Lies and confusion about the iMEGA case

Who or what is iMEGA? According to its web site (http://www.imega.org/),

The Interactive Media Entertainment & Gaming Association (iMEGA) is a
not-for-profit corporation headquartered in Washington DC.

iMEGA was founded in 2007 as a professional association dedicated to
the continued growth and innovation of the Internet. We seek constructive
engagement with government at the Federal and State levels to ensure that the
challenges of this still nascent medium are addressed with the full
participation of the people and companies that have built the Internet into the
powerful influence on society it has become.

I first became aware of this group when they filed suit last year to prevent enforcement of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). I didn't pay a lot of attention to the case, because from news reports I was quite certain that it was a dog, with virtually no chance of winning. Now that I've read more about it, I'm convinced that my first impression was correct.

The first--and quite possibly last--major decision about the case was issued on March 4. You can read it here: http://www.imega.org/wp-content/uploads/2008/03/imega-v-gonzales-et-al_3608.pdf. Here's the Reader's Digest condensed version: The government attempted to have the case dismissed first because, it said, iMEGA had no legal "standing" to bring the suit. To oversimplify, in order to bring a lawsuit attempting to prevent enforcement of a criminal statute, you have to show that you are actually in potential danger of being prosecuted under it. iMEGA defeated the government's argument on this point; the judge found that the association did, in fact, have sufficient standing to challenge the law, because "a plain reading of the UIGEA reveals that its prohibitions could easily apply to the to the actions of the plaintiff's member businesses."

But that was the end of their victories. The government next argued that even if iMEGA had standing, every one of their claims was legally invalid, to the point that they didn't even need to have a trial to determine any disputed facts. The judge agreed with them down the line, on every item; every claim that iMEGA made about the alleged unconstitutionality or unenforceability of the statute was shot down decisively.

It's important, I think, to note the legal standard in play: For a motion to dismiss at this early point, the judge is required to assume that all of the facts claimed in the plaintiff's suit are actually true. The legal question is, essentially, "Even if everything the plaintiff says is true, can they possibly win on the legal arguments?" Her answer was no. The case has been dismissed. iMEGA's press release says that they plan an appeal, but I'd lay 10:1 against an appeal being successful, after reading the district court's decision. The claims iMEGA makes are just horribly weak and implausible.

(I suppose I have to add the disclaimer that I think the UIGEA is stupid and bad public policy. But that doesn't mean that it's unconstitutional, or that any lawsuit brought against it should, by rights, prevail, if the suit is based on bad legal arguments, as this one was.)

Now let's look at the incredible PR spin job that iMEGA does with this whopping defeat: http://www.imega.org/2008/03/07/court-grants-imega-standing-to-challenge-flawed-online-gaming-law/. First, they say that they "applaud" the decision. Well, that's interesting, since they LOST. Their attorney spouts the nonsense that the standing portion of the decision is a "major victory." Hogwash. Standing is not that difficult to establish. And it's a purely pyrrhic victory if, after having standing acknowledged, you lose on every one of the merits of your case before you even get to trial.

iMEGA's press release next quotes their lead attorney, Eric Bernstein, as saying, "Judge Cooper’s ruling holds that, even with the passage of UIGEA, online gambling is only illegal in states where a statute specifically says it is."

No, it doesn't. First, we need to make clear what it means when a judge "holds" something or other. That word means not that the judge made some offhand comment in the text of the decision, but that a question was squarely put to and decided by the court. Court decisions can be reduced to three parts: "findings" (where there are disputed facts, the judge decides which ones to accept and reject), "holdings" (substantive decision on the disputes as to the meaning or application of law), and "dicta" (everything else). There is simply no holding in this case anything like what Mr. Bernstein claims.

As far as I can find, the closest the court came to any such statement is as a presumption (based on a plain reading of the statute) while making another point entirely, about whether the plaintiff's First Amendment rights of free expression are hindered by the UIGEA: "The plaintiff has not identified, and the Court does not discern, any 'communicative element' inherent in the only conduct criminalized by UIGEA--the taking of another's money.... Also, as UIGEA only has potential application if a bet or wager is otherwise unlawful where initiated or received, the plaintiff cannot claim any First Amendment protections for conduct--in accepting the funds for that bet or wager--that essentially facilitates another's criminal act." (Emphasis added.)

