at Speaking Rock.
Autry Report 1. According to Mr. Autry, the survey found that 69% of respondents
had received free sweepstakes entries at Speaking Rock. FN8 Oct. 7, 2014, Tr. 75.
Furthermore, 89% of respondents knew that "all of the proceeds of [Speaking Rock]
are contributions that go to benefit the members of the Ysleta del Sur Pueblo."
Id.; Autry Report 4. Mr. Autry testified that these numbers were "statistically
significant." Oct. 7, 2014, Tr. 75-76. During a subsequent survey conducted on
September 28, 2014, Mr. Autry found that 81% of respondents had attended a concert
or other special event hosted by the Tribe. Id. at 76, 78. Mr. Autry testified,
however, that neither of the surveys determined the "causation" for the
respondents' presence at Speaking Rock. Id. at 82. Therefore, Mr. Autry explained
that neither survey establishes whether respondents patronized Speaking Rock for
the specific purpose of donating to the Tribe. Id. The Pueblo Defendants further
presented the expert testimony of Robert Robicheaux ("Dr.Robicheaux"), a professor
of marketing at the University of Alabama-Birmingham. See Oct. 6, 2014, Tr. 263.
Dr. Robicheaux has forty years of experience "studying sweepstakes and other forms
of sales promotion." Id. at 265. According to Dr. Robicheaux, all sweepstakes have
three characteristics: (1) a finite set of predetermined prizes, (2) no means for
a participant or operator to influence the chance of winning, and (3) an
alternative means of free entry. Id. at 268-69. Furthermore, Dr. Robicheaux
testified that the product promoted by a sweepstakes need not be tangible. Id. at
276, 286. Nor, he explained, is there any requirement that a promotional
sweepstakes last for either a limited or extended period of time. Id. at 302.
FN8. The survey contained a margin of error of +/3.6%. Oct. 7, 2014, Tr. 73.
*10 According to Dr. Robicheaux, for a sweepstakes to have an alternative means
of free entry, the sweepstakes sponsor "cannot require that any person who wants
to participate in the sweepstakes has to buy anything." Id. at 269. However, Dr.
Robicheaux testified that there is no required minimum percentage of participants
that must enter through the free play alternative. Id. at 270. Indeed, Dr.
Robicheaux explained that it is standard practice for sponsors to grant only a
limited number of free entries to each participant per day. Id. at 284. While
visiting Socorro, Dr. Robicheaux witnessed hundreds of people waiting in line to
receive free entries. Id. at 280.
After reviewing the Tribe's current gaming operation, Dr. Robicheaux testified
that in his expert opinion "the sweepstakes promotions offered at the
entertainment centers have all the ... characteristics" of a sweepstakes. Id. at
278.
The Pueblo Defendants additionally offered the testimony of three witnesses
describing the technical mechanics of the sweepstakes offered at Speaking Rock and
Socorro. First, Randee Ralph Kerns ("Mr.Kerns"), Director of Business Development
and Compliance at Diamond Game Enterprises ("Diamond Game"), testified regarding
the sweepstakes operated by Diamond Game and Blue Stone. FN9 Oct. 7, 2014, Tr. 7.
According to Mr. Kerns, Blue Stone controls the implementation of its sweepstakes
at the Entertainment Centers, including control over the rules by which the
sweepstakes operate. Id. at 8. Mr. Kerns testified that the Tribe is not
authorized to make any alterations to Blue Stone's gaming hardware or software.
Id. at 11. Nonetheless, he explained, the sweepstakes are run for the benefit of
the Tribe, id. at 44, and neither Blue Stone nor Diamond Game sells a product in
connection with a sweepstakes at Speaking Rock or Socorro. Id.
FN9. Diamond Game leases its equipment to Blue Stone which, in turn,
provides the gaming equipment to the Entertainment Centers. See Decl. of
Randee Kerns, Defs.' Ex. O, at 1. Mr. Kerns therefore has personal knowledge
of the technical aspects of Blue Stone's sweepstakes.
Mr. Kerns also testified that Blue Stone's sweepstakes contain "a finite pool
of [predetermined] prizes available for each donation level." Id. at 13. These
prizes are "fixed[,] ... locked down in a set, and ... issued out in order to the
kiosks one by one as the kiosks request a result." Id. Moreover, according to Mr.
Kerns, Blue Stone provides participants the option of obtaining free entry credits
at the Entertainment Centers, by mail, or over the Internet. Id. at 14. However,
he explained, playing by free entry does not alter the odds of winning a prize.
Id. at 15. Between September 30, 2013, and September 28, 2014, Blue Stone issued
598,359 free entry credits. Id. at 26.
Mr. Kerns testified that Blue Stone's gaming kiosks do not contain any
electronic or mechanical means of creating a randomized result. Id. at 20.
Therefore, according to Mr. Kerns, the kiosks' graphical displays do not change
the odds, result, or amount of any prize awarded. Id. at 16-17. Further, Mr. Kerns
stated that all of Blue Stone's kiosks are attached to a server, id. at 18, and if
a kiosk is not connected to a server the kiosk cannot be used. Id. at 42.
Accordingly, Mr. Kerns testified that the server, the wiring, and the kiosks are
all "essential parts" of the sweepstakes' administration. Id.
*11 Mr. Kerns further states that prior to the start of the sweepstakes, the
computer server takes a finite pool of preprogrammed results and shuffles them
once. Id. at 20. He then explained that each sweepstakes pool has an expiration
date upon which the pool will terminate if all the predetermined entries have not
been used. Id. at 46. Mr. Kerns stated that the information remaining upon
termination is archived and a new sweepstakes is created. Id. The servers are
designed, however, to create a new pool of entries if the current pool is
exhausted prior to the sweepstakes' expiration date. Id. at 37-38. Mr. Kerns
testified that upon creation of a new pool, a random number generator is used to
shuffle the pool's predetermined results. Id. at 35.
Jack Saltiel ("Mr.Saltiel"), President of Eclipse Gaming Systems, provided
similar testimony indicating that AMS's sweepstakes operate substantially
similarly to Blue Stone's.FN10 According to Mr. Saltiel, AMS currently has
approximately three-hundred kiosks at the Entertainment Centers. Id. at 130. He
described AMS's kiosks as "upright cabinets with two video displays, a bill
acceptor[,] ... a printer, and some buttons on them in order to interact with the
users." Id. at 115. Mr. Saltiel testified that the kiosks' simulated gaming
displays are "designed to create the look and the feel of casino-like games." Id.
at 133. However, Mr. Saltiel explained that the kiosks merely "present the result
of a previously determined outcome," and, "[w]ithin the kiosk itself, there is no
game that is actually played." Id. at 115. Therefore, according to Mr. Saltiel,
participants cannot alter the predetermined result through interaction with the
kiosk. Id. at 116.
FN10. Eclipse Gaming Systems produces the software run by AMS. Oct. 7, 2014,
Tr. 110. Accordingly, Mr. Saltiel has personal knowledge regarding the
operation of AMS's sweepstakes. Id. at 114.
Mr. Saltiel additionally testified that AMS provides participants with an
alternative means of free entry. Id. at 122. He further stated that no advantage
is gained by entering the sweepstakes through donation, as all entries are drawn
from the same finite pool and the odds of winning do not change based on the means
of entry. Id. at 122, 127. Furthermore, Mr. Saltiel testified that AMS's
sweepstakes contain a predetermined number of winning entries that "are generated
when the sweepstakes [are] started." Id. at 121-22, 125. According to Mr. Saltiel,
all entries are drawn from the same finite pool and distributed in a previously
shuffled order maintained on a server. Id. at 122.
Mr. Saltiel testified that AMS's kiosks cannot reveal the predetermined results
without being connected to a server, id. at 126, and the server, likewise, cannot
operate without being attached to the kiosks. Id. at 137. Therefore, Mr. Saltiel
stated that the server and the kiosks are both "component[s] of the overall
system." Id.FN11
FN11. The parties did not present witness testimony discussing the
sweepstakes operated by XCite or Winter Sky. There is no indication,
however, that the parties dispute that these sweepstakes operate similarly
to the sweepstakes offered by AMS and Blue Stone. Furthermore, non-testimony
evidence in the record tends to establish that the sweepstakes of all four
vendors operate in a substantially similar manner. See BMM Certification
Test Report ("BMM Report"), Defs.' Ex. A.
Finally, the Pueblo Defendants presented the testimony of Richard Henry
Williamson ("Mr.Williamson"), a former employee of BMM Test Labs. Oct. 6, 2014,
Tr. 221. Mr. Williamson testified that BMM Test Labs ("BMM") is an internationally
recognized company specializing in the certification of gaming software. Id. at
222-23. According to Mr. Williamson, BMM conducted lab testing on all four of the
Tribe's third-party vendors' sweepstakes systems. Id. at 225, 241. Based on this
testing, BMM produced a report certifying that all four vendors' software met a
series of specifications provided by the Pueblo Defendants' attorney. Id. at 241,
250; BMM Certification Test Report ("BMM Report"), Defs.' Ex. A.FN12 Mr.
Williamson further testified that BMM subsequently conducted two on-site
inspections at Socorro and Speaking Rock in 2013 and 2014 to ensure that the
software operated in practice as it did during lab testing. Oct. 7, 2014, Tr. 225;
BMM Field Inspection Report, Defs.' Ex. B. Through this testing, he explained, BMM
verified that the sweepstakes software at Socorro and Speaking Rock operated as
indicated in the BMM Report as recently as August 2013. Oct. 7, 2014, Tr. 244.
FN12. The top of the columns in the BMM Report are redacted for unknown
reasons. However, testimony at the Hearing established that the left column
heading states the "criteria" used to test the software, while the right
column heading states the "test results." See Oct. 6, 2014, Tr. 230.
C. The Tribe's Sweepstakes
*12 Based upon the undisputed evidence presented at the hearing and information
otherwise available in the record, the Court understands the following regarding
the sweepstakes currently offered by the Tribe at its Entertainment Centers.
Both Speaking Rock and Socorro offer sweepstakes operated by the four
third-party vendors-Blue Stone, Winter Sky, AMS, and XCite. See Oct. 6, 2014, Tr.
120; see also Accelerated Marketing Solutions, LLC Compliance Statement ("AMS
Compliance Statement"), Pl.'s Ex. 35, at 2; Letter from Brian Bonnette to Randolph
Barnhouse (Nov. 27, 2012) ("Winter Sky Letter"), Pl.'s Ex. 36, at 1. The
sweepstakes are run to solicit donations for the Tribe. Oct. 7, 2014, Tr. 44.
Indeed, the third-party vendors do not sell a product in connection with the
sweepstakes. See Oct. 7, 2014, Tr. 44 (Blue Stone); see also Winter Sky LLC's
Stipulation of Facts ("Winter Sky Stipulation"), Pl.'s Ex. 13, at 1; XCite
Amusement, Inc.'s Stipulation of Facts ("XCite Stipulation"), Pl.'s Ex. 14, at 1;
Accelerated Marketing Solutions, LLC's Stipulation of Facts ("AMS Stipulation"),
Pl.'s Ex. 15, at 1.
Participants play the sweepstakes through hundreds of electronic gaming systems
offered at Speaking Rock and Socorro. See Oct. 6, 2014, Tr. 40, 85; Oct. 7, 2014,
Tr. 130. The electronic sweepstakes systems consist of three components: (1) video
sweepstakes terminals ("Kiosks"), (2) a central server ("Server"), and (3) a point
of sale system ("POS"). See BMM Report 9 (Blue Stone), 27(AMS), 44 (Winter Sky),
57 (XCite). Before proceeding with its analysis, the Court briefly discusses each
of these components, as well as the Tribe's free-entry alternative, in more detail
below.
1. The Kiosks
The Kiosks are responsible for providing an entertaining display for the
redemption of sweepstakes tickets, BMM Report 9 (Blue Stone), 27(AMS), 44 (Winter
Sky), 57 (XCite), and are "upright cabinets with two video displays, a bill
acceptor and a printer." Oct. 7, 2014, Tr. 115; see also May 6, 2014, Incident
Supplement Page ("May 6, 2014, Report"), Pl.'s Ex. 1, at 9. Participants begin an
interaction with a Kiosk by inserting either cash or pre-obtained free entry
vouchers into the Kiosk's bill reader. Oct. 6, 2014, Tr. 22; Oct. 7, 2014, Tr. 9.
When a participant enters cash into a Kiosk's reader, a message appears on the
Kiosk's screen stating that all "donations" go toward helping fund the Tribe's
services in health care, education, public safety, elder care, veterans' services,
and after school and day care programs. May 6, 2014, Report 3; Oct. 6, 2014, Tr.
22; Oct. 7, 2014, Tr. 28, 49. This message further informs participants more
specifically which "entities" are assisted by their donations. See May 6, 2014,
Report 5. After the message is displayed, a screen prompts the participant to
either agree or disagree to make a donation. Id. at 3; Oct. 6, 2014, Tr. 22. Each
Kiosk, however, has a sign informing the participant that no donation is
necessary. Oct. 6, 2014, Tr. 43; May 6, 2014, Report 3, 5. If a participant does
not agree to donate, the Kiosk prints a "cash-out ticket" in the amount inserted
into the Kiosk. Oct. 6, 2014, Tr. 22; see also May 6, 2014, Report 3. If a
participant agrees to make a donation, however, the Kiosk displays a series of
touch screen buttons that allow the participant to either "max," "donate," or
"play." Oct. 6, 2014, Tr. 40, 6162; see also May 6, 2014, Report 11. The exact
language displayed on the Kiosks' buttons differs by Kiosk. Oct. 6, 2014, Tr. 40.
*13 After a participant touches the "max," "donate," or "play" button, the
Kiosk uses "[v]isual entertainment" to indicate whether the sweepstakes entries
represent a winning or losing result. See BMM Report 34(AMS), 49 (Winter Sky), 60
(XCite), 116 (Blue Stone). This visual entertainment is "designed to create the
look and the feel of casino-like games." Oct. 7, 2014, Tr. 133.
The Kiosks themselves contain no random number generators or any other capacity
to create a random result. Id. at 20. Nor do the Kiosks' visual entertainment
displays alter or determine the sweepstakes result. See BMM Report 34(AMS) (Kiosk
cannot independently alter or set the value of a result), 60 (XCite) (same), 84
(Winter Sky) (same), 94 (Blue Stone) (same). The Kiosks can only read the value of
a result sent by the Server. See id. at 34(AMS), 60 (XCite), 84 (Winter Sky), 94
(Blue Stone). Accordingly, "[t]he entertaining display is solely determined by the
outcome delivered to the [Kiosk] by the [Server]." Id. at 27(AMS), 44 (Winter
Sky), 57 (XCite), 91 (Blue Stone). Indeed, in order to obtain a sweepstakes
result, the Kiosk must be connected to a Server. Oct. 7, 2014, Tr. 42, 126.
