New York Law Review

Tag: gambling law

  • Albert Simon, Inc. v. Myerson, 36 N.Y.2d 300 (1975): Legality of Pinball Machine Prohibition

    Albert Simon, Inc. v. Myerson, 36 N.Y.2d 300 (1975)

    A municipality may prohibit pinball machines, even if they are not inherently gambling devices, if the prohibition is reasonably related to a proper governmental purpose, such as preventing evils associated with gambling, and the legislative judgment that pinball machines contribute to such evils is not irrational.

    Summary

    Albert Simon, Inc., a distributor of pinball machines, challenged a determination by the New York City Commissioner of Consumer Affairs to withdraw approval for licensing and installation of their machines. The city’s decision was based on a local ordinance prohibiting gaming devices, including pinball machines. The petitioners argued that their machines were amusement devices, not gambling devices. The Court of Appeals reversed the Appellate Division’s order, holding that the city’s prohibition was valid because it was rationally related to the legitimate governmental purpose of preventing gambling and its associated evils. The court emphasized that it’s the potential use of the machines, not their inherent nature, that justifies the ban.

    Facts

    Albert Simon, Inc. distributed four types of pinball machines in New York City.

    The Commissioner of Consumer Affairs initially approved the licensing and installation of these machines.

    The Commissioner later withdrew approval, citing a provision in the Administrative Code of the City of New York that prohibited gaming devices, including pinball machines.

    The distributors conceded that there was an element of chance in the games but argued they were primarily for amusement because no prizes or free plays were awarded.

    Procedural History

    The distributors initiated an Article 78 proceeding to challenge the Commissioner’s determination.

    The lower court ruled against the distributors.

    The Appellate Division reversed.

    The Court of Appeals reversed the Appellate Division’s order, dismissing the petition and upholding the Commissioner’s determination.

    Issue(s)

    Whether a municipality’s prohibition of pinball machines, based on their potential use for gambling, violates due process, even if the machines are not inherently gambling devices.

    Whether the Commissioner’s initial approval and licensing of the machines estops the city from later withdrawing approval.

    Whether the state’s regulation of gambling preempts the city’s ability to prohibit pinball machines.

    Holding

    1. No, because the prohibition is reasonably related to the legitimate governmental purpose of preventing gambling and its associated evils, and the legislative judgment connecting pinball machines to these evils is not irrational.

    2. No, because an erroneous application of the law does not prevent a public official from correctly applying and enforcing it later.

    3. No, because Article 225 of the Penal Law, dealing with gambling offenses, does not indicate a legislative intent to reserve exclusive regulatory power to the state, preventing a city from prohibiting pinball machines.

    Court’s Reasoning

    The court reasoned that the city’s ordinance was a valid exercise of its police power to prevent the evils associated with gambling. Even though the pinball machines may not be gambling devices in and of themselves, the extensive declaration of legislative purpose in the ordinance made it clear that the city was concerned with how the machines were used and their potential to encourage gambling among adults and children, leading to juvenile delinquency and crime. The court stated, “A very extensive declaration of legislative purpose incorporated in the ordinance (§ 436-8.0, subd a) makes clear that it is the use to which such gaming devices are put rather than their inherent characteristics that motivated their interdiction.”

    The court emphasized that it is not the court’s role to determine whether the legislation is wise or the best way to achieve its purpose, but only whether it has a rational basis. The court quoted Nettleton Co. v Diamond, 27 NY2d 182, 193, “To reinforce the presumption that the regulation is valid…we have an expressed legislative judgment that there is a strong relationship between gambling and the evils that attend it, on the one hand, and pinball machines, on the other. We cannot say this judgment is irrational.”

    The court also rejected the argument that the Commissioner was estopped from withdrawing approval, stating, “An erroneous application of law does not relieve a public official from the obligation to apply and enforce it correctly thereafter.”

    Finally, the court found no preemption issue, as the state’s Penal Law did not explicitly reserve exclusive regulatory power in the gambling field. The court cited People v Cook, 34 NY2d 100, and Myerson v Lentini Bros. Moving & Stor. Co., 33 NY2d 250, to support this conclusion.

