iMEGA submitted the challenge last year, and the District Court dismissed it. iMEGA then appealed the dismissal, and since then the case has been slowly wending its way through the Third Circuit Court of Appeals.

2007: iMEGA files challenge

In June 2007, iMEGA filed suit in the United States District Court in Trenton, N.J. against then-United States Attorney General Alberto Gonzales, the Federal Trade Commission and the Federal Reserve, seeking a temporary restraining order preventing implementation and enforcement of the Unlawful Internet Gambling Enforcement Act.

In its complaint, iMEGA raised a number of grounds challenging the constitutionality and enforceability of the UIGEA, which prohibits financial institutions from engaging in transactions with online sites that engage in "unlawful Internet gambling."

Specifically, iMEGA alleged six causes of action. The first three were based on allegations that the UIGEA violated constitutional rights of "expressive association" (in effect, being part of a group that was targeted by the UIGEA), rights to privacy (the right to gamble in the privacy of your home), and protected commercial speech (the right to advertise and run your business).

The three remaining causes of action presented more of a "kitchen sink" approach to attacking the UIGEA. iMEGA argued that the UIGEA was an ultra vires act of Congress (beyond its authority) inasmuch as it violated a World Treaty Organization order - that is, that the U.S. ban on online gambling interfered with free trade statutes that the United States was party to.

iMEGA also claimed that the UIGEA was an unconstitutional ex post facto law (making conduct that was legal, illegal after the fact), and further claimed it was a violation of the 10th Amendment of the U.S. Constitution, because it took away a right that should have been reserved to the states.

In its papers submitted in support of the hearing on its request for a temporary restraining order, iMEGA buttressed its complaint with a new argument, claiming that the UIGEA's inconsistent regulation of Internet gambling, and its inconsistent effect across the states, also renders it unconstitutional.

Government responds with dismissal

The government responded to the complaint with a motion to dismiss, asserting that iMEGA lacked legal standing to bring suit, that the UIGEA did not violate iMEGA's members' First Amendment or privacy rights, and that the rest of iMEGA's claims were wholly without merit.

After a hearing in front of District Judge Mary Cooper, the court agreed with all but one of the government's arguments. While Judge Cooper agreed with iMEGA that it had properly asserted its legal standing to pursue claims against the government under the First Amendment on behalf of its members (in other words, that iMEGA had "associational standing" with respect to the First Amendment claims), the judge ultimately rejected all of iMEGA's other arguments.

In fact, Judge Cooper agreed with the government on every other legal issue and concluded that the UIGEA had been lawfully enacted and did not impermissibly intrude on the Constitution's guarantees.

She found no violation of iMEGA's member's free speech or privacy rights, and rejected iMEGA's argument that it had standing to raise claims based on the order issued by the World Trade Organization. Judge Cooper further noted that even if iMEGA had standing to assert this claim, the laws of the United States trump the WTO agreement.

The court also quickly dispatched iMEGA's claim that the UIGEA was an ex post facto violation, finding that the law was not retroactive in nature, but prospective. Judge Cooper also rejected iMEGA's assertion that there had been a 10th Amendment violation, because only a state - not an individual or entity - can bring such an action.

Finally, the court ruled that the UIGEA was not "void for vagueness" because it was not so poorly written that a person of average intelligence would have to guess at its meaning (the legal standard governing such a claim).

Having found against iMEGA on virtually every ground, Judge Cooper granted the government's motion to dismiss iMEGA's complaint and denied iMEGA's motion for a temporary restraining order as moot. iMEGA then appealed her decision.

Dept. of Justice rebuts appellate arguments

In its appeal, iMEGA raises three main arguments in an attempt to reverse the District Court's decision to dismiss its action. First, it claims that the UIGEA is unconstitutionally vague so as to make it a violation of its members' due process rights, due to its failure to clarify several key terms, including "unlawful Internet gambling."

It further argues that the judge erred in finding that iMEGA lacked standing to assert the First Amendment rights of private citizens, in addition to those of its member companies.

Finally, it contends that the court misruled in finding no violation of the right to privacy in the implementation of the UIGEA which, it claims, unconstitutionally prohibits private, consensual, legal conduct.

iMEGA did not appeal the ruling on three of its arguments: the WTO treaty infringement, ex post facto and 10th Amendment issues.

In its reply brief, filed Oct. 29, the government argues that iMEGA failed to raise the issue of the language of the UIGEA being "void for vagueness" at the district court, and that therefore it cannot be raised on appeal.

Although it is typically true that issues not asserted at the trial court are waived and cannot thereafter be raised for the first time on appeal, the government's argument is a bit odd, since Judge Cooper did in fact discuss this issue in her order dismissing the case.

The government is focusing, however, on the fact that the original complaint filed by iMEGA did not raise this issue of vagueness explicitly. How the appellate panel ultimately deals with the procedural waiver issue is critical, because it will determine whether the appellate court will even get to the substantive issue of the language of the UIGEA.

The government further argues in its 24-page reply brief that the district court was correct in determining that iMEGA lacked standing to assert a claim based on privacy rights and that, even if such a claim could be brought, the UIGEA does not interfere with those rights.

According to the brief, Internet gambling is not the type of "private, intimate, consensual" conduct that is intended to be protected against any governmental regulation. Simply put, Internet gambling is not a fundamental entitlement of the type covered by the right to privacy.

iMEGA has 15 days from the date of the government's brief to submit a response to the government's arguments. After that, the matter will be set for hearing before a three-judge panel. Oral arguments in the appeal and the issuance of a ruling are expected in 2009.

Related Articles:

[ul][li]iMEGA files appeal of UIGEA lawsuit[/li][li]Law professor join's iMEGA's UIGEA fight[/li][li]Judge gives iMEGA case mixed results[/li][li]iMEGA Submits UIGEA Comments[/li][/ul]
Visit PokerListings.com