2. The Server
The Server is the "core component" of the sweepstakes systems. BMM Report 9
(Blue Stone), 27(AMS), 44 (Winter Sky), 57 (XCite). Software hosted on the Server
creates sweepstakes by generating randomized pools of sweepstakes entry results.
See id. at 14 (Blue Stone), 33(AMS), 48 (Winter Sky), 60 (XCite). Each sweepstakes
consists of multiple "donation levels." Oct. 7, 2014, Tr. 35-36. The "donation
level" refers to the number of sweepstakes credits needed to obtain a single entry
result from the pool. Id. There is one pool of results created for each donation
level, id. at 35, with multiple Kiosks potentially connected to a single pool. Id.
at 42.
Within each pool the Server creates a finite number of entries, see BMM Report
33(AMS), 48 (Winter Sky), 60 (XCite), 115 (Blue Stone), and assigns each entry a
fixed value upon creation. See id. at 33(AMS), 48 (Winter Sky), 60 (XCite); Oct.
7, 2014, Tr. 13 (Blue Stone). Therefore, the Server creates a finite number of
predetermined winning entries when each pool is assembled. See BMM Report 33(AMS),
48 (Winter Sky), 60 (XCite), 115 (Blue Stone); Oct. 7, 2014, Tr. 13 (Blue Stone).
Once the pool of fixed results is created, a random number generator shuffles
the results in the pool. See BMM Report 13 (Blue Stone), 59 (XCite). Neither the
participant nor the sweepstakes "operator" is able to alter the order of the
sweepstakes results once they are shuffled. See id. at 34(AMS), 47 (Winter Sky),
58 (XCite), 92 (Blue Stone).
The Server, upon request, sends a sweepstakes result from a pool to a Kiosk,
which in turn displays the result in an entertaining fashion. See id. at 34(AMS),
60 (XCite), 74 (Winter Sky), 94 (Blue Stone). The means of choosing which
sweepstakes result is sent to the Kiosk differs between the four vendors. Some
vendors select entries sequentially from the randomized pool. See id. at 32(AMS),
59 (XCite), 93 (Blue Stone). Other vendors employ a random number generator to
pick a random result located in the pool. Id. at 48 (Winter Sky). Regardless of
the means of selecting the particular entry result, "[o]nce [an] outcome has been
dispensed and displayed, it is marked as burned in the database" and cannot be
used again. Id. at 33(AMS), 48 (Winter Sky), 59 (XCite); accord id. at 93 (Blue
Stone).
*14 "[A]ll sweepstakes entries, made with or without purchase or donation, are
drawn from the same sweepstakes pool." See id. at 35(AMS), 50 (Winter Sky), 61
(XCite); accord id. at 15 (Blue Stone). Accordingly, a participant's chance of
winning a sweepstakes is not increased by purchasing a product, making a donation,
or providing personal information. Oct. 6, 2014, Tr. 238; Oct. 7, 2014, Tr. 127.
Each sweepstakes pool continues until it expires or all entries have been
dispensed. See BMM Report 16 (Blue Stone), 35(AMS), 61 (XCite), 74 (Winter Sky).
However, if the sweepstakes pool empties before the expiration date, the system is
designed to create an identical pool that is again randomly shuffled. See id. at
32(AMS), 72 (Winter Sky), 92 (Blue Stone). Therefore, though each created pool
contains a finite number of entries and a finite time period, there is,
theoretically, an infinite series of identical pools generated as needed until the
sweepstake's deadline ends. See id. at 32(AMS), 72 (Winter Sky), 92 (Blue Stone);
see also Oct. 6, 2014, Tr. 255-56.
3. The POS
The POS is a computer terminal the Entertainment Centers' cashiers use to
accept donations and distribute sweepstakes entries. Oct. 7, 2014, Tr. 19. It
offers participants the opportunity to make donations and reveal sweepstakes
results without engaging a Kiosk. Id. at 18-19, 57. However, the POS can also
print bar coded sweepstakes tickets for use at the Kiosks. BMM Report 9 (Blue
Stone), 27(AMS), 44 (Winter Sky), 57 (XCite). Entries obtained through the POS are
drawn from the same pool as entries revealed through the Kiosks. Oct. 7, 2014, Tr.
19.
4. Means of entry
Participants may receive sweepstakes entries either in connection with a
donation to the Tribe or through a request for free entry without donation. See
BMM Report 15 (Blue Stone), 33(AMS), 48 (Winter Sky), 59 (XCite). Participants
receive approximately one sweepstakes entry credit per one cent donated. Oct. 6,
2014, Tr. 212. The amount of sweepstakes entry credits provided with an in-person
request for a free voucher varies from 1 to 5,000. Id. at 145-46. The average
number of free entries received per request for entry without donation is 800. Id.
at 148. Signage informing participants that no donation is necessary to play is
posted on Kiosks and walls throughout both Entertainment Centers. Id. at 43; May
6, 2014, Report 49. This "signage is clear throughout the facilit[ies]." Oct. 6,
2014, Tr. 281; see also id. at 43.
Around four to five hundred people a day request free entries at the
Entertainment Centers. Id. at 146. In total, the Tribe received over a million and
a half free entry forms between 2012-2014. See id. at 147; Defs.' Free Entry
Appls., Defs.' Ex. H; see also No Donation Necessary Forms from Entertainment
Centers from March 13 through 19, 2012, Defs.' Ex. D; No Donation Necessary Forms
from Entertainment Centers from May 7 through 9, 2012, Defs.' Ex. E; No Donation
Necessary Forms from Entertainment Centers from July 9, 2013, Defs.' Ex. F; No
Donation Necessary Forms from Entertainment Centers from May 16, 2014, Defs.' Ex.
G. Though each free entry application represents a single participant, more than a
single sweepstakes entry credit is granted per voucher. Oct. 6, 2014, Tr. 147-48.
II. CONTEMPT
A. Standard
*15 " 'A movant in a civil contempt proceeding bears the burden of establishing
by clear and convincing evidence (1) that a court order was in effect, (2) that
the order required certain conduct by the respondent, and (3) that the respondent
failed to comply with the court's order.' " Seven Arts Pictures, Inc. v.
Jonesfilm, 512 F. App'x 419, 422 (5th Cir.2013) (quoting Martin v. Trinity Indus.,
Inc., 959 F.2d 45, 47 (5th Cir.1992)). "[E]vidence is clear and convincing only if
it 'produces in the mind of the trier of fact a firm belief or conviction as to
the truth of the allegations sought to be established' [which] 'enable[s] the fact
finder to come to a clear conviction, without hesitancy, of the truth of the
precise facts of the case.' " Oaks of Mid City Resident Council v. Sebelius, 723
F.3d 581, 585 (5th Cir.2013) (quoting Travelhost, Inc. v. Blandford, 68 F.3d 958,
961 (5th Cir.1995)).
B. Pueblo Defendants are in Contempt for Operating Unapproved Tribal Sweepstakes
Texas argues that the Pueblo Defendants are in contempt of the Modified
Injunction for operating a Tribal Sweepstakes without first obtaining the Court's
approval. See Mot. for Contempt 9.
The Pueblo Defendants respond that they cannot be held in contempt because the
Modified Injunction is ambiguous and open to more than one interpretation. See
Oct. 6, 2014, Tr. 11-12, 215-16; Oct. 7, 2014, Tr. 231. While the Pueblo
Defendants do not clearly articulate the basis for this contention, the Court
understands the Pueblo Defendants to assert that the Court's September 27, 2001,
Order is ambiguous as to what it permits and prohibits, and therefore one possible
interpretation of the Modified Injunction would allow the Tribe to conduct the
sweepstakes currently offered at Speaking Rock and Socorro. Specifically,
according to the Pueblo Defendants, the sweepstakes currently offered at Speaking
Rock and Socorro are permitted National Third-Party Vendor Sweepstakes for which
the Pueblo Defendants did not need prior judicial approval. Oct. 6, 2014, Tr. 12;
Oct. 7, 2014, Tr. 231-34.
"The judicial contempt power is a potent weapon which should not be used if the
court's order upon which the contempt was founded is vague or ambiguous." In re
Baum, 606 F.2d 592, 593 (5th Cir.1979) (citing Int'l Longshoremen's Ass'n, Local
1291 v. Phila. Marine Trade Ass'n, 389 U.S. 64, 76, 88 S.Ct. 201, 19 L.Ed.2d 236
(1967)); accord Martin, 959 F.2d at 47. "Congress responded to that danger by
requiring that a federal court frame its orders so that those who must obey them
will know what the court intends to require and what it means to forbid." U.S.
Steel Corp. v. United Mine Workers of Am., 519 F.2d 1236, 1246 (5th Cir.1975)
(citing Int'l Longshoremen's Ass'n, 389 U.S. at 76); accord Salazar ex rel.
Salazar v. Dist. of Columbia, 602 F.3d 431, 442 (D.C.Cir.2010); Reno Air Racing
Ass'n, Inc. v. McCord, 452 F.3d 1126, 1132 (9th Cir.2006); Islander E. Rental
Program v. Barfield, No. 96-41275, 145 F.3d 359, at *3-4 (5th Cir. Mar.24, 1998).
Accordingly, Federal Rule of Civil Procedure 65(d) requires that any injunction
must "state its terms specifically" and "describe in reasonable detail ... that
act or acts restrained or required." Fed.R.Civ.P. 65(d) (emphasis added); Hornbeck
Offshore Servs., L.L.C. v. Salazar, 713 F.3d 787, 792 (5th Cir.2013). Nonetheless,
"[w]hile injunctions should be specific, the command for specificity is not
absolute; it merely requires injunctions to be 'framed so that those enjoined will
know what conduct the court has prohibited.' " Martin's Herend Imps., Inc. v.
Diamond & Gem Trading United States of America Co., 195 F.3d 765, 771 (5th
Cir.1999) (quoting Meyer v. Brown & Root Constr. Co., 661 F.2d 369, 373 (5th
Cir.1981)). "[A] district court is entitled to a degree of flexibility in
vindicating its authority against actions that, while not expressly prohibited,
nonetheless violate the reasonably understood terms of the order." Hornbeck, 713
F.3d at 792.
1. The Modified Injunction is not ambiguous
*16 As stated above, the Original Injunction has the "practical and legal
effect of prohibiting illegal as well as legal gaming activities by the [ Pueblo
Defendants]." Ysleta I, 220 F.Supp.2d at 699. The Pueblo Defendants are well aware
of the Original Injunction's broad prohibition against both legal and illegal
gaming; indeed, several of the Pueblo Defendants have directly attacked the
Original Injunction as overbroad on this very basis. See Mot. to Am. the Inj. 9 (
Pueblo Defendants Ysleta del Sur Pueblo, Tigua Gaming Agency, and Tribal Council
recognizing that the Original Injunction "enjoin[s] all gaming activities
regardless of their legality under Chapter 47 [of the Texas Penal Code]."); Ysleta
I, 220 F.Supp.2d at 701-02. In response, the Court made clear that in order to
offer any gaming on its lands, the Tribe must first "petition the Court for a
modification of any of the terms of the [Original] [I]njunction that they believe
might limit their ability to participate in any legal gaming activity for which
they have qualified under Texas law." Nov. 2, 2001, Order 3-4.
On March 1, 2002, the Pueblo Representatives submitted such a petition by their
First Clarification Request, seeking "a clarifying declaration" that certain
contests offered by third-party vendors at the Tribe's Big Bear Lube Express and
Running Bear stores did not violate the Original Injunction. First Clarification
Req. 3-5. The Pueblo Representatives specifically enumerated a number of national
vendors offering sweepstakes at the Tribe's stores, including Mobil 1, Nestle
Crunch, M & Ms, Corn Nuts, 7UP, Pepsi, Doritos, Cheerios, and Coca-Cola. Id. at
4-5.
On May 17, 2002, in response to the First Clarification Request, the Court
modified the Original Injunction to permit certain third-party vendor contests
"conducted at [the Tribe's] Big Bear Lube Express [and] ... Running Bear
[s]tores." See May 17, 2002, Order 12-13. In doing so, the Court explicitly
referred to the same vendors listed in the First Clarification Request-namely,
Mobil 1, Nestle Crunch, M & Ms, Corn Nuts, 7UP, Pepsi, Doritos, Cheerios, and
Coca-Cola. See id. The Court then explained,
Though the record does not include specific information about each of these
contests or giveaways, the Court will presume that they are of a type that are
common at fuel stations and grocery stores across the country. For this reason,
the injunction will be modified to permit these and other like-national third
party vendor contests, provided that no specific contest violates Texas gaming
law.
Id. at 13 (emphasis added).
While the Pueblo Defendants spend considerable resources attempting to take
this passage out of context, it means exactly what it says and no more: that the
Original Injunction was modified to permit only the enumerated contests offered at
the Tribe's stores and "other like-national third party vendor contests" that are
"of a type ... common at fuel stations and grocery stores across the country." Id.
(emphasis added). This language is clear on its face.
*17 Still, the Court further delineated the boundaries of the permissible
contests by listing specific vendors' contests as examples of the sort permitted,
and explaining that the permitted sweepstakes were of a type found at particular
businesses-grocery stores and gas stations. Id. at 12-13. The Court's plain
language, as well as the specific examples which further delineate the boundaries
of the permitted contests, are sufficiently clear to give the Pueblo Defendants
adequate notice of what conduct remained prohibited. See Lady Primrose's, Inc. v.
After Hours Bath Prods., Inc., No. 99-40753, 211 F.3d 125, at *5, *5 n. 8 (5th
Cir. Mar.6, 2000) (holding that injunction which prohibited "offering for sale the
After Hours French Lace Dusting Powder or any similar product" was sufficiently
clear) (emphasis added); Medtronic, Inc. v. Benda, 689 F.2d 645, 649 (7th
Cir.1982) (holding injunction sufficiently specific where court "elaborate[d] on
the prohibition by identifying several specific acts which [were] covered ...
[thus] help[ing] to clarify the boundaries of the injunction"). Though the
Modified Injunction encompasses a range of potential contests by permitting "other
like-national third party vendor contests," see Ysleta I, 220 F.Supp.2d at 705,
given the large variety of products presumably sold at the Tribe's stores, the
Court finds "the [Modified Injunction's] degree of specificity here is appropriate
in light of the commercial environment in which [it] applies." See Lady
Primrose's, 211 F.3d 125 at *5 n. 8 (citing United States v. Central Adjustment
Bureau, Inc., 823 F.2d 880, 881 (5th Cir.1987)).
Moreover, the Court modified the Original Injunction in response to the Pueblo
Representatives' request for "nothing more than a clarification that the [ Tribe]
may" permit certain third-party contests at the Tribe's stores. See First
Clarification Request 1, 4. In permitting the contests at the Tribe's stores, the
Court set out its modification in nearly identical language to that contained in
the Pueblo Representatives' request, including a full listing, virtually verbatim,
of the contests for which the Pueblo Representatives sought clarification. Compare
First Clarification Request 4-5, with May 17, 2002, Order 12-13, and Ysleta I, 220
F.Supp.2d at 705. The Court will not permit the Pueblo Defendants to now cast a
shadow of ambiguity onto a Court order that so closely tracks the language of
several of the Pueblo Defendants' own request.FN13 See ITT Educ. Servs., Inc. v.
