Case 3:14-cv-06450-MAS-LHG Document 91 Filed 07/16/18 Page ... · 7/16/2018 · united states...

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

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NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, an

unincorporated association, NATIONAL BASKETBALL ASSO-

CIATION, a joint venture, NATIONAL FOOTBALL LEAGUE,

an unincorporated association, NATIONAL HOCKEY LEAGUE,

an unincorporated association, and OFFICE OF THE COMMIS-

SIONER OF BASEBALL, an unincorporated association doing

business as Major League Baseball,

Plaintiffs,

v.

PHILIP D. MURPHY, Governor of the State of New Jersey, DA-

VID L. REBUCK, Director of the New Jersey Division of Gaming

Enforcement and Assistant Attorney General of the State of New

Jersey, and FRANK ZANZUCCKI, Executive Director of the New

Jersey Racing Commission, NEW JERSEY THOROUGHBRED

HORSEMEN’S ASSOCIATION, INC., and NEW JERSEY

SPORTS AND EXPOSITION AUTHORITY,

Defendants.

_____________________________________________________

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Civil Action No. 3:14-cv-06450

(MAS)(LHG)

PLAINTIFFS’ MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANT NJTHA’S

MOTION FOR JUDGMENT ON INJUNCTION BOND AND DAMAGES

Of Counsel:

Jeffrey A. Mishkin

Anthony J. Dreyer

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

Four Times Square

New York, New York 10036-6522

Phone: (212) 735-3000

Paul D. Clement

Erin E. Murphy

KIRKLAND & ELLIS LLP

665 Fifteenth Street, N.W.

Washington, D.C. 20005

Phone: (202) 879-5000

William J. O’Shaughnessy

Richard Hernandez

McCARTER & ENGLISH, LLP

Four Gateway Center

100 Mulberry Street

Newark, New Jersey 07102

Phone: (973) 622-4444

Attorneys for Plaintiffs National Collegiate Athletic

Association, National Basketball Association, Na-

tional Football League, National Hockey League,

and Office of the Commissioner of Baseball

Case 3:14-cv-06450-MAS-LHG Document 91 Filed 07/16/18 of 24 PageID: 1881

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Table of Contents

Table of Authorities ........................................................................................................................ ii

Preliminary Statement ......................................................................................................................1

Factual Background .........................................................................................................................4

A. The Initial Litigation (“Christie I”)..........................................................................4

B. The Current Litigation (“Christie II”)......................................................................6

Argument .........................................................................................................................................9

I. AS A MATTER OF LAW, ANY LIABILITY UNDER THE TRO BOND IS

LIMITED TO COSTS AND DAMAGES SUSTAINED DURING THE FOUR-

WEEK PENDENCY OF THE TRO, WHICH EXPIRED ON NOVEMBER 21,

2014....................................................................................................................................10

II. NJTHA’S ARGUMENT THAT THE LEAGUES ACTED IN BAD FAITH IN

PURSUING THEIR RIGHTS UNDER PASPA IS FRIVOLOUS ...................................11

A. As A Matter Of Law, The Leagues Did Not Act In Bad Faith In Seeking

To Protect Their Rights Under A Statute That Was Subsequently

Determined To Be Unconstitutional ......................................................................12

B. As A Matter Of Law, The Leagues Did Not Act In Bad Faith In Seeking

To Protect Their Rights Under PASPA Despite Some Of The Leagues

Having Promoted Fantasy Sports, Held Events In Jurisdictions Where

Sports Gambling Is Licensed, And/Or Failed To Stop Sports Betting On

Events Like March Madness ..................................................................................13

III. NJTHA IS NOT ENTITLED TO RECOVER ANYTHING UNDER THE BOND

BECAUSE, AS A MATTER OF LAW, IT WAS NOT “WRONGFULLY

ENJOINED” BY THE TRO ..............................................................................................17

IV. NJTHA HAS NOT PROVEN THE EXISTENCE OR AMOUNT OF ANY

ALLEGED DAMAGES DURING THE FOUR WEEKS THAT IT WAS

RESTRAINED BY THE TRO ..........................................................................................18

Conclusion .....................................................................................................................................20