If a non-attorney read this and said that it was a "holding" of the court that the UIGEA only prohibited conduct that was already illegal under relevant state law, I could easily dismiss it as a misunderstanding. But Mr. Bernstein knows full well how to distinguish a court's holdings from its incidental statements. What he claims as the former is unarguably the latter. In short, he is lying through his teeth.

Continuing with the press release: "'iMEGA is very pleased that the Court recognized our standing and the weaknesses in UIGEA' said Joe Brennan Jr., the chairman of iMEGA." Note that he does not name any specific "weaknesses in UIGEA" that he claims the court "recognized." That's too bad. It might be enlightening, since I can't find anything in the decision that could plausibly be seen as such a finding, a holding, or even dicta.

The closest I can find is in the concluding paragraph: "The plaintiff's claims ... pose questions as to whether UIGEA, given its exceptions and conjectural enforcement problems, will be successful in accomplishing its desired ends." But this is plainly not the judge expressing an opinion she formed on this; instead, she's just restating what it is the plaintiff is alleging. In fact, she explicitly declines to opine in the way that Mr. Brennan claims that she does: "But it is not the Court's role to pass on the wisdom of a Congressional act or speculate as to its effectiveness." So Mr. Brennan is lying just as much as his attorney is.

Mr. Brennan is next quoted in the press release as follows: "Judge Cooper found that banks, credit card companies and other payment system instruments are exempt from criminal sanctions under UIGEA, significantly undercutting UIGEA’s enforcement mechanism."

That's just complete rot. What he is apparently referring to is merely a footnote dealing with a hypothetical, not a substantive ruling at all. The plaintiff claimed that UIGEA violates the Constitution's ban on ex post facto laws; i.e., Congress can't make an action a crime after it has been committed. This was one of the sillier claims in the suit, since nothing in UIGEA even remotely hints of such an attempt. By both text and clear implication, it prohibits only conduct occurring after its passage. The judge recognized that, and had no difficulty dismissing this part of the complaint.

iMEGA had based this particular claim on a previous case from the Fifth Circuit appellate court, which held, in part, that the federal Wire Act did not prohibit interstate electronic money transfers for gambling other than sports bets. In response, the judge in this case added in a "by the way" footnote that the financial institutions in that Fifth Circuit case would not be criminally liable under UIGEA anyway, since by its own terms the statute in question "does not include the activities of a financial transaction provider." In other words, the judge was making a hypothetical, footnoted comment about how parties in another, previous case might fare under the UIGEA.

This is about as purely dicta and as far from an actual holding or ruling as one can get. Furthermore, she is doing no more than quoting the plain terms of the statute, not making any sort of interpretive call as to what that language means as applied to an actual controversy in front of her. Banks and other financial institutions were not parties to this lawsuit, so the judge could not make any legal determination about their status and/or rights, even if she had been inclined to do so.


Lou Krieger weighs in, and gets it wrong

Lou Krieger blogged about this case on Tuesday, March 11, at http://loukrieger.blogspot.com/2008/03/banks-will-not-be-held-liable-for.html. His first sentence says, "Criminal liability for banks that are unable to stop online gambling transactions was removed by a US Supreme Court Judge in a decision that is unlikely to be appealed." Let's see how many errors we can count in that one sentence.

First, the decision did not come from a "US Supreme Court Judge." It was from Mary L. Cooper, a federal judge in the District of New Jersey. (If she has recently been elevated to the Supreme Court, thus giving us 10 justices there instead of the traditional 9, I apparently missed the announcement, as well as the Senate hearings on her confirmation, etc.)

Second, there was nothing in the decision that even remotely "removed" criminal liability. As I just explained, she merely stated a completely incidental, off-the-cuff, footnoted recognition that the plain language of the UIGEA exempts financial institutions from criminal liability. (They are subject to civil sanctions, though.) Since banks were not parties in the case, nothing that the judge should incidentally happen to say about them is of any legal significance.