Arce, 533 F.3d 342, 348 (5th Cir.2008) ("Appellant's argument that the
injunction's language is not sufficiently specific also fails because the language
of the injunction closely tracks the bargained-for contractual language of the
confidentiality provision."). For the Pueblo Defendants to attempt so here
approaches bad faith.
FN13. Pueblo Defendants Ysleta del Sur Pueblo, Tigua Gaming Agency, and
Tribal Council were among the Tribal Representatives that submitted the
First Clarification Request, and are, therefore, well aware of the language
and purpose of the submitted request. See First Clarification Req. 1.
Furthermore, it appears that the Pueblo Defendants themselves are well aware
that the current sweepstakes operations are not National Third-Party Vendor
Sweepstakes. On August 10, 2009, the Pueblo Defendants submitted their Third
Proposal for the Court's approval. See Third Proposal. The gaming operations
contemplated in the Third Proposal appear to be substantially similar to the
sweepstakes currently offered at the Entertainment Centers. Indeed, both
operations (1) center on the Tribe providing sweepstakes entries to patrons who
make a donation to the Tribe, compare Third Proposal Ex. 1, at 2, with Oct. 7,
2014, Tr. 236, (2) involve the use of electronic gaming kiosks, compare Third
Proposal Ex. 1, at 2, with Oct. 6, 2014, Tr. 40, 85, and Oct. 7, 2014, Tr. 130,
and (3) are administered by a third-party vendor through a central database.
Compare Third Proposal Ex. 1, at 2, with Ysleta del Sur's Answers and Objs. to
Pl.'s First Set of Interrs., Pl.'s Ex. 10, at 2, and Ysleta del Sur Tribal
Council's Answers and Objs. to Pl.'s First Set of Interrs., Pl.'s Ex. 11, at 2,
and BMM Report 9 (Blue Stone), 27(AMS), 44 (Winter Sky), 57 (XCite).
*18 At the Hearing, the Pueblo Defendants themselves characterized the Third
Proposal as a request for a Tribal Sweepstakes. See Oct. 6, 2014, Tr. 138 ("Docket
284, filed August the 10th of 2009, was the Proposal for Tribal Sweepstakes."). In
light of this admission, and given the similarity between the Third Proposal and
the current sweepstakes, the Pueblo Defendants cannot argue in good faith that the
Modified Injunction was too ambiguous to give the Pueblo Defendants reasonable
notice of the prohibited activity. See Hornbeck, 713 F.3d at 792 ("[A] district
court is entitled to a degree of flexibility in vindicating its authority against
actions that, while not expressly prohibited, nonetheless violate the reasonably
understood terms of the order."). Accordingly, the Pueblo Defendants' claim of
ambiguity is specious at best.
For the above mentioned reasons, the Court finds that the meaning of the
Modified Injunction was sufficiently specific and detailed for the Pueblo
Defendants to "know what conduct the court has prohibited." See Martin's Herend
Imps., Inc., 195 F.3d at 771.
2. The Tribe's sweepstakes are not National Third-Party Vendor Sweepstakes
Having determined that the Modified Injunction is not unclear or ambiguous, the
Court now turns to the Pueblo Defendants' argument that the Tribe's current
sweepstakes are National Third-Party Vendor Sweepstakes, which the Modified
Injunction would permit. Though the Pueblo Defendants try hard to make much of
this issue, the truth of the matter is simple: The Tribe's current sweepstakes are
not a permitted National Third-Party Vendor Sweepstakes.
As an initial matter, the contests allowed by the Modified Injunction are
contests promoting third-party products sold at the Tribe's stores. See May 17,
2002, Order 12-13; Ysleta I, 220 F.Supp.2d at 705. All fourteen contests
enumerated in the Modified Injunction are sweepstakes offered by third-party
vendors to promote those third-party vendors' consumer products commonly found at
grocery stores and fuel stations. Here, there is no contention whatsoever, let
alone any evidence, that the sweepstakes offered at Speaking Rock and Socorro are
attached to any third-party product. Indeed, the evidence demonstrates that, to
the contrary, the sweepstakes are run purely for the benefit of the Tribe. Oct. 7,
2014, Tr. 44. And, though operated by third-parties, none of the Tribe's current
sweepstakes sell or promote a third-party product of any sort in connection with
the sweepstakes, and certainly not any products comparable to the oil promoted by
Mobil 1, or the candy promoted by M & Ms, or any of the other products offered at
the Tribe's stores, as set out in the Modified Injunction. See Winter Sky
Stipulation 1; XCite Stipulation 1; AMS Stipulation 1; see also Oct. 7, 2014, Tr.
44; Oct. 6, 2014, Tr. 25. In a fashion utterly incomparable to the contests
enumerated in the Modified Injunction, here, the Tribe promotes donations to the
Tribe through devices provided by third-party vendors of gaming systems.
*19 Furthermore, the Tribe's sweepstakes are not "of a type that are common at
fuel stations and grocery stores across the country." See May 17, 2002, Order 13;
Ysleta I, 220 F.Supp.2d at 705. Indeed, the sweepstakes more closely resemble
contests of a type that are common at casinos across the country. The Tribe's own
witness-Mr. Saltiel-testified as much. See Oct. 7, 2014, Tr. 133 (stating that the
sweepstakes "are designed to create the look and the feel of casino-like games").
Unlike any sweepstakes found at fuel stations and grocery stores, the Tribe's
current sweepstakes are played on hundreds of electronic Kiosks that reveal
results through an "entertaining display" accompanied by distinctive casino-like
sounds. See Oct. 6, 2014, Tr. 21-22, 84, 236; Oct. 7, 2014, Tr. 133; see also May
6, 2014, Report 9, 23, 45. Such sweepstakes do not resemble the contests offered
by the likes of Doritos and Coca-Cola "at fuel stations and grocery stores across
the country." See May 17, 2002, Order 13; Ysleta I, 220 F.Supp.2d at 705. The
undisputed evidence presented at the Hearing shows as much.
Accordingly, neither the product, nor the vendors, nor the sweepstakes
themselves are even remotely comparable to the contests specifically enumerated by
the Court in the Modified Injunction. For the Pueblo Defendants to now come before
the Court and claim otherwise is, frankly, absurd.
Moreover, even after the Court made it abundantly clear that sweepstakes
substantially similar to those currently offered at the Entertainment Centers
constituted prohibited Tribal Sweepstakes, the Pueblo Defendants proceeded to not
only operate such sweepstakes, but to even expand those operations by opening a
second entertainment center at Socorro. Compare Oct. 18, 2010, Order 5 ("It is
therefore ORDERED that the Defendants' latest proposal to conduct a sweepstakes
[ECF No. 284] be, and it is hereby, DENIED WITHOUT PREJUDICE.") (emphasis in the
original) (issued October 18, 2010), with Oct. 6, 2014, Tr. 95 (Lt. Loper
indicating that Texas first determined Socorro was operating in 2012), 209 (
Pueblo Defendants' attorney stating that Socorro did not exist in 2010).
In response to this brazen posture, the Court warns the Pueblo Defendants that
the Court will not grant the Pueblo Defendants "immunity from civil contempt
because the plan or scheme which they adopted was not specifically enjoined." See
McComb v. Jacksonville Paper Co., 336 U.S. 187, 192, 69 S.Ct. 497, 93 L.Ed. 599
(1949). As the United States Supreme Court declared over sixty years ago,
[s]uch a rule would give tremendous impetus to the program of experimentation
with disobedience of the law[.] ... The instant case is an excellent
illustration of how it could operate to prevent accountability for persistent
contumacy. Civil contempt is avoided today by showing that the specific plan
adopted by respondents was not enjoined. Hence a new decree is entered enjoining
that particular plan. Thereafter the defendants work out a plan that was not
specifically enjoined. Immunity is once more obtained because the new plan was
not specifically enjoined. And so a whole series of wrongs is perpetrated and a
decree of enforcement goes for naught.
*20 Id. at 192-93.
Pursuant to Supreme Court authority, the Court will not permit the Pueblo
Defendants to conduct a series of "experimentation[s] with disobedience" by making
slight variations to the Tribe's gaming operations in attempts to avoid the reach
of the Modified Injunction. See id. at 192. Under the terms of the Modified
Injunction, the Tribe is currently prohibited from conducting "illegal as well as
legal gaming activities." Ysleta I, 220 F.Supp.2d at 699. The only exception to
this rule is the Tribe's right to permit the contests enumerated in the Modified
Injunction, and "other like-national third party vendor contests" that are "of a
type ... common at fuel stations and grocery stores across the country." Id. at
705 (emphasis added). For any other contests the Tribe is "free to petition the
Court for a modification of any of the terms of the [Modified Injunction] that
they believe might limit their ability to participate in any legal gaming activity
for which they have qualified under Texas law." Id. at 711; Nov. 2, 2001, Order
3-4. However, should the Tribe choose not to petition the Court and instead "make
their own determination of what the [Modified Injunction] mean[s] ... they act[ ]
at their peril." See McComb, 336 U.S. at 192.
Accordingly, the Court finds that Texas has established by clear and convincing
evidence that the Tribe's sweepstakes are not National Third-Party Vendor
Sweepstakes as contemplated by the Modified Injunction. The Pueblo Defendants'
contention to the contrary is less than meritless. The current sweepstakes are,
and have been, prohibited conduct. Nonetheless, the Pueblo Defendants continue to
operate those sweepstakes in the face of the Modified Injunction. The Court finds
that the Pueblo Defendants are, therefore, in contempt of the Modified Injunction.
III. THE TRIBE'S SWEEPSTAKES MAY NOT CONSTITUTE LOTTERY
Because the Court has found the Pueblo Defendants in contempt for operating a
Tribal Sweepstakes without approval, the Court does not reach the issue of whether
the Tribe's current sweepstakes are prohibited lotteries under Texas law.
Nonetheless, because the Court provides the Pueblo Defendants with the opportunity
to submit to the Court a detailed sweepstakes proposal, as explained in more
detail below, the Court offers the following discussion as a guide to the parties.
Texas alleges that the Tribe's current sweepstakes are prohibited lotteries as
defined by Texas Penal Code s 47.01(7). Mot. for Contempt 13-15. In support of
this argument, Texas relies on numerous Texas Attorney General opinions. See
Section C Pl.'s Hr'g Preparation Order Compliance ("Plaintiff's Hearing
Compliance"), ECF No. 486, at 26, 30. The Pueblo Defendants respond that the
sweepstakes are not lotteries because "consideration is not required to enter."
Pueblo Defs.' Resp. and Mem. in Opp'n to Pl.'s Fifth Am. Mot. for Contempt ("
Pueblo Defendants' Response"), ECF No. 431, at 6. The Pueblo Defendants further
argue that because the current sweepstakes conform to the criteria approved by a
Texas trial court in American Legion, Knebel Post 82 v. TABC, Cause No.
D-1-GN-10-003084 (Dist. Ct. Travis Cnty. Oct. 14, 2011),FN14 there is no violation
of Texas law in the present case. Oct. 7, 2014, Tr. 244. Texas responds that the
Knebel opinion is of little precedential value and inconsistent with the opinions
of higher Texas courts. Oct. 7, 2014, Tr. 248-49.
FN14. Because the Knebel decision is not readily available in electronic
databases, the Court notes that a copy of the case can be found in the
record at ECF No. 358-2.
*21 As an initial matter, the Court has found only one definition of a
"sweepstakes" under Texas statutory law. Section 622.001 of the Texas Sweepstakes
Act, Tex. Bus. & Comm.Code s 622.001 et seq., defines a "sweepstakes" as "a
contest that awards one or more prizes based on chance or the random selection of
prizes." Id. s 622.001(4). The Sweepstakes Act, however, "does not apply to a
sweepstakes for which the only use of the mail is for a consumer to return an
entry form to the sweepstakes sponsor," id. s 622.051(b), nor "to a sweepstakes in
which the value of the most valuable prize is less than $50,000." Id. s
622.052(a). Neither party has argued that the Sweepstakes Act applies to the
Tribe's current sweepstakes. In fact, Texas appears to assert that the Tribe's
sweepstakes do not fit either the mailing or minimum prize thresholds set out in
the Sweepstakes Act. See Pl.'s Hr'g Compliance 13.
Upon a review of the evidence, however, the Court notes that the Tribe's
current sweepstakes may potentially fall within the provisions of the Sweepstakes
Act. First, testimony at the Hearing indicated that participants can both request
entry to the sweepstakes and receive results through the mail. Oct. 7, 2014, Tr.
56 (Mr. Kerns testifying that upon receiving a mail-in request form, "there is a
process ... where two people access the [S]erver at Speaking Rock, remove the next
result from the pool," and mail the result to the participant). Accordingly, it
does not appear that the "only use of the mail is for a consumer to return an
entry form to the sweepstakes sponsor." See Tex. Bus. & Comm.Code s 622.052(b).
Further, at least two of the Tribe's sweepstakes vendors appear to offer maximum
prizes of $50,000.00.00 or higher. See XCite Sweepstakes Rules ("XCite Rules"),
Defs.' Ex. L, at 3 (indicating maximum prize of "50000" without reference to the
units this number represents); AMS Official Sweepstakes Rules ("AMS Rules"),
Defs.' Ex. M, at 4-11 (listing prizes of "372464," "208080," "400000," and
"409776" without reference to the units these numbers represent).
The Pueblo Defendants shall, therefore, in any proposal submitted to the Court,
address whether the provisions of the Texas Sweepstakes Act apply to the gaming
operations submitted in the proposal. In particular, the Pueblo Defendants shall
provide detailed information indicating the maximum prizes, in dollars, awarded by
each sweepstakes, and explicitly discuss the extent to which the sweepstakes
employ the use of the mail.
However, because the parties have focused their arguments on the issue of
whether or not the Tribe's sweepstakes constitute illegal lotteries under Texas
law, the Court does not address the implications of the Texas Sweepstakes Act
further at this time. Instead, the Court turns to an analysis of the legality of
promotional sweepstakes in the context of Texas lottery law.