  • NYRA v. Off-Track Pari-Mutuel Betting Comm., 27 N.Y.2d 210 (1970): Constitutionality of Off-Track Betting

    New York State Racing Ass’n, Inc. v. New York State Off-Track Pari-Mutuel Betting Commission, 27 N.Y.2d 210 (1970)

    The state’s authorization of off-track betting, with a portion of the revenue allocated to municipalities, constitutes a “reasonable revenue” for the support of government as required by the New York Constitution, and does not violate due process rights of existing racetrack operators.

    Summary

    The New York Court of Appeals upheld the constitutionality of New York statutes authorizing off-track pari-mutuel betting. The plaintiffs, corporations operating horse racetracks, argued that the statutes failed to provide a reasonable revenue for the state, violated the constitutional prohibition on gambling, and deprived them of property without due process. The Court of Appeals rejected these arguments, holding that the allocation of off-track betting revenue to municipalities constituted a reasonable revenue for the support of government, and that the state could alter the conditions under which gambling businesses operate to allocate a greater share of profits for public benefit.

    Facts

    The New York legislature passed chapters 143 and 144 of the Laws of 1970, which established the Off-Track Pari-Mutuel Betting Commission and authorized off-track pari-mutuel betting systems. Chapter 144 specifically created the New York City Off-Track Betting Corporation. The plaintiffs, who operated racetracks and on-track betting, claimed that the new off-track betting system would adversely affect their business by diverting revenues and using their facilities without compensation.

    Procedural History

    The plaintiffs, New York racing corporations, brought actions against the New York State Off-Track Pari-Mutuel Betting Commission and other parties, seeking a declaratory judgment that chapters 143 and 144 of the Laws of 1970 were unconstitutional and seeking to restrain official action under those chapters. The trial court ruled in favor of the defendants, upholding the validity of the statutes. The plaintiffs appealed directly to the New York Court of Appeals on constitutional grounds.

    Issue(s)

    1. Whether the statutes authorizing off-track betting provide a “reasonable revenue for the support of government” as required by Article I, Section 9 of the New York Constitution, given that a portion of the revenue is allocated to municipalities?

    2. Whether the Governor’s message to the Legislature accelerating the vote on the off-track betting proposal complied with Article III, Section 14 of the New York Constitution?

    3. Whether the off-track betting statutes deprive the plaintiffs of property without due process of law?

    Holding

    1. Yes, because the allocation of net revenues to participating municipalities is closely tied to the financial dependence of local governments on the State and benefits State revenues.

    2. Yes, because the Governor expressed the opinion that an immediate vote was desirable, and the facts supporting his opinion were rational and reasonable.

    3. No, because the state can alter the conditions under which gambling businesses operate, including allocating a greater share of profits for public benefit.

    Court’s Reasoning

    The court reasoned that the State’s revenue share of off-track betting (0.5% tax plus 20-50% of net revenues over operating expenses) constitutes a “reasonable revenue” within the meaning of the New York Constitution. The Court emphasized that the legislature has broad discretion to determine what constitutes a reasonable revenue. The court noted, “What is a reasonable revenue as a question of judgment and value is normally within the legislative province.”

    The court also held that the Governor’s message accelerating the vote on the proposal complied with the Constitution, finding that the Governor’s stated reasons for requesting an immediate vote were reasonable and that the legislature’s subsequent action in passing the bill demonstrated the public interest in its consideration.

    Regarding the due process claim, the court acknowledged the plaintiffs’ investments in their racetrack and on-track betting businesses. However, the court emphasized that gambling is prohibited in New York unless specifically authorized by the legislature. Therefore, the legislature has the power to alter the conditions under which gambling businesses operate, including allocating a greater share of the profits for public benefit. The court stated, “Continuance of this kind of business depends on legislative permission, and this permission may be conditioned and the imposed conditions altered from time to time according to the legislative view of fairness.” The court found that the off-track betting statute attempted to compensate racetrack owners for the use of their facilities and was not grossly unjust or unreasonable.

    The court distinguished the plaintiffs’ gambling enterprises from other businesses, noting that “Liquor is permitted unless prohibited; in New York gambling is prohibited unless permitted.” This distinction justified greater legislative control over gambling enterprises.