Third is this business about "unlikely to be appealed." I have no idea where that comes from. The various governmental defendants cannot appeal--BECAUSE THEY WON! You can't appeal a decision that went in your favor. If the plaintiff appeals, then the government can seek the appellate court's simultaneous review of Judge Cooper's decision on standing--the one part of the case on which they got an adverse decision--but they cannot initiate the appeal. If he is referring to the plaintiff, I don't see how he gets to a conclusion that the case is "unlikely to be appealed," as Mr. Bernstein explicitly says in the press release, "we plan to appeal to the Third Circuit Court of Appeals." Whichever side of the question of an appeal Mr. Krieger is addressing, he's wrong.

Mr. Krieger continues: "Most experts are of the opinion that the US Government will not appeal the decision that banks should be held criminally liable for something the industry insists they have no control over."

I have no idea which "experts" he polled to come to this conclusion, and he doesn't identify them, nor tell us how many there were, nor how big the majority was that constituted "most" of them. But this sentence again shows that Mr. Krieger is completely lost as to what this decision said and did.

As I explained, the government cannot appeal the case, even if it wanted to, because it WON. So apparently Mr. Krieger's panel of alleged "experts" are a little confused about the single most fundamental point of appellate law: that only the loser can file an appeal. (Kind of makes you wonder just how they came to be regarded as "experts," doesn't it?)

Second, the sentence quoted is in direct contradiction to the first sentence of his blog post. There he said, erroneously, that the court ruled that banks could not be found criminally liable under the UIGEA. Now, however, he is saying that the government "will not appeal the decision that banks should be held criminally liable." Uh, well, which is it, Mr. Krieger?

I'm not the first to point out Mr. Krieger's obvious factual error about which court issued the ruling, and the highly questionable claim about the decision allegedly absolving banks of criminal liability; see, e.g., http://ndebtpokertour.blogspot.com/2008/03/battle-against-uigea-wages-on-and-on.html, which I found via http://hardboiledpoker.blogspot.com/2008/03/good-bad-and-uigea.html. I mention this because the first of these, cheer_dad's blog, says that he posted a comment on Mr. Krieger's blog about his concerns. But as of this afternoon, no comments show up there. Since he did put up another new post yesterday (Thursday, March 13), it makes me wonder whether he is deliberately not posting comments critical of his statements.

Cheer_dad is also careful to add, "Do NOT construe my comments as criticism of Lou Krieger who I greatly admire and respect. I believe he has reported consistently and kept the poker blogging community very well informed on the subject of the fight against the UIGEA. I for one am grateful." Well, readers may feel free to construe my comments as criticism of Lou Krieger for sloppy reporting, at least in this instance. The more prominent one's place in the poker community, the more careful one should be in getting the basic facts right, and on that count he failed miserably here.

Poker News also errs

Haley Hintze, reporting for Poker News, also got at least one thing about the relevant law wrong, I believe. (See http://www.pokernews.com/news/2008/03/imega-action-dismissed-legal-standing-granted.htm.) She writes, "However, iMEGA was granted legal standing as an association acting on behalf of members potentially affected by UIGEA implementation, allowing the group to continue to appeal or possibly file a new action against the law on different grounds."

iMEGA can certainly file an appeal, but they could do so even if the decision had been that they do not have standing, so the implication that their right to appeal is only preserved because of how the judge ruled on the question of standing is just plain wrong.

I don't know where she gets the last part of her assertion (about possibly filing a new action on different grounds), but I believe it is in error. I don't claim expertise in federal procedure, but my understanding is that iMEGA would be unlikely to be able to bring a new claim. The general rule is that you have to bundle all of your complaints into one lawsuit. If you fail to recognize and state a possible cause of action in your original suit, and the case gets dismissed, you're out of luck; you can't come back later against the same defendants with different legal theories asking for the same remedy. This makes perfect sense, as a protective measure for defendants. It's very expensive to defend onesself against civil suits, and it would also be a waste of court resources if a plaintiff were able to bring a series of suits, each making one legal claim. Rather, a plaintiff gets one shot at the defendants, and if he neglects to name a cause of action, tough, it's his own fault, and he doesn't get a second bite at the apple. If Ms. Hintze has specific grounds for thinking that this general rule will not apply to this case, I'd be interested in hearing about it, though I think it's more likely that she just doesn't understand general principles of court procedure.