A. Texas Lottery Law
*22 Under the Restoration Act, the Tribe may only engage in gaming that is not
"prohibited by the laws of the State of Texas." 25 U.S.C. s 1300g-6(a). Prior to
1991, section 47, article 3 of the Texas Constitution provided that "[t]he
Legislature shall pass laws prohibiting the establishment of lotteries and gift
enterprises in this State, as well as the sale of tickets in lotteries, gift
enterprises or other evasions involving the lottery principle, established or
existing in other States." Tex. Const. sec. 47, art. 3 (amended 1980) (emphasis
added); Verney v. Abbot, No. 03-05-00064-CV, 2006 WL 2082085, at *1 (Tex.App. July
28, 2006). In 1991, however, section 47 of article 3 was amended to provide that
"[t]he Legislature shall pass laws prohibiting lotteries and gift enterprises in
this State other than those authorized by Subsections (b), (d), and (e) of this
section." FN15 See Tex. Const. sec. 47, art. 3 (as amended 1991); Verney, 2006 WL
2082085, at *1. "Significantly, the portion denouncing the sale of tickets in
lotteries, gift enterprises or other evasions involving the lottery principle ...
did not survive the amendment process." Owens v. State, 19 S.W.3d 480, 484
(Tex.App.2000). Accordingly, "[t]he current version of Article III, section 47(a)
is substantially the same [as the pre-amended provision], except that as amended,
it permits certain lotteries." Id. The "multifarious issues of what is and is not
permitted by the 1991 amendment to section 47 of article III have yet to be
resolved." Verney, 2006 WL 2082085, at *2. "Rather, they remain the subject of
legislative debate and Attorney General opinions." Id.
FN15. Subsections (b), (d), and (e) permit charitable bingo, raffles, and a
state lottery. See Tex. Const. sec. 47, art. 3 (amended 1991). As no party
argues that the Tribe's current gaming operations fall within these
provisions, the Court does not address them.
"In its present form, the [Texas] Constitution does not define 'lottery.' "
Owens, 19 S.W.3d at 484. "Where, as here, a constitutional provision is not
self-executing, it is incumbent on the [Texas] Legislature to enact legislation to
implement public policy." Id. (citing City of Corpus Christi v. City of
Pleasanton, 154 Tex. 289, 276 S.W.2d 798, 803 (Tex.1955)).
Pursuant to this constitutional mandate, the Texas Legislature passed Texas
Penal Code s 47.03, making it an offense to set up or promote any "lottery." See
Tex. Penal Code Ann. s 47.03(a) (5). A "lottery" under Texas law is "any scheme or
procedure whereby one or more prizes are distributed by chance among persons who
have paid or promised consideration for a chance to win anything of value, whether
such scheme or procedure is called a pool, lottery, raffle, gift, gift enterprise,
sale, policy game, or some other name." Id. s 47.01(7). Thus, to fall under the
prohibition of the Texas Penal Code, a lottery must contain the elements of
chance, prize, and consideration. See id.; Jester v. State, 64 S.W.3d 553, 557
(Tex.2001).
The parties do not dispute that the prize and chance elements are present in
the Tribe's sweepstakes. See Pueblo Defs.' Mot. for Summ. J., ECF No. 468, at 15
("[T]here is no dispute that the sweepstakes offer prizes and employ games of
chance."); Oct. 6, 2014, Tr. 23-24, 83-84; see also May 6, 2014, Report 15, 19,
21. The parties dispute, however, whether the Tribe's sweepstakes contain the
element of consideration. See Oct. 7, 2014, Tr. 230, 239. Furthermore, the Court
finds certain evidence regarding the creation of the sweepstakes' pools to be of
concern in relation to the element of chance. Accordingly, the Court addresses the
elements of consideration and chance below.
1. Promotional sweepstakes and the element of consideration
*23 "Even before the definition of lottery was written into the statutes, Texas
courts, resorting to the popular meaning of the term, identified three elements in
a lottery: prizes, chance, and direct or indirect consideration." Jester, 64
S.W.3d at 557 (citing Cole v. State, 133 Tex.Crim. 548, 112 S.W.2d 725
(Tex.Crim.App.1937)). "The current Penal Code ... does not substantively vary from
that definition, and the ways in which the gambling statutes have changed does not
affect the requirement of consideration." Id.
Long standing judicial precedent clearly establishes two principles regarding
the element of consideration in relation to sweepstakes. First, consideration is
absent from a sweepstakes where no participant provides any form of payment to
enter the sweepstakes. See Griffith Amusement Co. v. Morgan, 98 S.W.2d 844,
844-45, 847 (Tex.Civ.App.1936); Brice v. State, 156 Tex.Crim. 372, 242 S.W.2d 433,
435 (Tex.Crim.App.1951). Second, "consideration [is present] if sweepstakes
participants must pay money for the privilege of playing or if participants who
pay have better chances of winning than non-paying participants." United States v.
Davis, 690 F.3d 330, 337 (5th Cir.2012) (emphasis added) (citing Cole, 112 S.W.2d
at 727; Brice, 242 S.W.2d at 434).
The instant Case presents facts which fall somewhere between this guidance. On
the one hand, participants in the Tribe's sweepstakes are not required to make a
donation in order to play. Certified software reports from BMM Test Labs confirm
that participants can play the sweepstakes with free entry vouchers. See BMM
Report 35(AMS), 48 (Winter Sky), 59 (XCite), 114 (Blue Stone); see also Oct. 6,
2014, Tr. 260. Further, it is clear that participants have, in fact, obtained free
entry vouchers from the Tribe over a million and a half times since 2012. See
Defs.' Free Entry Appls., Defs.' Ex. H; see also No Donation Necessary Forms from
Entertainment Centers from March 13 through 19, 2012, Defs.' Ex. D; No Donation
Necessary Forms from Entertainment Centers from May 7 through 9, 2012, Defs.' Ex.
E; No Donation Necessary Forms from Entertainment Centers from July 9, 2013,
Defs.' Ex. F; No Donation Necessary Forms from Entertainment Centers from May 16,
2014, Defs.' Ex. G; Oct. 6, 2014, Tr. 146 (400 to 500 participants a day request
free entries).
It is, however, likewise beyond dispute that at least some of the Tribe's
sweepstakes participants do make a payment in the form of a donation to the Tribe
in connection with the sweepstakes. See Oct. 6, 2014, Tr. 120-21 ( Tribe received
approximately $30,000,000.00 in donations from the sweepstakes in 2012 and 2013);
Oct. 7, 2014, Tr. 54 ("[T]otal daily average value of the donations [made through
the sweepstakes] is $552,614.24."), 156 (majority of $7,600,000.00 net increase in
Tribe's governmental assets due to donations received through sweepstakes).
Accordingly, in order for the Court to be able to determine whether any
sweepstakes proposal is permitted under Texas law, the Pueblo Defendants'
proposal, and any response from Texas, must address the legal issues set out in
the following, and any other, pertinent law.
a. Case law
*24 After an extensive review of case law discussing lotteries and other games
of chance in Texas, the Court has identified the following precedent as
controlling on the issue of the legality of promotional sweepstakes.
In State v. Socony Mobil Oil Co., Inc., 386 S.W.2d 169 (Tex.App.1964), the
Texas Court of Appeals reviewed a "cooperative advertising" scheme between Socony
Mobil Oil Co., Inc. ("Mobil") and Idea Research and Development Corporation
("Idea"). Id. at 170-71. Under the terms of the cooperative advertising agreement,
dealer-agents of Mobil were instructed to "give [bingo] cards to anyone that asked
for them." Id. at 171. Though participants "[were] not required to buy anything at
the filling station [in order to receive a card,] ... the cards [could] be given
to customers who [did] make a purchase." Id. at 172. The evidence did not show
what proportion of the bingo cards were given to customers and what proportion
were given to non-customers. Id. Nonetheless, the court expressly recognized that
the cards "[were] intended to increase the sale of Mobil products ... [and] had
that effect." Id. Despite this evidence indicating that the bingo cards tempted at
least some participants to patronize the dealer-agents' premises, the Court of
Appeals held that where "a person can receive a [bingo] card and win a prize ...
without paying one cent for the privilege of participating," the promotion as
conducted was not a lottery. Id. at 173.
More recently, in Jester v. State, 64 S.W.3d 553 (Tex.2001), the Supreme Court
of Texas considered the sufficiency of the evidence to convict a cafe owner who
offered a sweepstakes played on electronic devices at his store. Like the bingo
scheme in Socony Mobil, the sweepstakes in Jester offered participants the
opportunity to receive plays without any purchase necessary. Id. at 555.
Participants, however, also received entries in connection with the purchase of
prepaid telephone cards. Id. at 554-55. Specifically, "[participants] insert[ed] a
minimum of one dollar into [a] machine," and "[f]or each dollar inserted, the
machine dispense[d] one prepaid telephone card." Id. at 554. "In addition to
receiving the telephone card, the machine [also gave] the player 100 credits [to
play the sweepstakes] for each dollar inserted." Id. at 555. In analyzing whether
consideration was present in this sweepstakes, the Supreme Court of Texas held
that "the decision turn [ed] on whether the sweepstakes was intended to promote
the sale of telephone cards or whether the telephone cards were there as an
attempt to legitimize an illegal gambling device." Id. at 558.
In United States v. Davis, 690 F.3d 330 (5th Cir.2012), the Fifth Circuit
likewise implicitly recognized that receipt of sweepstakes entries in connection
with the purchase of a product would not necessarily result in the presence of
consideration. In Davis, participants could enter a sweepstakes either by (1)
purchasing Internet time at one of the defendants' cafes, (2) requesting free
entries in person, or (3) requesting free entries through the mail. Id. at 333.
Though the Davis court noted that "the consideration element in the Texas gambling
statutes can be fulfilled without an explicit exchange of money for the
opportunity to participate in a sweepstakes," id. at 339, the court, citing
Jester, again focused its analysis on "whether the sweepstakes was intended to
promote the sale of [Internet time] or whether the [Internet time] [was] there as
an attempt to legitimize an illegal gambling device." Id. at 338 (citing Jester,
64 S.W.3d at 558).
*25 Thus, in both Jester and Davis, the courts examined sweepstakes schemes in
which "free" entries were provided in connection with the purchase of a product.
See Jester, 64 S.W.3d at 554-55; Davis, 690 F.3d at 333. The Court finds it
significant that neither the Jester nor the Davis courts held that consideration
was necessarily present where participants received entries to the sweepstakes in
connection with the purchase of a product. Instead, both courts focused their
analysis on whether the sweepstakes was intended to promote the sale of a
legitimate product or whether the presence of the product was mere subterfuge to
promote play in the sweepstakes. See Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d
at 338-39. The inference drawn from these cases, therefore, is that at least in
certain circumstances, a promotion may provide entries to a sweepstakes in
connection with the purchase of a product without supplying the necessary
consideration to bring that sweepstakes within the meaning of an illegal lottery
under the Texas gaming statutes.
In 2011, a Texas state district court held that a charitable sweepstakes
offered by Post 83 FN16 of the American Legion was not illegal gambling under
Texas law. In Knebel, plaintiffs provided entry to a charitable sweepstakes to
participants who (1) purchased an alcoholic beverage, (2) made a donation, or (3)
requested entries without making a donation or purchase. See Knebel, Cause No.
D-1-GN-10-003084 at 2. The Knebel court held that such a sweepstakes could be
permissible under Texas law if it retained a number of characteristics,
specifically: (a) a finite number of predetermined entry results; (b) results
drawn from the same fixed pool of finite entries; (c) an alternative means of free
entry; (d) equal treatment of free entrants; (e) electronic game graphics that
could not change the content of the results; (f) opening of more than one entry
could not increase or decrease or otherwise change the prize associated with an
entry; and (g) the software had to contain security to prevent tampering. Id. at
2-3.
FN16. Although listed as Post 82 in Knebel' s case heading, plaintiff in the
case was in fact Post 83. See Knebel, Cause No. D-1-GN-10-003084 at 1.
i. Persuasive value of Knebel
The Pueblo Defendants rely heavily on the Knebel decision, arguing that there
is no violation of Texas law in the present Case if the Tribe's sweepstakes
conform to the criteria approved in Knebel. Oct. 7, 2014, Tr. 244. Texas responds
that the Knebel requirements cannot purge the illegality of the Tribe's
sweepstakes because the opinion is of little precedential value and is
inconsistent with the opinions of higher Texas courts. Id. at 248-49.
State trial court decisions are treated with less deference than state
appellate courts. See Hampton Co. Nat. Sur., LLC v. Tunica Cnty., Miss., 543 F.3d
221, 226 (5th Cir.2008) (citing 19 C. Wright & A. Miller, Federal Practice and
Procedure s 4507 (2008)). Nonetheless, trial court decisions "may be 'attributed
some weight' on interpreting state law," id. (citing Comm'r of Internal Revenue v.
Bosch's Estate, 387 U.S. 456, 465, 87 S.Ct. 1776, 18 L.Ed.2d 886 (1967)), and are
"entitled to consideration as an indication of what the state law is, but in and
of themselves ... are not controlling on the federal courts if they are not
regarded as precedents within the state itself." Id.
*26 The Court recognizes that the decision in Knebel lacks citation to legal
authority in support of its conclusions of law. Nor has Knebel been relied on by
subsequent Texas courts as binding precedent within Texas. Indeed, the opinion has
been partially overturned to the extent that the Texas Court of Appeals reversed
the trial court's grant of summary judgment in favor of the plaintiff. See TABC v.
Am. Legion Knebel Post 82, No. 03-11-00703-CV, 2014 WL 2094195, at *7 (Tex.App.
May 16, 2014) (finding material issue of fact existed as to whether participants
were required to pay to enter the sweepstakes). Accordingly, Knebel is not
controlling, see Hampton, 543 F.3d at 226, and, to the extent the Pueblo
Defendants assert that conformance with the Knebel factors necessitates finding no
violation of Texas law, the Court rejects the Pueblo Defendants' argument.
Nonetheless, no Texas authority, other than Knebel, has definitively ruled on
the possible legality of charitable sweepstakes as presented in this case.
Further, the "multifarious issues of what is and is not permitted by the 1991
amendment" to the Texas constitution's gaming prohibitions have not been resolved.
Verney, 2006 WL 2082085, at *2; see also G2, Inc. v. Midwest Gaming, Inc., 485
F.Supp.2d 757, 766 (W.D.Tex.2007) (recognizing issues surrounding charitable
sweepstakes as "unsettled" under Texas law). Therefore, in light of the absence of
any superior authority on the issue of charitable sweepstakes in Texas, the Court
finds the Knebel decision to carry at least "some weight" to the extent it is not
inconsistent with higher judicial authority. See Hampton, 543 F.3d at 226.
b. Texas Attorney General opinions
Texas has relied on numerous Texas Attorney General opinions to support its
argument that the Tribe's current sweepstakes constitute illegal lotteries under
the Texas Penal Code. For the following reasons, the Court finds Texas's reliance
on the cited Attorney General opinions unpersuasive.
Attorney General opinions are "not binding on the judiciary." Coates v.
Brazoria Cnty. Tex., 919 F.Supp.2d 863, 870 (S.D.Tex.2013) (quoting Jones v.
Williams, 121 Tex. 94, 45 S.W.2d 130, 131 (Tex.1931)). Nonetheless, "[o]pinions of
the Attorney General are 'entitled to careful consideration by courts, and [are]
quite generally regarded as highly persuasive.' " Harris Cnty. Comm'rs Court et
al. v. Moore, 420 U.S. 77, 87 n. 10, 95 S.Ct. 870, 43 L.Ed.2d 32 (1975) (citing
Jones, 45 S.W.2d at 131); see also Swearingen v. Owens-Corning Fiberglas Corp.,
968 F.2d 559, 564 (5th Cir.1992). An opinion of the Attorney General, however,
"may be given close scrutiny" if "it appears to be in direct conflict with several
earlier opinions of the Attorney General." Harris Cnty., 420 U.S. at 87 n. 10.