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Table of Authorities

Cases

Astrazeneca LP v. Breath Ltd.,

No. 08-cv-1512 (RMB) (AMD), Dkt. No. 1237 (D.N.J. Aug. 6, 2015) ............................19

In re Continental Airlines, Inc.,

279 F.3d 226 (3d Cir. 2002)...............................................................................................15

Coyne-Delany Co. v. Capital Development Board,

717 F.2d 385 (7th Cir. 1983) .......................................................................................17, 18

Don Post Studios, Inc. v. Cinema Secrets, Inc.,

148 F. Supp. 2d 572 (E.D. Pa. 2001) .................................................................................15

Global NAPs, Inc. v. Verizon New England, Inc.,

489 F.3d 13 (1st Cir. 2007) ................................................................................................18

Henglein v. Colt Industries Operating Corp.,

260 F.3d 201 (3d Cir. 2001)...............................................................................................15

Humphrey v. Viacom, Inc.,

No. 06-2768 (DMC), 2007 WL 1797648 (D.N.J. June 20, 2007) .......................................6

Instant Air Freight Co. v. C.F. Air Freight, Inc.,

882 F.2d 797 (3d Cir. 1989)...............................................................................................15

Izzo v. Township of Raritan,

No. 15-1262 (MAS) (TJB), 2016 WL 4107686 (D.N.J. July 28, 2016) ............................15

Latuszewski v. VALIC Financial Advisors, Inc.,

393 F. App’x 962 (3d Cir. 2010) .................................................................................17, 19

NCAA v. Christie,

No. 12-cv-4947 (MAS) (LHG), 2012 WL 6698684 (D.N.J. Dec. 21, 2012) ......................5

NCAA v. Christie,

926 F. Supp. 2d 551 (D.N.J.), aff’d, 730 F.3d 208 (3d Cir. 2013), cert. denied,

134 S. Ct. 2866 (2014) ............................................................................................... passim

NCAA v. Christie,

61 F. Supp. 3d 488 (D.N.J. 2014), aff’d, 799 F.3d 259 (3d Cir. 2015), aff’d,

832 F.3d 389 (3d Cir. 2016) (en banc), rev’d on other grounds sub nom.

Murphy v. NCAA, 138 S. Ct. 1461 (2018) ................................................................. passim

Office of Commissioner v. Markell,

579 F.3d 293 (3d Cir. 2009)...........................................................................................5, 12


iii

qad. inc. v. ALN Associates, Inc.,

781 F. Supp. 561 (N.D. Ill. 1992) ......................................................................................16

Scanvec Amiable Ltd. v. Chang,

No. 02-6950, 2002 WL 32341772 (E.D. Pa. Nov. 1, 2002) ..............................................10

Sprint Communications Co. v. CAT Communications International, Inc.,

335 F.3d 235 (3d Cir. 2003).........................................................................................11, 18

Steinberg v. Am. Bantam Car Co.,

173 F.2d 179 (3d Cir. 1949)...............................................................................................10

Statutes and Rules

28 U.S.C. §§ 3701-3704 ............................................................................................................1, 12

Fed. R. Civ. P. 65(c) ......................................................................................................................17

Other Authorities

11A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice &

Procedure § 2954 (3d ed. 2013) .........................................................................................10

13 James Wm. Moore, Moore’s Federal Practice § 65.53 (3d ed. 2018) ......................................19


Preliminary Statement

Plaintiffs National Collegiate Athletic Association (“NCAA”), National Basketball Asso-

ciation (“NBA”), National Football League (“NFL”), National Hockey League (“NHL”), and

Office of the Commissioner of Baseball doing business as Major League Baseball (“MLB”)

(collectively the “Leagues”) respectfully submit this memorandum of law in opposition to the

motion, pursuant to Federal Rule of Civil Procedure 65.1, of defendant New Jersey Thorough-

bred Horsemen’s Association, Inc. (“NJTHA”). In that motion, NJTHA seeks to recover nearly

$150 million in damages against the $3.4 million bond that this Court ordered to secure a four-

week temporary restraining order (“TRO”) during the period between October 24, 2014, when

the TRO was issued, and November 21, 2014, when the TRO expired and was replaced by a final

judgment and permanent injunction, for which no bond was sought or issued. NJTHA acknowl-

edges that a wrongfully enjoined party’s recovery for damages is ordinarily limited to the amount

of the bond. (NJTHA Br. at 34.) But NJTHA asserts that it is entitled to recover more than forty

times the amount of the bond in this case for damages allegedly suffered over a 42-month period

because, NJTHA argues, the Leagues acted in bad faith in pursuing their rights under a statute

that was subsequently declared unconstitutional. As demonstrated below, NJTHA is not entitled

to recover anything from the injunction bond, and its motion should be denied.