Ms. Hintze also makes a small error in this sentence: "In a footnote to the dismissal of one of iMEGA's motions, a states-rights challenge based on the Tenth Amendment, Judge Cooper noted that 'UIGEA exempts purely financial entities from criminal liability.'" Actually, this was in a footnote to the ruling on the plaintiff's claim under the ex post facto clause of the Constutition, not the Tenth Amendment claim.

Those small points aside, the Poker News story gets the general gist and most of the details of the case right, and, to its credit, expresses some skepticism about the iMEGA press release.

Conclusion

The iMEGA suit was, in my opinion, ill-founded. The claims it made were weak and never had much chance of prevailing. The court's decision seems to be very solid and well-grounded in precedential case law. For iMEGA to claim this decision as a victory is pure face-saving spin. It was, in fact, a thorough and well-deserved legal ass-kicking. Shame on Lou Krieger for buying their BS hook, line, and sinker, and for additionally screwing up the facts in the process.

I have emailed iMEGA, Mr. Krieger, and Ms. Hintze with links to this post, inviting their responses. If I get any, I will post them here as an addendum.


Addendum, March 15, 2008

I decided to do a Google blog search to see what others have been writing about this decision. Goodness gracious, the bloggers and secondary poker "news" sources of the world just have no clue about basic legal precepts.

Probably the error repeated most often (e.g., here: http://www.holdem4u.info/2008/03/07/judge-gives-imega-case-mixed-results/) is that the judge's ruling "did give the group legal standing to challenge the law in an appellate court." No, no, no. iMEGA could file an appeal even if the court had ruled that they did not have legal standing to bring the suit originally. Appeal of an unfavorable trial-court decision is a matter of statutory right in virtually every civil case. It doesn't matter whether the adverse decision is that you didn't have standing, that the facts didn't support your case, or that the law was against you--no matter what the grounds for the decision going against you, you can appeal.

An anonymous poster at http://www.reviewed-casinos.com/casino_news/0703081.php wrote that the judge said "she could not rule on the constitutional issues." Huh??? She did rule on the constitutional issues, as would have been apparent if this writer had bothered to read the decision. How can so many people post facts and opinions without even taking the time to read the core material?

The same author claims that the court ruled that "neither does it [the UIGEA] violate World Trade Organisation rules." Not quite. The judge simply noted that federal law prohibits private individuals and organizations from bringing suits alleging violations of WTO agreements. As an aside, she noted that it doesn't matter whether the UIGEA is inconsistent with WTO agreements, because in the case of a conflict, the statute's provisions would have to be held to trump the WTO agreements. (I don't claim to know whether that is actually an accurate statement of the law, but that's what the court said.)

Here's a poker blogger who simply stole Lou Krieger's post, without any attribution, and presented it as his own: http://www.fullofpoker.com/2008/03/banks-not-responsible-for-gambling.html. He's a thief and a plagiarist. Probably cheats at poker, too, given those personal ethics.

Christopher Costigan, over at gambling911.com, is just friggin' crazy about the court decision. See his breathless enthusiasm at http://www.gambling911.com/online-gambling-030608A.html. He calls the decision a "major victory" and "great news." He is either completely clueless or a protege of Jon Lovitz's "Pathological Liar" character.

Here's a new flash, folks: Just because you read something in the internet doesn't mean it's true. Shocking, I know, but you need to be told this sooner or later. Better it come from a friend like me, no?


Addendum, March 17, 2008

Mr. Krieger sent me this email today:

****
Thanks for your email and link to your site. If you go back to my blog you'll see that's I've published a correction to my factual errors, a link to your post, along with a significant portion of your analysis of the iMEGA spin on Judge Cooper's decision.

I would have gotten back to you earlier, but I wanted to see if I received any other note's on this post (I did), plus I was involved in a bicycling event over the weekend and had to finish up the editing for Poker Player Newspaper. As long as you keep the discourse civil--which you did--critique and criticism are always welcome.

Thanks for reading my blog. Now that I know of it, I'll read yours in the future too.

Lou Krieger

*****

The new post at his blog referenced above is at
http://loukrieger.blogspot.com/2008/03/lots-of-corrections-on-my-march-11-post.html