As early as 1967, the Texas Attorney General recognized that companies could
conduct promotional sweepstakes connected to the sale of a product without running
afoul of the Texas Penal Code. In Opinion M-67, the Attorney General reviewed a
promotional sweepstakes offered by a soft drink bottling company. See Tex. Att'y
Gen. Op. No. M-67 at 1-2 (1967). Under the promotion, certain bottle caps were
printed with pictures of prizes. Id. at 1. Customers who found these pictures
under their drinks' caps could turn the cap in for the specified prize. Id. In
conjunction with this paid means of entry, the sweepstakes' advertisements clearly
stated that customers could receive free bottle crowns from a variety of sources.
Id. According to the Attorney General, "it seem [ed] clear that any such program
providing that anyone may participate without the necessity of a purchase, and
given reasonable opportunity to register or otherwise become eligible at each of
the participating stores, [did] not constitute a lottery." Id. at 2.
*27 In 1997, the Attorney General again confirmed that a promotional
sweepstakes that provides customers with sweepstakes entries upon the purchase of
a legitimate product is not necessarily prohibited under Texas gaming laws. See
Tex. Att'y Gen. Op. No. LO-97-008, 1997 WL 113966 (1997). The sweepstakes scheme
at issue involved the sale of "Lucky Shamrock" phone cards. See id. at *1. "In
addition to receiving the long distance credit, and for no additional charge, the
purchaser of the phone card [received an entry] to participate in the [Lucky
Shamrock] sweepstakes promotion." Id.
After finding both prize and chance present in the sweepstakes, id. at *2, the
Attorney General opined that whether the sweepstakes constituted an illegal
lottery "center[ed] on whether a purchaser of the [product] furnishe[d] any amount
of the ... consideration for the privilege of participating in the sweepstakes."
Id. If a purchase "is the sole means of entering the sweepstakes ... a court will
attribute a portion of the [amount paid] to consideration for participation in the
sweepstakes." Id. However, the Attorney General concluded, a sweepstakes may
"circumvent this result" if it "provide[s] an 'alternative' means of entering the
contest that does not require the payment of consideration, and it [treats]
'customers' and 'non-customers' alike." Id. (citing Socony Mobil, 386 S.W.2d at
172-73).
Despite the above cited opinions, Texas argues that the Tribe's sweepstakes are
illegal lotteries because four Texas Attorney General opinions, GA-0527 from 2007,
JM-482 from 2002, JM-513 from 1986, and H-820 from 1976, stand for the proposition
that the "elimination of consideration from some players who play for free does
not remove the element of consideration from all others who pay to play." See
Pl.'s Hr'g Compliance 26, 30.
As an initial matter, the Court notes that Attorney General Opinion GA-0527
addressed the issue of whether "[a] stored-value card enabling the purchase of
merchandise is a medium of exchange within the definition of cash" under Texas
Penal Code s 47.01(4)(B). See Tex. Att'y Gen. Op. No. GA-0527, 2007 WL 709285 at
*3 (2007). At no point in the Opinion did the Attorney General consider free or
paid entries to a sweepstakes or their effect on the element of consideration. The
Court therefore finds Opinion GA-0527 irrelevant to the legality of the Tribe's
gaming operations.
Texas's reliance on Opinion H-820 is similarly misplaced. In Opinion H-820, the
Attorney General was asked to determine if six separate gaming proposals would
constitute illegal lotteries. See Tex. Att'y Gen. Op. No. H-820 (1976). In the
first proposal, the sweepstakes sponsor would sell tickets to a drawing for
certain prizes. Id. at 3. The second involved the sponsor giving tickets to a
drawing to persons who made a donation to a charity. Id. In the third, the sponsor
would grant customers who bought admission tickets an automatic entry to a
drawing. Id. The fourth proposal involved selling tickets to game booths at a
carnival, with each ticket granting the purchaser a chance to win a door prize. Id
at 4. The fifth entitled each person who purchased a commodity a chance to win a
door prize. Id. Finally, the sixth proposal revolved around selling memberships to
a club, with members being eligible for a free prize drawing. Id. Importantly,
however, none of the schemes considered in Opinion H-820 offered a free means of
entry, as is the case with the sweepstakes at issue here. Accordingly, the Court
finds Opinion H-820 factually distinguishable and therefore unpersuasive in the
context of the Tribe's gaming operations.
*28 In Opinion JM-513, the Attorney General concluded that a charitable
sweepstakes would constitute an illegal lottery "if a nonprofit organization gives
away artistic paintings to holders of numbered tickets, where the winners are
chosen at random, and where each person receiving a numbered ticket is asked to
make a donation for the purchase of art collections." See Tex. Att'y Gen. Op.
JM-513, 1986 WL 219359, at *1 (1986). Texas is correct that in Opinion JM-513, the
Attorney General declared that such an arrangement would constitute an illegal
lottery because, among other reasons, "the fact that one person receives a chance
to win for free while another person 'pays' for the chance does not negate the
fact that someone in the contest has paid consideration for the chance to win."
Id. at *2.
The Attorney General's conclusion in Opinion JM-513 may well be persuasive in
the proper context. That is, where it is established that at least one person has
paid for the chance to win a prize. This Court, however, is faced with a different
issue, that is, whether the Tribe's participants are in fact paying for the chance
to win a prize, as opposed to paying for a Tribal product. Where, as here, the
determination turns on whether a product is legitimate such that any consideration
paid is for the product and not for the sweepstakes, Opinion JM-513 offers little
guidance. Accordingly, the Court finds Opinion JM-513 unpersuasive in the present
context.
Furthermore, even assuming that Opinion JM-513 was relevant, the Attorney
General gives no explanation why the sweepstakes in Opinion JM-513, issued in
1986, was less legitimate than the sweepstakes considered legal in Opinion M-67,
issued in 1967. Id. at *1-2. Nor does the Attorney General's subsequent Opinion
LO-97-008, issued in 1997, explain why that sweepstakes could be legal, as opposed
to the sweepstakes presented in Opinion JM-513, which the Attorney General
declared illegal without similar analysis in 1986. See Tex. Att'y Gen. Op. No.
LO-97-008, 1997 WL 113966, at *2-5. Upon review of the three opinions, it appears
that the only way to reconcile the differing conclusions is in the Attorney
General's treatment of a payment made in connection with a charitable sweepstakes
as opposed to a payment made in connection with a for-profit sweepstakes. In
Opinion JM-513, the sweepstakes sought to promote donations to a charitable
organization. See Tex. Att'y Gen. Op. JM-513, 1986 WL 219359, at *1. In both
Opinion M-67 and Opinion LO-97-008, on the other hand, for-profit companies
employed a sweepstakes to promote the sale of their products. See Tex. Att'y Gen.
Op. No. LO-97-008, 1997 WL 113966, at *1 (sweepstakes promoting sale of phone
cards); Tex. Att'y Gen. Op. No. M-67 at 1 (sweepstakes promoting sale of soft
drinks). It appears that, where the sweepstakes promoted a payment in connection
with a charitable sweepstakes, the Attorney General equated any payments in the
form of donations to a direct cash payment made to play the sweepstakes. See Tex.
Att'y Gen. Op. JM-513, 1986 WL 219359, at *2 ("[Charitable sweepstakes] would
constitute a 'lottery' unless no one actually made a donation."). On the other
hand, where the sweepstakes promoted a payment to a for-profit company, the
Attorney General accepted that participants' payments could be made to obtain the
promoted product and not to play the sweepstakes. See Tex. Att'y Gen. Op. No.
LO-97-008, 1997 WL 113966, at *2 (payment not necessarily consideration where
sweepstakes promoted the sale of phone cards); Tex. Att'y Gen. Op. No. M-67 at 2
(payment not necessarily consideration where sweepstakes promoted the sale of soft
drinks). In no opinion does the Attorney General explain why this is so.
*29 As both the Jester and Davis courts make clear, if entries to a sweepstakes
are granted in connection with the purchase of a product, the product must be the
"primary subject of the transaction," otherwise the payment is made to purchase an
entry to win a prize, and the so-called sweepstakes is, in actuality, an illegal
lottery. See Jester, 64 S.W.3d at 559; Davis, 690 F.3d at 339-40; see also Tex.
Att'y Gen. Op. No. LO-97-008, 1997 WL 113966, at *2 (presence of consideration
"centers on whether a purchaser of the [product] furnishes any amount of the ...
consideration for the privilege of participating in the sweepstakes"). Thus, while
it is no violation of law to issue sweepstakes entries to customers purchasing a
product, Opinion JM-513 is consistent with case law that a customer cannot "pay to
play" the sweepstakes without violating Texas law. See Jester, 64 S.W.3d at 559;
Davis, 690 F.3d at 339-40; Tex. Att'y Gen. Op. No. LO-97-008, 1997 WL 113966, at
*2; Tex. Att'y Gen. Op. JM-513, 1986 WL 219359, at *2. Put another way, for a
sweepstakes to be legal in the presence of an exchange of payment, it appears that
the payment must be made for a non-gaming product; the product cannot be a sham
existing to disguise what is actually a payment to play the game. See Jester, 64
S.W.3d at 55859; Davis, 690 F.3d at 338-39.
The Court has found no other legal basis, however, supporting the Attorney
General's assumption in Opinion JM-513 that a participant making a donation to a
charitable organization is necessarily paying to play the sweepstakes. Nor does
Opinion JM-513 cite to any legal authority, or give any explanation, for treating
the analysis different when a sweepstakes seeks to promote a charitable product.
Accordingly, because the Court has found no basis for Opinion JM-513's conclusion,
and because it conflicts, without explanation, with both prior and subsequent
Attorney General opinions on the issue of consideration in promotional
sweepstakes, the Court rejects the Attorney General's unsupported assumption in
JM-513 as unpersuasive. See Harris Cnty., 420 U.S. at 87 n. 10.
For substantially the same reasons, Opinion JC-482 is likewise unpersuasive. In
Opinion JC-482, a non-profit organization inquired whether it would constitute an
illegal lottery if participants could, without making any donation, enter a weekly
sweepstakes drawing by filling out a numbered ticket made available at a
particular sweepstakes location. See Tex. Att'y Gen. Op. No. JC-482, 2002 WL
463420, at *1 (2002). Although not required in order to obtain a ticket, a
participant could donate money to the sweepstakes and become a member of the
corporation. Id. In Opinion JC-482, the Attorney General again stated that such a
sweepstakes would constitute an illegal lottery because "the fact that one person
receives a chance to win for free while another person 'pays' for the chance does
not negate the fact that someone in the contest has paid consideration for the
chance to win." Id. at *3. As discussed above, this proposition in of itself is
sensible, and finds support in the case law. See Jester, 64 S.W.3d at 558-59;
Davis, 690 F.3d at 338-39. Nonetheless, once again, it offers little guidance to
the Court here because it assumes that a participant has paid for the chance to
win and makes no analysis of the legitimacy of any product. Accordingly, Opinion
JC-482 is, like JM-513, wholly unpersuasive in the present context because it
assumes, without any explanation, that a payment made in the form of a donation is
the functional equivalent of consideration paid to play the sweepstakes.
*30 Finally, it is not clear that the Tribe's status as a federally-recognized
Native American tribe is even comparable to the charitable organizations or
other non-profit entities at issue in these Attorney General opinions.
Consequently, Opinions JC-482 and JM-513 may be inapposite for this additional
reason.
B. Promotional Sweepstakes Are Not Per Se Illegal in Texas
Accordingly, opinions from the Texas courts, Fifth Circuit and Texas Attorney
General support the proposition that a sweepstakes will not necessarily constitute
an illegal lottery when a means of entry is connected to the purchase of a
legitimate product. See Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at 338-40;
Socony Mobil, 386 S.W.2d at 173-74; Tex. Att'y Gen. Op. No. LO-97-008, 1997 WL
113966, at *2-3; Tex. Att'y Gen. Op. No. M-67 at 2. However, a promotional
sweepstakes must also offer an alternative means of free entry and the primary
subject of the transaction must be the promoted product and not the sweepstakes
game itself. See Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at 338-40; Socony
Mobil, 386 S.W.2d at 173-74; Tex. Att'y Gen. Op. No. LO-97-008, 1997 WL 113966, at
*2-3; Tex. Att'y Gen. Op. No. M-67 at 2.
Therefore, any determination of the presence of consideration in the Pueblo
Defendants' sweepstakes proposal should turn on whether the sweepstakes is
intended to promote a Tribal product, or whether the product is mere subterfuge to
legitimize consideration paid to participate in the Tribe's sweepstakes. See
Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at 338-40; Tex. Att'y Gen. Op. No.
LO-97-008, 1997 WL 113966, at *2-3. To be legal, the product promoted by the
Tribe's sweepstakes must be the "primary subject of the transaction." See Jester,
64 S.W.3d at 558-59; Davis, 690 F.3d at 338-40; see also Att'y Gen. Op. No.
LO-97-008, 1997 WL 113966, at *2 (presence of consideration "centers on whether a
purchaser of the [product] furnishes any amount of the ... consideration for the
privilege of participating in the sweepstakes").
Furthermore, the Tribe "must provide an 'alternative' means of entering the
contest that does not require the payment of consideration, and it must treat
'customers' and 'non-customers' alike." See Tex. Att'y Gen. Op. No. LO-97-008,
1997 WL 113966, at *2 (citing Socony Mobil, 386 S.W.3d at 172-73); accord Davis,
690 F.3d at 337 ("[C]onsideration [is present] if ... participants who pay have
better chances of winning than non-paying participants." (citing Cole, 112 S.W.2d
at 727, 730; Brice, 242 S.W.2d at 434)); Oct. 6, 2014, Tr. 268-69 (Dr. Robicheaux
testifying that "companies and non-profits cannot require that any person who
wants to participate in the sweepstakes has to buy anything"). "[T]he mere
pretense of free prizes, designed to evade the law, [will] not negate the element
of consideration." Jester, 64 S.W.3d at 558 (citing Brice, 242 S.W.2d at 434).
*31 Because the Court allows the Pueblo Defendants the opportunity to submit a
sweepstakes proposal within sixty days of this Order, the Court raises the
following issues of concern regarding the Tribe's current sweepstakes in light of
the above cited law.
1. The Tribe's product
"In order to avoid characterization as a 'lottery,' a promotional scheme must
... involve the legitimate sale of a product." Tex. Att'y Gen. Op. No. LO-97-008,
1997 WL 113966, at *4; see also Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at
338-40. "If a product of little or no value is being sold in conjunction with a
sweepstakes ticket, the consideration may be deemed to have been paid for the
privilege of entering the sweepstakes." Tex. Att'y Gen. Op. No. LO-97008, 1997 WL
113966, at *4; see also Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at 338-40.
