Kentucky appeals loss in domain name case

Justice scales

In the wake of the Kentucky Court of Appeal's decision that halted the forfeiture of 141 domain names of Internet gambling sites, lawyers representing the Commonwealth of Kentucky have filed a notice of appeal.

The action was expected, as the losing party has an automatic right of appeal. Plus, given how fervently Kentucky Governor Steve Beshear has pursued his attempts to shut down out-of-state online gambling sites, it was unlikely that he would not continue his fight to protect Kentucky's own gambling interests.

"We're not surprised that Gov. Beshear and Secretary [J. Michael] Brown filed their appeal," confirmed Joe Brennan Jr., chairman of iMEGA, a trade association that had filed the writ of prohibition that the appeal court approved. "They both invested a lot of political capital in this suit. They likely feel they can't back down.

"Their attorneys took this [on] on a contingency fee-basis, and have reportedly sunk over a million dollars of their own money in this suit, and other suits like this that they reportedly prepared for other states," Brennan said.

"Without a win in Kentucky, it will be hard to get those other suits off the ground, and they'll have taken huge losses on their own gamble."

Procedurally, the notice of appeal halts enforcement of the Court of Appeal's decision, which prohibited the lower court judge from enforcing his seizure order and holding the forfeiture hearing. That hearing had already been stayed pending the Court of Appeal's ruling on the writ.

What this means is that nothing will happen to the domain names in question until after the Kentucky Supreme Court weighs in.

The Supreme Court of Kentucky is a seven-member panel of justices, currently five men and two women, who are elected from the seven appellate districts in the state and serve eight-year terms. They are not appointees of the Governor.

The Kentucky Court of Appeals found in favor of the domain names, by a 2-1 vote, on the narrow issue that they were not "gambling devices" as defined under the applicable Kentucky seizure statute.

By basing its ruling on the interpretation of the state statute, the Court of Appeal was not required to address other issues raised, including claims that the lower court's order violated constitutional protections under both the First Amendment and the Commerce Clause.

Thus, the issue before the state Supreme Court will be whether the Court of Appeal erred in its interpretation of the Kentucky seizure statute. For Kentucky to prevail, the Supreme Court would have to agree with the dissenting opinion that the domain names are in fact "gambling devices."

"We feel very good with where we're at right now," said Jon L. Fleischaker, lead attorney for iMEGA and managing partner at Dinsmore & Shohl in Louisville, Ky. "The Court of Appeals was very clear in its ruling that you cannot use Kentucky's 'gambling devices' law to seize Internet domain names, because they do not meet the statutory definition."

But Michael Brown, secretary of the Kentucky Justice and Public Safety Cabinet, intends to continue the fight to shut down all online gambling that originates from outside the state.

On Wednesday, Brown announced the upcoming appeal. "The Commonwealth will continue its action to protect Kentucky citizens from illegal Internet gambling operations, and appeal the recent Court of Appeals ruling to the state Supreme Court."

Finding a silver lining, he stated that the Court of Appeal's decision "demonstrated that illegal and unregulated activity is occurring in Kentucky, and that millions of dollars are being lost as a result of that activity, a fact that wasn't disputed in Tuesday's ruling."

Using the one dissenting opinion to bolster his position, Brown noted, "We now have two judges who agree with our position and two who disagree. So the most appropriate step is to make our case to the higher court."

John Pappas, executive director of the Poker Players Alliance, an advocacy group for poker players, issued a statement following the notice of appeal, saying, "Kentucky residents should be outraged that the commonwealth is investing another minute of time and another dollar of scarce resources in this quixotic case."

Pappas' statement went on to add, "Unfortunately, the Governor and the hired-gun attorneys want to drag their ultimate defeat to another venue at the expense of Internet freedom and the rights of law-abiding Kentucky poker players."

It's too soon to say when the Kentucky State Supreme Court may take up the appeal, but it is expected that it may be sometime this spring.

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