First, Third Circuit law is clear that any liability under a bond issued pursuant to a TRO

does not extend beyond the expiration or dissolution of the TRO. But NJTHA does not limit its

damages claim to the four-week period during which the TRO was in effect. Rather, NJTHA

claims damages for its inability to offer sports gambling at Monmouth Park during the entire

period between this Court’s issuance of the TRO and the United States Supreme Court’s decision

on May 14, 2018, striking down the Professional and Amateur Sports Protection Act, 28 U.S.C.

§§ 3701-3704 (“PASPA”), as unconstitutional. To the extent that NJTHA seeks damages for the


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period after November 21, 2014, when the TRO expired and this Court entered final judgment in

the case, NJTHA’s motion must be denied.

Second, NJTHA’s attempt to expand its recovery to include damages that exceed the

amount of the bond and that were allegedly sustained after the expiration of the TRO by

asserting that the Leagues acted in bad faith in pursuing their rights under PASPA is specious,

and should be rejected as a matter of law. Given that this Court and the Third Circuit had

previously upheld the constitutionality of PASPA, NCAA v. Christie, 926 F. Supp. 2d 551, 561-

62 (D.N.J.), aff’d, 730 F.3d 208 (3d Cir. 2013), cert. denied, 134 S. Ct. 2866 (2014) (“Christie

I”), the Supreme Court’s subsequent invalidation of the statute in May 2018 is wholly irrelevant

to the question of whether the Leagues acted with good or bad faith in October 2014, when they

sought and obtained the TRO and posted the $3.4 million bond in support thereof. In addition,

this Court and the Third Circuit have squarely held that the Leagues were entitled, as a matter of

law, to seek to enforce their rights under PASPA to be free from state-sponsored sports betting,

even though at least some of them participated in fantasy sports and otherwise coexisted with

lawful and unlawful sports wagering. When it issued the TRO, this Court was fully aware that

some of the Leagues participated in fantasy sports, held sporting events in locations (like London,

Las Vegas and Canada) where sports betting is legal, had not (according to NJTHA) curbed the

proliferation of sports pools on championships like March Madness, and/or recognized that

sports betting may eventually be more broadly legalized. Having litigated and lost this issue in

both Christie I and in this case, NJTHA is barred by the doctrines of collateral estoppel and law

of the case from relitigating the issue anew. Furthermore, the undisputed facts do not support

NJTHA’s contention that the Leagues misled the Court or otherwise acted in bad faith in


3

protecting their rights under PASPA and seeking a brief TRO pending a final decision on their

PASPA claims.

Third, NJTHA cannot establish as a matter of law that it was “wrongfully enjoined,” a

predicate for any recovery at all against the bond. As NJTHA’s own legal authorities recognize,

bonds are required under Rule 65 because TROs are issued on an expedited basis without the

benefit of a full factual or legal record, and thus are subject to being reversed once a full record is

developed. Here, bound by the Third Circuit’s earlier holding that PASPA was constitutional,

this Court issued the TRO on the ground that the Leagues were likely to prevail on the merits of

their claim that New Jersey’s putative “partial repeal” of its sports gambling laws was, in fact, an

authorization of such gambling in violation of PASPA. On a full record, that conclusion was

affirmed, not only by this Court, but by the Third Circuit panel, the Third Circuit en banc, and a

majority of the Supreme Court. NCAA v. Christie, 61 F. Supp. 3d 488 (D.N.J. 2014), aff’d, 799

F.3d 259 (3d Cir. 2015), aff’d, 832 F.3d 389 (3d Cir. 2016) (en banc), rev’d on other grounds

sub nom. Murphy v. NCAA, 138 S. Ct. 1461 (2018) (“Christie II”). Indeed, in light of the Third

Circuit’s earlier holding in Christie I, the grounds on which this Court’s ultimate holding was

reversed—PASPA’s unconstitutionality—was not even at issue on the motion for the TRO.