The Court notes that the Pueblo Defendants have not clearly articulated what
product they believe the Tribe's sweepstakes promote.
The Pueblo Defendants appear to argue that a charitable sweepstakes need not
promote a product. Oct. 7, 2014, Tr. 238-39 ("[T]he issue of product and what
people receive from that is really separate from the issue of whether people can
donate."); Defs.' Hr'g Compliance 3. The reasoning behind the Pueblo Defendants'
argument is most clearly articulated in the Pueblo Defendants' pre-hearing
briefing:
A private party cannot accept donations. So a private party must sell a product
to offer a sweepstakes. Because the private party cannot accept donations, there
must be something more than a "sham" product. But only if for private gain.
Knebel imposes no such restriction on nonprofit donations which by definition
are of value and which by definition are legitimate if the nonprofit is
legitimate.
Defs.' Hr'g Compliance 3.
Contrary to the Pueblo Defendants' assertion, Knebel does not stand for the
proposition that a charitable sweepstakes need not promote a product. While it is
true the Knebel court held that a charitable sweepstakes was not "per se
gambling," Knebel, Cause No. D-1-GN-10-003084 at 3, at no point in the opinion
does the court hold that no product is required in a charitable sweepstakes.
Indeed, as discussed above, Knebel is short and devoid of substantive analysis.
Among the issues that the Knebel court fails to discuss is the product promoted by
the sweepstakes and whether that product is the primary subject of the
transaction. See id. at 1-3. The Knebel opinion is silent on the issue of the
sweepstake's product, and therefore does not stand, either one way or the other,
as persuasive authority that no product is needed in connection with a charitable
sweepstakes. Nor do the Pueblo Defendants cite to any other authority for their
assertion that a product need not be attached to a charitable sweepstakes. As a
result, the Court rejects the Pueblo Defendants' position on this point.
*32 The Court further notes that the Pueblo Defendants have presented argument
that the donation itself is the product that the sweepstakes are designed to
promote. For instance, the Pueblo Defendants have stated that participants receive
"complimentary sweepstakes entries as a courtesy for making a charitable donation
to the [ Tribe]." Pueblo Defs.' Mot. for Summ. J. 11; see also Oct. 7, 2014, Tr.
44 (Mr. Kerns affirming that the sweepstakes "are run to solicit donations" for
the Tribe); Oct. 7, 2014, Tr. 236 ( Tribe stating that it tells participants, "If
you give us a donation, you can participate in our sweepstakes"). This
characterization of the donations, however, conflates the payment to the Tribe
with the product the sweepstakes are designed to promote. After an exhaustive
search, the Court has found no authority equating a donation to a product in such
a manner. Indeed, Texas law appears to make no distinction between charitable
payments made to play a sweepstakes and payments made to a for-profit entity for
the same purpose. See State v. Amvets Post No. 80 et al., 541 S.W.2d 481, 483
(Tex.Civ.App.1976) ( "A gain is no less a gain if it is contributed to charity.
Consequently, a lottery is no less a lottery if the proceeds are used for
charitable purposes."). The "primary subject of the transaction," therefore,
cannot be the payment made to enter the sweepstakes, whether charitable or not.
See Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at 339-40; Amvets, 541 S.W.2d at
483. Accordingly, in submitting any proposal to this Court, the Pueblo Defendants
must show that the Tribe's sweepstakes promote a product separate from the
donations made by participants.FN17
FN17. The Court notes that the Pueblo Defendants' expert witness, Dr.
Robicheaux, suggested that the Tribe's product is entertainment. See Oct. 6,
2014, Tr. 282. The Court does not believe that the entertainment of playing
the sweepstakes can serve as the "primary subject of the transaction"
because the product must be sufficiently distinct from the sweepstakes for
the Court to find that the payment was not given for the purpose of securing
entry into the sweepstakes. See Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d
at 339-40; Tex. Att'y Gen. Op. No. LO-97-008, 1997 WL 113966, at *2.
The Pueblo Defendants have additionally presented evidence regarding the
services supported by the donations made to the Tribe. See Oct. 7, 2014, Tr.
164-66, 181-82, 199-205. It is unclear to the Court whether the Pueblo Defendants
contend that these services are a legitimate product promoted by the sweepstakes.
Therefore, to the extent that the Pueblo Defendants believe that the services
themselves either are the promoted product, or substantially legitimize some
product, the Pueblo Defendants shall brief that assertion in any proposal
submitted to the Court.
Furthermore, in any proposal, the Pueblo Defendants must do more than merely
identify a bona fide product. For the Tribe's sweepstakes to be considered legal
under Texas law, the Pueblo Defendants must also establish that the Tribe's
product is valued as the "primary subject of the transaction," and not "mere
subterfuge" to promote an illegal lottery. See Jester, 64 S.W.3d at 559; Davis,
690 F.3d at 338-40. In making this evaluation, decisions from the Supreme Court of
Texas and the Fifth Circuit have measured the product's value from two
perspectives: that of the sweepstakes participants, and the sweepstakes sponsor.
See Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at 335, 339.
*33 In Jester, the court held a sweepstakes could be found to constitute an
illegal lottery where there was substantial evidence showing that neither the
participants, nor the vendors, valued the product connected with the participants'
payment. See Jester, 64 S.W.3d at 558-59. With respect to the sweepstakes
participants, the court's conclusion was based on the fact that (1) participants
purchased the product despite the cost exceeding market value, (2) the product
often was not functional, and (3) some participants did not even know what product
they were purchasing. Id. at 558. Further, as to the sweepstakes sponsors, the
court noted that (1) employees were aware customers did not value the product, (2)
there were no signs on the outside of the building advertising the product, and
(3) no employee made a sales pitch promoting the purchase of the product. Id.
Similarly, in Davis, the Fifth Circuit found sufficient evidence to conclude
that the product associated with the sweepstakes was not the primary subject of
the transaction where there was strong evidence that neither the participants nor
the sweepstakes sponsors valued the product connected to the sweepstakes. Davis,
690 F.3d at 335, 339. For instance, customers' receipts revealed that over 300,000
minutes of Internet time remained after sweepstakes gaming, thus indicating that
customers did not use the Internet time they purchased. Id. at 399. Indeed,
"customers actually used 'a little less' than $100 worth of Internet time each
week." Id. at 335. "That amount was dwarfed by the $27,770 in Internet time sales
during a representative week." Id. This evidence was further bolstered by
testimony that all of the customers in the Internet cafe were playing the
sweepstakes, and none were actually using the Internet. Id. at 339. There was also
evidence casting doubt upon the sweepstakes sponsor's legitimate interest in the
product sold. For example, the manager of the cafe stated he was "not worried
about" the income from non-sweepstakes services. Id.
Thus, in any sweepstakes proposal, the Pueblo Defendants should explain in
detail what product the Tribe's sweepstakes are designed to promote, and should
show, through citation to evidence and law, that the product promoted is the
"primary subject of the transaction" for both the Tribe and its sweepstakes
participants. See Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at 338-40.
a. Casino-like atmosphere
The Fifth Circuit has indicated that a casino-like atmosphere can represent
"[f]urther evidence that [a] defendant['s] true purpose" is to promote the playing
of a sweepstakes and not the sale of a product. Davis, 690 F.3d at 339. The Texas
Attorney General, likewise, has indicated that the "nature of the appeal which the
business makes to secure the patronage of its customers" is of relevance in
determining whether a promotional scheme constitutes a lottery. Tex. Att'y Gen.
Op. No. LO-97-008, 1997 WL 113966, at *4 (citing G.A. Carney, Ltd. v. Brzeczek,
117 Ill.App.3d 478, 72 Ill.Dec. 881, 453 N.E.2d 756, 760 (Ill.App.1983)).
*34 In light of the above, the Court finds troubling the Tribe's clear intent
to create a casino-like business model. The undisputed evidence at the Hearing
established that the Entertainment Centers are lined with "rows and rows" of
sweepstakes Kiosks that look similar to slot machines. Oct. 6, 2014, Tr. 21-22,
84; May 6, 2014, Report 9 (photo of row of Kiosks), 37 (same), 45 (same).
Specifically, Speaking Rock contains close to 1,000 such machines, while Socorro
contains "close to 400." Oct. 6, 2014, Tr. 85. Further, the Entertainment Centers
are filled with the sounds of bells and whistles emitted from these Kiosks. Id. at
59-60, 72 Ill.Dec. 881, 453 N.E.2d 756. There is also at least some evidence that
the Entertainment Centers contain low lighting and offer free food and drinks to
participants engaged with the Kiosks. Id. at 26, 50, 286-87, 72 Ill.Dec. 881, 453
N.E.2d 756.
It is additionally indisputable that the Kiosks are designed to look and
function similar to slot machines. The Kiosks are "upright cabinets with two video
displays, a bill acceptor and a printer." Oct. 7, 2014, Tr. 115. When a
participant makes a donation, the Kiosk allows the participant to choose a game
theme resembling roulette, black jack, poker, or other common casino games. Oct.
6, 2014, Tr. 59-60, 258. The Kiosks further make distinctive sounds, mimicking
bells, whistles, and coins falling into a tray whenever a participant pushes the
Kiosks' buttons. Id. at 59-60, 84, 72 Ill.Dec. 881, 453 N.E.2d 756. Indeed, the
Kiosks' simulated gaming displays are "designed to create the look and the feel of
casino-like games." Oct. 7, 2014, Tr. 133; see also May 6, 2014, Report 5
(indicating officers played Kiosks named "Busting Vegas" and "Lucky Penguins").
Accordingly, it is beyond dispute that the Entertainment Centers are designed to
look and feel like casinos.
The Court accordingly is highly concerned that the casino-like business model
indicates that the "true purpose" of the Entertainment Centers is to "create a
place where people [are] comfortable staying for a long time ... and playing the
sweepstakes," and not to promote a tribal product. See Davis, 690 F.3d at 339.
Likewise, the Court is concerned that the "true purpose" for participants in
patronizing the Entertainment Centers is the chance to win an uncertain prize, not
to support the Tribe's product. See id. The Pueblo Defendants shall, therefore,
address these concerns in any sweepstakes proposal submitted to the Court.
2. Finite pool of predetermined results
At the Hearing, the Pueblo Defendants presented substantial evidence regarding
the Tribe's sweepstakes' conformance to the Knebel court's requirement that a
sweepstakes have a finite number of predetermined entries. See Oct. 6, 2014, Tr.
227-36; Oct. 7, 2014, Tr. 13-16, 19-20, 121-23, 126-27; see also BMM Report
33(AMS), 48 (Winter Sky), 60 (XCite), 115 (Blue Stone). Neither the Knebel court,
nor the parties, however, cite to any other Texas legal authority that sets out
this requirement.
*35 Upon review of Texas and federal law, it appears that statutory
requirements regarding finite and predetermined entries in sweepstakes have been
enacted for the purpose of consumer protection. The Texas Sweepstakes Act, for
instance, prohibits the publication of sweepstakes rules that "do not uniquely
identify the prizes" to be awarded. See Tex. Bus. & Comm.Code s 622.106. The
Deceptive Mail Prevention and Enforcement Act likewise requires disclosure of "the
quantity, estimated retail value, and nature of each prize" associated with a
sweepstakes conducted through the mail. See 39 U.S.C. s 3001(k)(3)(A)(V)(bb).
Knebel as well, provides "some weight" that Texas law would not necessarily
prohibit a charitable sweepstakes that contained, among other factors, a finite
set of predetermined entries. See Hampton, 543 F.3d at 226; Knebel, Cause No.
D-1-GN-10-003084, at 2. Expert testimony at the Hearing further indicated that
promotional sweepstakes across the country generally contain predetermined prizes
and entries. See Oct. 6, 2014, Tr. 269; see also, e.g., Md.Code Ann., Comm. Law s
13305(g); Colo.Rev.Stat. Ann. s 6-1-803(6)(c).
The Court is concerned that the Tribe's sweepstakes, as operated, may not in
practice consist of a finite pool of predetermined prizes. It is true that the BMM
Report certified that the Tribe's sweepstakes pools contain finite sets of
predetermined results. See BMM Report 33(AMS), 48 (Winter Sky), 60 (XCite); Oct.
7, 2014, Tr. 13 (Blue Stone). It is also true that the sweepstakes pools expire
upon a certain date. See BMM Report 16 (Blue Stone), 35(AMS), 61 (XCite), 74
(Winter Sky). Nonetheless, if the entries in a pool are exhausted prior to the
termination date, the Server automatically creates a new, identical pool of
entries. See id. at 32(AMS), 72 (Winter Sky), 92 (Blue Stone). The Pueblo
Defendants presented no evidence establishing how frequently new pools are
generated. As a practical matter, the rate at which the sweepstakes pools
regenerate may render the prize pool virtually infinite.
Accordingly, in any proposal, the Pueblo Defendants shall explain the relevance
of the finite pool of predetermined results to the legality of their sweepstakes.
Further, to the extent the Pueblo Defendants argue that this is a legal
requirement, they shall detail how any proposed sweepstakes will incorporate a
finite pool of predetermined results, including information regarding the rate of
renewal of those sweepstakes pools.
3. The Tribe's alternative means of free entry
Texas also argues that the Tribe's alternative means of free entry is
insufficient because only a small percentage of the participants enter for free.
Oct. 7, 2014, Tr. 247; Pl.'s Hr'g Compliance 10 ("alleged free entries are
insignificant"). This shows, according to Texas, that "the [ Tribe's] business
model is to entice the players to exchange money for chances to play." Oct. 7,
2014, Tr. 247.
*36 The Pueblo Defendants respond that the evidence presented establishes that
the "[E]ntertainment [C]enters [do] everything they can to make [free entry] as
easy as possible" and in fact the sweepstakes participants have taken advantage of
free entries in large numbers. Id. at 240-41.
In order to avoid the Texas Penal Code's prohibitions against lotteries, a
valid promotional sweepstakes must negate the element of consideration by offering
an alternative means of free entry. See Jester, 64 S.W.3d at 558-59; Davis, 690
F.3d at 338-39; Socony Mobil, 386 S.W.2d at 172-73; Tex. Att'y Gen. Op. No.
LO-97-008, 1997 WL 113966, at *3; Tex. Att'y Gen. Op. No. M-67 at 2. "[T]he mere
pretense of free prizes, designed to evade the law, [will] not negate the element
of consideration." Jester, 64 S.W.3d at 558 (citing Brice, 242 S.W.2d at 434).
Thus, the Tribe "must provide an 'alternative' means of entering the contest that
does not require the payment of consideration, and it must treat 'customers' and
'non-customers' alike." See Tex. Att'y Gen. Op. No. LO-97-008, 1997 WL 113966, at
*2 (citing Socony Mobil, 386 S.W.3d at 172-73). Furthermore, these free entries
cannot be "nominal." See Jester, 64 S.W.3d at 558.
The Pueblo Defendants have presented substantial evidence that a free entry
alternative is, in fact, available to participants. See BMM Report 15 (Blue Stone)
(certifying sweepstakes accepts "no purchase necessary" entries), 33(AMS)
(certifying that "patron[s] may request an entry without purchase or donation"),
48 (Winter Sky) (same), 59 (XCite) (same); see also Oct. 6, 2014, Tr. 43 (every
Kiosk has a prominently displayed placard stating "No Donation Required"); May 6,
2014, Report 49 (photo of "No Donation Necessary" sign).
Further, the Pueblo Defendants have submitted evidence indicating that the
Tribe has received over a million and a half free entry applications since 2012.
See Defs.' Free Entry Appls., Defs.' Ex. H; No Donation Necessary Forms from
Entertainment Centers from March 13 through 19, 2012, Defs.' Ex. D; No Donation
Necessary Forms from Entertainment Centers from May 7 through 9, 2012, Defs.' Ex.
E; No Donation Necessary Forms from Entertainment Centers from July 9, 2013,
Defs.' Ex. F; No Donation Necessary Forms from Entertainment Centers from May 16,
2014, Defs.' Ex. G; see also Oct. 6, 2014, Tr. 146 (400 to 500 participants a day
request free entries), 280 (indicating that customers queue for free entries).
The Pueblo Defendants have also shown that donation-based entrants receive no
advantage over participants who enter for free. See Oct. 7, 2014, Tr. 122, 127;
see also BMM Report 15 (Blue Stone) (free entries drawn from same pool as donation
based entries), 35(AMS) (same), 50 (Winter Sky) (same), 61 (XCite) (same).
Though the Texas officers who testified at the October 6, 2014, hearing stated
that they did not see or receive free entry options during their investigation,
see Oct. 6, 2014, Tr. 60, 84, the same officers testified that they did not
attempt to look for free entry. Id. at 44-45, 90. The Court therefore finds the
officers' testimony on the issue of free entry availability unpersuasive. Further,
Texas's own evidence indicates that "No Donation Necessary" signs are posted on
Kiosks throughout both Entertainment Centers. See May 6, 2014, Report 3 (Speaking
Rock), 5 (Socorro), 49 (photo showing "No Donation Necessary" sign). Indeed, Lt.
Ferguson testified that each Kiosk contains a sign stating that no donation is
necessary. Oct. 6, 2014, Tr. 43. Texas has offered no evidence to undermine the
Pueblo Defendants' assertions that an alternative means of free entry is available
at the Entertainment Centers.
*37 Nonetheless, despite the Pueblo Defendants' substantial evidence regarding
the availability of a free play alternative, Texas argues that the Court should
find the Tribe's alternative means of free entry to be merely "nominal" because
the evidence indicates that the vast majority of participants pay to play the
sweepstakes. See Oct. 7, 2014, Tr. 247. Texas, however, has presented no evidence
or law establishing that a minimum amount of participants must use an alternative
means of entry in order for a sweepstakes operation to avoid being labeled an
illegal lottery. To the contrary, expert testimony indicates that there are no
guidelines in any state requiring a certain proportion of sweepstakes entrants to
be through a free means of entry. See Oct. 6, 2014, Tr. 270.
Accordingly, Texas is advised that its response to any Pueblo Defendants'
proposal urging the Court to find the Tribe's alternative means of free entry to
be merely nominal must be supported by citations to law and evidence in the
record.
IV. THE TRIBE'S KIOSKS AS GAMBLING DEVICES
Texas alleges that the Tribe's Kiosks are illegal "gambling devices" as defined
under the Texas Penal Code. Mot. for Contempt 11-12; Oct. 7, 2014, Tr. 250. The
Pueblo Defendants respond that the Kiosks are not prohibited gambling devices
because the elements of chance, prize, and consideration are all absent. See Oct.
6, 2014, Tr. 260; Oct. 7, 2014, Tr. 235; Defs.' Mot. for Summ. J. 21; Defs.' Hr'g
Compliance 7-8.
Under Texas law it is illegal to possess "any gambling device," "subassembly,"
or "essential part of a gambling device." Tex. Penal Code Ann. s 47.06(a). The
Texas Penal Code defines a "gambling device" as "any electronic,
electromechanical, or mechanical contrivance ... that for a consideration affords
the player an opportunity to obtain anything of value, the award of which is
determined solely or partially by chance, even though accompanied by some skill,
whether or not the prize is automatically paid by the contrivance." Id. s
47.01(4).FN18 Like the definition of lottery, a gaming device becomes an illegal
"gambling device" where the three elements of chance, prize, and consideration are
present. See id. ss 47.01(4), 47.06; see also Davis, 690 F.3d at 333 (definition
of gambling device requires the "existence of some consideration exchanged for the
privilege of playing the sweepstakes"). The element of consideration in the
definition of a gambling device "should be treated in the same manner" as
consideration in the definition of lotteries. See Jester, 64 S.W.3d at 557. The
Pueblo Defendants have, as discussed below, disputed all three elements in
relation to the Kiosks at various times during the course of the present Motion
for Contempt.
FN18. The Texas Penal Code excludes from the definition of gambling device:
"any electronic, electromechanical, or mechanical contrivance designed,
made, and adapted solely for bona fide amusement purposes if the
contrivance rewards the player exclusively with noncash merchandise
prizes, toys, or novelties, or a representation of value redeemable for
those items, that have a wholesale value available from a single play of
the game or device of not more than 10 times the amount charged to play
the game or device once or $5, whichever is less."
Tex. Penal Code Ann. s 47.01(4)(B).
Because it is indisputable that the Tribe's devices offer cash prizes, the
Court finds the exclusion provided in s 47.01(4)(B) inapplicable in the
present case and does not address it further. See Official Rules for the
Blue Stone Entertainment Donation Sweepstakes Promotion, Defs.' Ex. K, at
2; XCite Sweepstakes Rules, Defs.' Ex. L, at 3; Winter Sky Electronic
Sweepstakes Rules, Defs.' Ex. N, at 4, 6; AMS Official Sweepstakes Rules,
Defs.' Ex. M, at 4-11; see also Oct. 6, 2014, Tr. 25; May 6, 2014, Report
15 (photo of cash prize), 19 (photo of cashier window), 21 (same).
The Pueblo Defendants assert that the element of chance is absent because "[a]
random number generator is not used to create the sweepstakes prizes or entries."
Defs.' Hr'g Compliance 8; see also Defs.' Mot. for Summ. J. 10; Oct. 7, 2014, Tr.
20, 235. The evidence, however, appears to establish the contrary. Though the
Kiosks contain no random number generator, Oct. 7, 2014, Tr. 20, a random number
generator is employed by the Server at various points in the pool creation
process. See BMM Report 13 (Blue Stone), 32(AMS), 48 (Winter Sky), 59 (XCite).
Furthermore, at least in connection with the Winter Sky sweepstakes, the Server
employs a random number generator to choose and issue a participant's result. See
id. at 48 (Winter Sky). Thus, it is clear that a random number generator is
employed at least at the Server level.
*38 Though the Kiosk itself does not apply the random number generator, the
Kiosk is nonetheless connected to the Server that does so. See Oct. 6, 2014, Tr.
124 (Mr. Maahs testifying that all vendors' Kiosks are connected to "at least one"
Server). Indeed, the Pueblo Defendants' own witness, Mr. Kerns, admits that both
the Kiosk and the Server are "essential parts" of the same overall gaming device.
See Oct. 7, 2014, Tr. 42. Accordingly, despite the Pueblo Defendants' attempt to
separate the element of chance from the Kiosks, it would nonetheless be illegal to
possess such an "essential part" of a gambling device, if the Court finds that the
gaming system as a whole contains the element of chance. See Tex. Penal Code Ann.
s 47.06(a). The Pueblo Defendants' attempt to negate the element of chance in
relation to the Kiosks, therefore, appears unavailing.
The Pueblo Defendants further argue that the Kiosks do "not award participants
any type of prize, cash or non-cash, nor afford the participant an opportunity to
obtain such a prize." Pueblo Defs.' Resp. 7. For the same reason that the Pueblo
Defendants' attempt to negate the element of chance in relation to the Kiosks is
unavailing, the Pueblo Defendants' attempt to remove the element of prize also
fails. It is indisputable that the sweepstakes system, as a whole, offers
participants the possibility of winning cash prizes. See Official Rules for the
Blue Stone Entertainment Donation Sweepstakes Promotion, Defs.' Ex. K, at 2; XCite
Rules 3; Winter Sky Electronic Sweepstakes Rules, Defs.' Ex. N, at 4, 6; AMS Rules
4-11; see also Oct. 6, 2014, Tr. 25; May 6, 2014, Report 15 (photo of cash prize),
19 (photo of cashier window), 21 (same). It is further indisputable that the
Kiosks print the prize vouchers awarded to participants. See BMM Report 27(AMS)
("[Kiosks are] [r]esponsible for the ... printing and redemption of sweepstakes
tickets."), 57 (XCite) (same), 71 (Winter Sky) (same), 91 (Blue Stone) (same).
Furthermore, though it is the Server that creates, defines, and chooses the
winning sweepstakes entries that result in cash prizes, See id. at 32-33(AMS), 48
(Winter Sky), 60 (XCite), 114-16 (Blue Stone), the Server nonetheless ultimately
sends these results to a Kiosk to display the result in an entertaining fashion.
See id. at 34(AMS), 60 (XCite), 74 (Winter Sky), 94 (Blue Stone). Accordingly,
because the Kiosks are an "essential part" of the sweepstakes system, Oct. 7,
2014, Tr. 42, the Kiosks would be no less prohibited if the sweepstakes system as
a whole contains the element of prize. See Tex. Penal Code Ann. s 47.06(a).
The Pueblo Defendants further assert that the element of consideration is
lacking from the Kiosks because participants need not pay to play. Oct. 6, 2014,
Tr. 260; Defs.' Mot. for Summ. J. 21; Defs.' Hr'g Compliance 7-8. As noted above,
the element of consideration in relation to the definition of gambling devices
should be treated in the same manner as the element of consideration in the
definition of lotteries. Jester, 64 S.W.3d at 557. Accordingly, whether
consideration is present in relation to the Kiosks turns, in part, on whether the
sweepstakes are intended to promote the Tribe's product or whether the Tribe's
product is a mere subterfuge to legitimize consideration paid to play the
sweepstakes. See id. at 558-59; Davis, 690 F.3d at 338-40. If a participants'
primary subject of the transaction is playing the sweepstakes, and not to promote
or secure the Tribe's product, the cash inserted into the Kiosk is consideration
paid for the sweepstakes. See Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at
338-40.
*39 Consequently, whether the Tribe's sweepstakes participants donate to the
Tribe primarily for the purpose of supporting or securing a tribal product is
highly relevant to the Court's determination of whether the Kiosks are illegal
gambling devices. In this regard, evidence presented at the Hearing has given the
Court cause for concern. The Tribe's own survey indicates that 94% of patrons at
Speaking Rock use the Kiosks during their visit, while 96% state that they use the
Kiosks "primarily for fun and entertainment." See Autry Report 3-4. Mr. Autry's
market research appears to support the finding that the patrons' main purpose is
to have fun playing the Kiosks, and not to purchase or support any tribal product.
See id.
Thus, in any future sweepstakes proposal, the Pueblo Defendants shall include a
detailed explanation regarding the extent to which participants value the Tribe's
product and whether the primary subject of the transaction is the product or
engaging with the Kiosks. See Jester, 64 S.W.3d at 558. The Pueblo Defendants must
further cite to legal authority to support their conclusions under applicable
Texas and federal law.
V. THE PUEBLO DEFENDANTS' PROPOSAL AND TEXAS'S RIGHT TO RESPOND
Because the Court recognizes the economic benefits at stake for the Tribe with
regard to this Order, see Oct. 7, 2014, Tr. 166 (Ms. Austin testifying that loss
of the donations would result in loss of jobs and the Tribe going "back ten steps
instead of [the] progressive move that [it is] on"); Ysleta del Sur Pueblo
Financial Statements Years Ended Dec. 31, 2012 and 2011, Pueblo Defs.' Ex. AR, at
42 (indicating $172,556,506.00 in "sales" at Speaking Rock in 2011); 44
(indicating $222,716,350.00 in "[c]ash received from customers" at Speaking Rock
in 2012), the Court will allow the Pueblo Defendants the opportunity to submit a
proposal outlining a legal tribal sweepstakes to be conducted on the Tribe's
territory. If the Pueblo Defendants do not submit such a proposal, they shall
cease all gaming operations, including all Tribal Sweepstakes promotions, on the
territory of the Ysleta del Sur Pueblo. Failure to cease all gaming operations
shall result in a civil penalty in the amount of $100,000.00 per day that the
Pueblo Defendants fail to cease operating.
In that proposal, the Pueblo Defendants shall address, at a minimum, the areas
of concern identified by the Court above. Specifically, the Pueblo Defendants must
explain what product the Tribe's sweepstakes promote. The Pueblo Defendants shall
further ensure that any explanation of the Tribe's product fully briefs, with
support found in both the evidence and the law, that the product promoted is the
"primary subject of the transaction" for both the Tribe and its sweepstakes
participants. See Jester, 64 S.W.3d at 558-59; Davis, 690 F.3d at 338-40. Further,
the Pueblo Defendants shall address the casino-like atmosphere at the
Entertainment Centers and explain how that atmosphere does not indicate that the
"true purpose" of the Entertainment Centers is the promotion of the sweepstakes
and not the Tribe's product. See Davis, 690 F.3d at 339.
*40 The Pueblo Defendants shall also address whether the provisions of the
Texas Sweepstakes Act apply to the gaming operations submitted in the proposal. In
particular, the Pueblo Defendants shall provide detailed information indicating
the maximum prizes, in dollars, awarded by each sweepstakes, and explicitly
discuss the extent to which the sweepstakes employ the use of the mail.
Additionally, the Pueblo Defendants shall detail whether the proposed
sweepstakes will incorporate a finite pool of predetermined results, and provide
specific information regarding the rate of renewal of those pools if they will
continue to automatically replenish upon exhaustion of the predetermined entries.
The Pueblo Defendants shall further address any other concerns or argument they
wish to bring to the Court's attention. As noted above, in briefing any issues in
the proposal, it would be unwise for the Pueblo Defendants to rely too heavily on
the state trial court's opinion in Knebel to support the legality of their
proposed gaming operations.
Furthermore, as a party to the action, Texas shall have a right to respond to
the Pueblo Defendants' Proposal. Specifically, Texas shall have thirty days from
submission of the proposal in which to submit a response indicating Texas's
position on the legality of the proposed sweepstakes under Texas law. The Court
advises Texas, however, that a "looks like a duck, quacks like a duck" analysis
may not suffice to establish the illegality of the proposal. See Oct. 6, 2014, Tr.
104.