Given the state of the law in October 2014, it can hardly be said that this Court wrongfully

entered the TRO.

Finally, even if NJTHA were permitted to recover damages for its inability to offer sports

betting at Monmouth Park during the four-week pendency of the TRO, the law is clear that the

entry of a bond merely sets the ceiling for a wrongfully enjoined party’s total recovery (including

any interest). But such a party is not automatically entitled to recover the full bond amount.

Rather, the party seeking recovery bears the burden to establish the existence and amount of its


4

actual losses during the TRO period. Despite its assertion to the contrary, NJTHA has not

already established—and this Court has made no factual findings about—the existence and

amount of any damages it allegedly sustained during the pendency of the TRO. Accordingly, the

amount of any such damages cannot be established as a matter of law on this motion, but must

await discovery into NJTHA’s financial and other records and an evidentiary hearing.

Factual Background

A. The Initial Litigation (“Christie I”)

The dispute between the Leagues and NJTHA began in 2012, when the State of New Jer-

sey first enacted a law authorizing sports gambling at New Jersey horse racetracks and Atlantic

City casinos, prompting the Leagues to file a lawsuit to enjoin enforcement of that law as a viola-

tion of PASPA. NJTHA intervened as a defendant in the lawsuit, asserting that it intended to

offer sports gambling at Monmouth Park racetrack. In their cross-motion for summary judgment,

the defendants argued that (i) the Leagues lacked Article III standing to enforce PASPA because

they would not be harmed by the spread of legalized sports gambling to New Jersey, and in fact

would benefit from it, and (ii) PASPA was unconstitutional. In support of their lack of injury

argument, the defendants asserted that the Leagues (a) invested in and promoted fantasy sports,

(b) held games in jurisdictions, like London, where sports gambling is legal, (c) failed to take

adequate measures to stop fans from gambling on their games, and/or (d) had financial relation-

ships with casinos. The defendants argued that the sworn statements by the four professional

League Commissioners and the NCAA President expressing their views that the spread of state-

sponsored sports wagering would irreparably harm the Leagues—the same statements on which

NJTHA predicates the instant motion—were untrue and evidenced the Leagues’ hypocrisy in

seeking to enforce PASPA and halt the spread of state-sponsored sports gambling in New Jersey.


5

On December 21, 2012, this Court denied the defendants’ cross-motion for summary

judgment, and held that the Leagues had indeed demonstrated injury-in-fact from New Jersey’s

violation of PASPA. NCAA v. Christie, No. 12-cv-4947 (MAS) (LHG), 2012 WL 6698684

(D.N.J. Dec. 21, 2012). This Court held that the Third Circuit’s prior decision in Office of

Commissioner v. Markell, 579 F.3d 293 (3d Cir. 2009), had already established that a violation

of PASPA caused injury-in-fact to the Leagues. Id. at *3. Moreover, this Court concluded that

the Leagues had established, through congressionally funded studies, several undisputed

consumer surveys, and the testimony of defendants’ own expert, that New Jersey’s authorization

of sports gambling was likely to cause reputational harm to the Leagues. Id. at *6-7.

Two months later, on February 28, 2013, this Court held that PASPA was constitutional,

and permanently enjoined New Jersey from authorizing sports wagering. Christie I, 926 F. Supp.

2d 551. In so doing, this Court held that the Leagues had established irreparable injury; indeed,

this Court wrote, New Jersey’s “enactment of the Sports Wagering Law in violation of the

Supremacy Clause, alone, likely constitutes an irreparable harm requiring the issuance of a

permanent injunction.” Id. at 578 (citations omitted).

The Third Circuit affirmed this Court’s decisions, holding that PASPA was constitutional

and that the Leagues had shown sufficient threatened harm to entitle them to a permanent

injunction. NCAA v. Governor of N.J., 730 F.3d 208 (3d Cir. 2013), cert. denied, 134 S. Ct.

2866 (2014). The Third Circuit considered—and rejected—the defendants’ arguments that the

Leagues had not shown irreparable injury because some of the Leagues (i) have been economi-

cally prosperous despite pervasive unregulated sports gambling and state-licensed sports

wagering in Nevada, (ii) actually benefit from sports wagering, (iii) hold events in jurisdictions,

such as Canada and England, where gambling on sports is licensed, and/or (iv) promote and


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profit from products that are allegedly “akin to gambling on sports, such as pay-to-play fantasy

leagues.” Id. at 223.1 The court concluded: “That the Leagues have standing to enforce a

prohibition on state-licensed gambling on their athletic contests seems to us a straightforward

conclusion, particularly given the proven stigmatizing effect of having sporting contests

associated with gambling, a link that is confirmed by commonsense and Congress’ own

conclusions.” Id. at 223-34 (emphasis added) (footnote omitted).

B. The Current Litigation (“Christie II”)

Immediately after the Supreme Court denied certiorari in Christie I, New Jersey again

attempted to legalize sports gambling, enacting a law that purported to “repeal” certain prohibi-

tions against sports gambling only at New Jersey racetracks and Atlantic City casinos. NJTHA

announced that it would begin offering sports wagering at Monmouth Park beginning on October

25, 2014. The Leagues brought suit to enjoin the new statute on October 20, 2014, and, when

NJTHA refused to postpone the beginning of its sports wagering operations, the Leagues moved

for a TRO and preliminary injunction.

The defendants, including NJTHA, opposed the TRO, arguing that the new law comport-

ed with PASPA because the selective repeal did not authorize sports gambling in violation of

PASPA. In addition, the NJTHA reasserted its contention that the Leagues could not show

irreparable harm from sports betting at Monmouth Park because, among other things, the new

Commissioner of the NBA had made public statements supporting legalized sports gambling, the

NFL participated in, and failed to enjoin, fantasy football tournaments, the NCAA was unable to

1 The Third Circuit noted that, in fact, fantasy leagues are legally distinct from the sports wager-

ing contemplated by the New Jersey Sports Wagering Law. Id. at 223 n.4 (citing Humphrey v.

Viacom, Inc., No. 06-2768 (DMC), 2007 WL 1797648, at *9 (D.N.J. June 20, 2007) (holding

that fantasy leagues that require an entry fee are not subject to anti-betting and wagering laws)).


7

“prevent March Madness brackets,” and the Leagues held games in “Las Vegas and London,

respectively, where sports betting is legal” or have “teams located in Canada where sports

betting is legal.” (ECF No. 21, at 4-5, 31-32.2) Bound by the Third Circuit’s holding in Christie

I that PASPA was constitutional, NJTHA did not challenge the constitutionality of PASPA in the

TRO proceedings.

On October 24, 2014, this Court granted the TRO (ECF No. 32), holding that the Leagues

were likely to prevail on the merits of their argument that the partial “repeal” of sports wagering

laws limited only to casinos and racetracks constituted an authorization of such gambling in

violation of PASPA. This Court also held that the Leagues had demonstrated a threat of

irreparable injury, notwithstanding NJTHA’s arguments about the Leagues’ involvement with

fantasy leagues and jurisdictions where sports betting is legal, because (i) “[c]onstitutional and

statutory violations . . . generally constitute irreparable harm” (ECF No. 41, at 13:20-23), and (ii)

the record was “replete with evidence” demonstrating irreparable harm that would be a “direct

result of sports wagering on plaintiffs’ games.” (Id. at 13:24-15:8.)

With the granting of the TRO, this Court ordered the Leagues to post a bond in the

amount of $1.7 million, explaining that the amount was a matter of the Court’s discretion, and

that in this instance, the Court “finds it appropriate to set the bond on the high side to avoid any

potential loss to defendants.” (Id. at 19:6-16.) This Court invited NJTHA to make an applica-

tion to the Court to increase the bond amount if it asserted that enjoining it from offering sports

gambling “poses a risk of harm greater than the value of the bond currently set.” (Id. at 19:18-

20.) On October 27, this Court directed that “the 14-day limitation period on the temporary

restraining order is extended, for good cause, and by consent of all parties, for an additional 14

2 All references to “ECF” are to docket entries in this action, No. 14-cv-6450 (MAS) (LHG).


8

days pursuant to Federal Rule of Civil Procedure 65(b)(2) until November 21, 2014.” (ECF No.