Moreover, though the Court must interpret Texas law to determine the legality
of the Tribe's gaming operations, Texas law is "operat[ing] as surrogate federal
law on the Tribe's reservation." Ysleta del Sur Pueblo v. Texas, 36 F.3d 1325,
1334 (5th Cir.1994). When interpreting federal laws enacted for the benefit of
Native American tribes, ambiguities must "be liberally construed, doubtful
expressions being resolved in favor of the [ tribe]." Blatchford v. Native Vill.
of Noatak & Circle Vill., 501 U.S. 775, 795, 111 S.Ct. 2578, 115 L.Ed.2d 686
(1991) (internal citations omitted); see also Seminole Tribe of Fla. v.
Butterworth, 658 F.2d 310, 316 (5th Cir.1981) (interpreting ambiguous Florida
gambling statute in favor of Indian tribe).
The ambiguity surrounding the "multifarious issues of what is and is not
permitted by the 1991 amendment" to the Texas constitution is well-recognized. See
Verney, 2006 WL 2082085, at *2; see also G2, Inc., 485 F.Supp.2d at 766. Thus, "in
construing [these] admittedly ambiguous statute[s], [the Court] must be guided by
that eminently sound and vital canon, that statutes passed for the benefit of
dependent Indian tribes ... are to be liberally construed, doubtful expressions
being resolved in favor of the Indians." Blatchford, 501 U.S. at 795 (internal
citations omitted). Texas is advised to take account that this is not a Texas
state court and the Pueblo Defendants are not the usual Texas citizens, rather
they are a sovereign nation. There are complex issues of federal law overlapping
the interpretation of these Texas state gaming statutes that Texas has failed to
acknowledge.
*41 Accordingly, any response from Texas should specifically address the law
which separates a legal promotional sweepstakes from a prohibited lottery under
Texas law, and how any proposal by the Pueblo Defendants does or does not comply
with that Texas law. What Texas has done to date has fallen well short of this
standard.
VI. TEXAS'S CLAIM FOR COSTS
Texas requests an award of costs incurred in conducting the undercover
inspections at the Entertainment Centers, as well as its legal expenses in
bringing the Motion for Contempt to final hearing. Mot. for Contempt 20.
The Pueblo Defendants, though not directly articulating so, appear to respond
that Texas should not recover the costs of its officers' salaries because Texas
would have incurred those expenses even if the officers had not inspected the
Entertainment Centers. See Oct. 6, 2014, Tr. 115. Further, the Pueblo Defendants
appear to argue that the additional expense Texas incurred by assigning officers
from Austin and San Antonio to inspect the El Paso-based Entertainment Centers was
unnecessary because the Attorney General could have used local officers to conduct
the inspections. Id. at 111-13. Texas replies that it was necessary to assign
officers from Austin and San Antonio because its El Paso-based officers lacked the
necessary "gambling inspection investigation experience." Id. at 116.
"[T]he proper aim of judicial sanctions for civil contempt is 'full remedial
relief.' " Fla. Steel Corp. v. N.L.R.B., 648 F.2d 233, 239 (5th Cir.1981) (citing
McComb, 336 U.S. at 193); accord N.L.R.B. v. Concordia Elec. Co-Op, Inc., No.
95-60404, 1999 WL 1411474, at *9 (5th Cir. Nov.9, 1999). Accordingly,
"[c]ompensatory civil contempt reimburses the injured party for the ... losses
flowing from noncompliance and expenses reasonably and necessarily incurred in the
attempt to enforce compliance." Rousseau v. 3 Eagles Aviation, Inc., 130 F. App'x
687, 690 (5th Cir.2005) (citing Norman Bridge Drug Co. v. Banner, 529 F.2d 822,
827 (5th Cir.1976)). In compensating the moving party, "a court has discretion to
award reasonable attorney's fees and other expenses necessary to make [the]
innocent party whole." See Dow Chem. Co. v. Chem. Cleaning, Inc., 434 F.2d 1212,
1215 (5th Cir.1970); Concordia Elec., 1999 WL 1411474, at *9 n. 94. "[S]uch
sanctions should be 'adapted to the particular circumstances of each case' and ...
the only limitation upon the sanctions imposed is that they be remedial or
coercive but not penal.' " Fla. Steel, 648 F.2d at 239 (internal citations
omitted); accord Concordia Elec., 1999 WL 1411474, at *9.
Texas seeks reimbursement for "the legal costs of bringing [the Motion for
Contempt] to final hearing." Mot. for Contempt 20. Because the Court has found the
Pueblo Defendants in contempt of the Modified Injunction, and in light of the
legal expense that Texas incurred to bring that contempt to the Court's attention,
the Court finds that Texas is entitled to reimbursement for its attorney's fees.
See Towne v. Gee Const., LLC, Civ. No. 11-1884, 2014 WL 4981442, at *2 (E.D.La.
Oct.6, 2014); TiVo Inc. v. Dish Network Corp., 655 F.Supp.2d 661, 664, 666
(E.D.Tex.2009); see also In re Katrina Canal Breaches Litig., No. 08-30362, 2008
WL 5069808, at *1 (5th Cir. Dec.2, 2008) ("[A] court may sanction a party by
awarding attorneys' fees to a government entity."); Dow Chem., 434 F.2d at 1215
("[A] court has discretion to award reasonable attorney's fees and other expenses
necessary to make [the] innocent party whole.").
*42 The Court notes, however, that Texas has not submitted any indication of
the total amount of attorney's fees incurred to bring the Motion for Contempt.
Texas has only submitted a legal billing invoice listing the costs of its
inspecting officers' expenses, see Pl.'s Ex. 38, which the Court understands to be
evidence supporting Texas's separate request for the costs of the undercover
inspections at the Entertainment Centers. See Mot. for Contempt 20.FN19 This is
insufficient. Accordingly, if Texas is seeking attorney's fees, Texas shall make
its application for attorney's fees within 14 days of this Order.FN20 The parties
shall follow the procedure set out in Local Rule CV-7(j) with regard to the award
of attorney's fees, and are encouraged to resolve any disputes prior to Texas's
making its application. See Local Rule CV-7(j).
FN19. The Court's understanding is based on the fact that the personnel
listed in the legal billing invoice appear to be the names of Texas's
inspecting officers, while there is no indication that the submitted billing
records apply to any of Texas's attorneys. See Pl.'s Ex. 38.
FN20. In the Fifth Circuit, courts employ the "lodestar" method to calculate
attorney's fees. See Smith & Fuller, P.A. v. Cooper Tire & Rubber Co., 685
F.3d 486, 490 (5th Cir.2012). The lodestar method determines attorney's fees
by "multiplying the number of hours reasonably expended by an appropriate
hourly rate in the community for the work at issue." Id.
Texas further requests reimbursement for the costs of inspecting the
Entertainment Centers in 2012, 2013, and 2014. See Mot. for Contempt 20; Pl's Ex.
38, at 1-2, 4, 6-7. In total, Texas seeks $71,937.27 for "travel costs, contract
costs, direct expenses, meals, [and] the hourly cost for the investigators and the
analysts involved." Oct. 6, 2014, Tr. 108; see also Pl.'s Ex. 38, at 9. In
response, the Pueblo Defendants appear to challenge Texas's requested recovery on
two grounds. First, they contend that Texas should not recover the costs of its
officers' salaries because Texas would have incurred that expense "regardless of
whether [the officers] were out ... in El Paso or [elsewhere]." See Oct. 6, 2014,
Tr. 115. Second, the Pueblo Defendants contend that portions of Texas's
investigation costs were unnecessary as "it certainly would have been more cost
efficient ... to have used local [officers] instead of having to incur the
expenses of hotel, travel, [and] meals ... during a 10-day investigation." See id.
at 112-13.
As an initial matter, the Court has found no support for the Pueblo Defendants'
argument that Texas may not recover the costs of its officers' salaries. Indeed,
courts have " 'broad discretion in assessing sanctions to protect the sanctity of
its decrees and the legal process.' " Hornbeck Offshore Servs., L.L.C. v. Salazar,
730 F.3d 402, 403 (5th Cir.2013) (citing Test Masters Educ. Servs.., Inc. v.
Singh, 428 F.3d 559, 581-82 (5th Cir.2005)). This includes the power to order a
contemnor to pay "all costs and expenses ... incurred by the [prevailing party] in
the investigation, preparation, presentation, and final disposition" of the
contempt proceedings. See N.L.R.B. v. Trailways, Inc., 729 F.2d 1013, 1024 (5th
Cir.1984) (emphasis added). Accordingly, a court may issue an award of the
salaries of employees involved in the investigation of a contemnor's actions. See
In re Establishment Inspection of Microcosm, 951 F.2d 121, 126 (7th Cir.1991)
(holding award of fixed benefits and overhead expenses "clearly valid" as costs
for preparing and prosecuting a contempt petition); Squillacote v. Local 248, Meat
& Allied Food Workers, 534 F.2d 735, 748 (7th Cir.1976) ("[S]alaries of
[prevailing party's] personnel in preparing and prosecuting a contempt petition,
may be awarded as compensation."), overruled on other grounds by Kinney v. Pioneer
Press, 881 F.2d 485, 493 (7th Cir.1993); Dow Chem., 434 F.2d at 1215 (holding
district court did not err in awarding "salary costs for several ... employees
involved in the investigation" of a contempt proceeding). Having found no support
for the Pueblo Defendants' argument that Texas should not recover the costs of its
officers' salaries, the Court rejects it. Texas is entitled to the recovery of
some of the costs of its investigations.
*43 Nonetheless, the Court finds merit in the Pueblo Defendants' argument that
Texas should not recover the unnecessary costs of assigning officers from Austin
and San Antonio to inspect the Entertainment Centers. Compensatory civil contempt
reimburses a party for expenses "reasonably and necessarily incurred in the
attempt to enforce compliance." Rousseau, 130 F. App'x at 690. Texas argues it was
necessary to assign officers from Austin and San Antonio because its El Paso-based
officers lacked the "experience or knowledge" to conduct the inspections. Oct. 6,
2014, Tr. 116. Testimony at the Hearing, however, fails to show what specialized
knowledge the officers assigned to conduct the inspections possessed. For
instance, prior to conducting the inspection, Lt. Ferguson did not review any of
the Case's materials, the Court's prior orders, or any authorities regarding the
difference between a legal sweepstakes and an illegal lottery under Texas law. Id.
at 53. Indeed, Lt. Ferguson testified that he did not know at the time of the
inspection what made a sweepstakes legal. Id. at 53-54. Lt. Loper, likewise, did
not review the Court's injunction prior to his inspection, and did not have any
knowledge regarding the definition of a legal sweepstakes. Id. at 91, 99. Nor did
Lt. Loper have any experience investigating sweepstakes in Texas. Id. at 97.
Furthermore, there is no evidence establishing that any specialized skills were
even needed to conduct the inspections. Both Lt. Loper and Lt. Ferguson testified
that they visited the Entertainment Centers only to determine whether it was
possible to put money in the Kiosks, push buttons, and receive a prize. Id. at
46, 89. This is hardly a specialized skill. Nor did any of the officers use
specialized computer skills to inspect the gaming Kiosks or Servers. Id. at 4748,
98.
Moreover, the Court finds the length of the inspections to be both unnecessary
and unreasonable. In particular, Lt. Loper spent ten days at the Entertainment
Centers in 2012, apparently including four days of surveillance before the
officers even began the undercover inspection inside the Entertainment Centers.
Id. at 88, 94. Texas requests a total of $57,602.98 in compensation for this
undercover operation alone. See Pl.'s Ex. 38, at 1-3. The Court finds, however,
that Texas has not established how this ten day inspection was either reasonable
or necessary in order to determine if it was possible to insert money into the
Kiosks, push the buttons, and receive a prize.
Accordingly, the Court declines to award the full amount of costs requested.
See Rousseau, 130 F. App'x at 690 (parties only entitled to costs "reasonably and
necessarily incurred in the attempt to enforce compliance"). Instead, the Court
finds that reasonable and necessary costs amount to the cost for three El
Paso-based officers to inspect the Entertainment Centers for two days in each of
2012, 2013, and 2014, along with the administrative overhead. Based upon the
information provided by Texas for the Austin and San Antonio-based officers'
salaries, and subtracting the costs of travel, the Court calculates this amount at
$16,928.64.FN21
FN21. In reaching this total, the Court calculates the average hourly salary
of Texas's officers from 2012-2014, as evidenced by Plaintiff's Ex. 38
(indicating average officer salary of $27.87/hour), and awards a cost equal
to three officers' salaries for two eight-hour inspections in each of 2012,
2013, and 2014 (totaling $4,013.28). In addition, the Court calculates the
average hourly overhead for Texas's officers, as evidenced by Plaintiff's
Ex. 38 (indicating average overhead costs of $30.91/hour, per officer), and
awards a cost equal to the overhead for three officers over two eight-hour
days in each of 2012, 2013, and 2014 (totaling $4,451.04). The Court then
adds these amounts, resulting in a total of $8,464.32. The Court then
doubles that amount to provide for reasonable costs incurred by a single day
in preparation for each inspection and a single day of debriefing after each
inspection. The Court calculates this total sum to amount to $16,928.64.
VII. CONCLUSION
*44 For the foregoing reasons, Texas's Motion for Contempt, ECF No. 423, is
GRANTED.
IT IS THEREFORE ORDERED that, within sixty (60) days of entry of this Order,
the Pueblo Defendants shall cease all gaming operations at Speaking Rock and
Socorro Entertainment Centers, as well as anywhere else on their lands, with the
exception of Third Party-Vendor Sweepstakes as defined by this Order and the
Modified Injunction. Failure to cease gaming operations shall result in a civil
penalty of $100,000.00 per day, jointly and severally among each of the Pueblo
Defendants, for each day the gaming operations continue in violation of this
Order.
IT IS FURTHER ORDERED that the Pueblo Defendants may submit a firm and detailed
proposal setting out a sweepstakes promotion that operates in accordance with
federal and Texas law. Any proposal shall address the issues of concern to the
Court as set out above with citation to legal authority and evidence. The Pueblo
Defendants shall submit any proposal within sixty (60) days of the entry of this
Order. Submission shall result in a stay of the order to cease gaming operations
on tribal lands. Any stay shall remain in effect during the Court's consideration
of the proposal.
IT IS FURTHER ORDERED that Texas shall have thirty (30) days from the
submission of any Pueblo Defendants' sweepstakes proposal to submit a response,
supported by citation to the legal authority.
IT IS FURTHER ORDERED that Texas shall submit, no later than fourteen (14) days
from entry of this Order, a memorandum, supported by the affidavit of counsel,
establishing the amount of reasonable attorney's fees incurred as a direct result
of the Pueblo Defendants' contempt. Such submission shall follow the procedures
set out in Local Rule CV-7(j).
IT IS FURTHER ORDERED that the Pueblo Defendants shall pay $16,928.64 to the
State of Texas for the reasonable costs associated with the 2012, 2013, and 2014
inspections.
SO ORDERED.