38, at 2.) In the same order, this Court ordered the bond amount increased to $3.4 million. (Id.)

At no point did the parties litigate—or did the Court make any express factual findings—

concerning the actual damages that NJTHA would suffer if it were precluded from sports

gambling operations during the four-week pendency of the TRO.

On November 10, 2014, this Court consolidated the Leagues’ application for a prelimi-

nary injunction with a decision on the merits of their complaint (ECF No. 50), and on November

21, 2014, this Court granted summary judgment to the Leagues, issuing a permanent injunction

in the Leagues’ favor. Christie II, 61 F. Supp. 3d 488. On the same day, the four-week-old TRO

expired by its own terms. On November 24, 2014, NJTHA filed a notice of appeal (ECF No. 68),

but did not request the posting of any post-judgment or appeal bond.

A panel of the Third Circuit affirmed this Court’s decision, reconfirming the constitu-

tionality of PASPA and expressly rejecting NJTHA’s repeated argument that the Leagues were

acting improperly by asserting that they were threatened with irreparable injury by the

authorization of sports wagering in New Jersey:

The NJTHA contends that the Leagues are essentially hypocrites because they en-

courage and profit from sports betting, noting that the NFL has been scheduling

games in London where sports gambling is legal, that the NCAA holds events in

Las Vegas where sports gambling is legal, and that the Leagues sanction and en-

courage fantasy sports betting. . . . It is not ‘unconscionable’ for the Leagues to

support fantasy sports and hold events in Las Vegas or London, nor is doing so

‘immediately related’ to the 2014 Law. We cannot conclude that the Leagues

acted unconscionably, i.e., amorally, abusively, or with extreme unfairness, in re-

lation to the 2014 Law.

NCAA v. Governor of N.J., 799 F.3d at 268 (emphasis added). By a 9-3 vote, the Third Circuit

sitting en banc also affirmed this Court’s grant of summary judgment, holding that “the 2014


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Law violates PASPA because it authorizes by law sports gambling,” and “continu[ing] to find

PASPA constitutional.” NCAA v. Governor of N.J., 832 F.3d at 402.

On May 14, 2018, the Supreme Court agreed with the Leagues and this Court that

“[w]hen a State completely or partially repeals old laws banning sports gambling, it ‘authorize[s]’

that activity.” Murphy v. NCAA, 138 S. Ct. 1461, 1474 (2018). The Supreme Court reversed the

judgment of the Third Circuit and this Court, however, on the grounds that PASPA impermissi-

bly commandeered the States, and thus was unconstitutional as a violation of the Tenth

Amendment. Id. at 1475-81.

Following the Supreme Court’s decision, NJTHA was free to offer sports gambling at

Monmouth Park. One month later, on June 14, 2018, it opened a sports book at the racetrack.

On May 24, 2018, even before it began operating its sports book, NJTHA filed this

motion. In its motion, NJTHA asserts that it is entitled to recover nearly $150 million in

damages allegedly suffered over the 42-month period between the issuance of the TRO and the

Supreme Court’s decision in May 2018 because, NJTHA argues, the Leagues acted in bad faith

in pursuing their rights under a statute that was ultimately declared unconstitutional while

simultaneously participating in fantasy sports and/or otherwise coexisting with, and allegedly

benefiting from, lawful and unlawful sports wagering.

Argument

NJTHA is not entitled to recover anything from the TRO bond, and its motion should be

denied for several reasons. First, as a matter of law, NJTHA may not recover damages allegedly

sustained after the expiration of the TRO on November 21, 2014. Second, NJTHA’s effort to

recover more than the amount of the bond for damages allegedly sustained after the expiration of

the TRO by asserting that the Leagues acted in bad faith in pursuing their rights under PASPA is


10

frivolous and should be rejected. Third, NJTHA is not entitled to recover anything under the

bond because, as a matter of law, it was not “wrongfully enjoined” by the TRO. And fourth,

NJTHA has not proven the existence or amount of any alleged damages during the four weeks

that it was restrained by the TRO.

I. AS A MATTER OF LAW, ANY LIABILITY UNDER THE TRO BOND IS

LIMITED TO COSTS AND DAMAGES SUSTAINED DURING THE FOUR-

WEEK PENDENCY OF THE TRO, WHICH EXPIRED ON NOVEMBER 21, 2014

Longstanding Third Circuit precedent establishes that “[t]he liability under a bond given

pursuant to a temporary restraining order cannot be carried over to cover possible liability under

a preliminary injunction,” much less under a final judgment and permanent injunction. Steinberg

v. American Bantam Car Co., 173 F.2d 179, 181 (3d Cir. 1949); accord Scanvec Amiable Ltd. v.

Chang, No. 02-6950, 2002 WL 32341772, at *3 (E.D. Pa. Nov. 1, 2002) (“Pursuant to Rule

65(c), the issuing court must make independent bond determinations for each injunctive period,”

and “a bond given pursuant to a temporary restraining order cannot be carried over to cover

possible liability under a preliminary injunction.” (quoting Steinberg, 173 F.2d at 181)). The

purpose of Rule 65(c) in connection with a TRO “is to enable a restrained or enjoined party to

secure indemnification for any costs, usually not including attorney’s fees, and any damages that

are sustained during the period in which a wrongfully issued [TRO] remains in effect.” 11A

Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 2954

(3d ed. 2013) (emphasis added). NJTHA does not cite a single contrary legal authority.

In the instant case, the TRO was in effect for four weeks and expired by its own terms on

November 21, 2014. With no post-judgment or appeal bond in place, the Leagues cannot be held

liable for any losses that NJTHA claims occurred after the expiration of the TRO. Accordingly,


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11

NJTHA’s request for damages allegedly suffered after November 21, 2014 should be rejected as

a matter of law.

II. NJTHA’S ARGUMENT THAT THE LEAGUES ACTED IN BAD FAITH

IN PURSUING THEIR RIGHTS UNDER PASPA IS FRIVOLOUS

NJTHA concedes that “ordinarily a wrongfully enjoined party will not recover damages

in excess of the bond amount.” (NJTHA Br. at 34.) The bond “generally limits the liability of

the applicant,” and thus permits the party seeking a TRO to determine “whether it wants to

expose itself to liability up to the bond amount.” Sprint Commc’ns Co. v. CAT Commc’ns Int’l,

Inc., 335 F.3d 235, 240 (3d Cir. 2003).

Perhaps in recognition of this general rule, counsel for NJTHA explained to Magistrate

Judge Goodman at the June 20, 2018 conference that, notwithstanding any contrary statements in

its brief, NJTHA was not seeking damages in excess of the $3.4 million bond amount (plus

interest) for the four-week period during which the TRO was in effect. NJTHA predicates its

request for an additional nearly $145 million in damages, which it asserts were suffered since the

expiration of the TRO, on its argument that the Leagues acted in bad faith in pursuing their rights

under PASPA. According to NJTHA, the Leagues’ alleged bad faith was manifested by (i) their

efforts to protect their rights under a statute—PASPA—that the Supreme Court subsequently

declared unconstitutional, and (ii) their assertion that they were threatened with irreparable harm

while simultaneously benefiting from (a) their investments and promotion of fantasy leagues, (b)

the holding of their events in jurisdictions that permit legalized sports betting, and/or (c) their

failure to stop sports betting on events like March Madness. This argument is frivolous, and

should be rejected as a matter of law.


12

A. As A Matter Of Law, The Leagues Did Not Act In Bad

Faith In Seeking To Protect Their Rights Under A Statute

That Was Subsequently Determined To Be Unconstitutional

NJTHA cites no authority for the patently absurd proposition that reliance on a duly en-

acted federal statute constitutes bad faith because the Supreme Court subsequently invalidated

the statute as unconstitutional years after that reliance. Congress enacted PASPA in 1992, and,

for more than twenty-five years, the clear language of the statute expressly provided the Leagues

with a cause of action to obtain injunctive relief to address violations of the statute. See 28

U.S.C. § 3703. Until May 2018, every challenge to the constitutionality of PASPA—both before

and after the Leagues relied on the statute to seek a TRO—had been rejected.

In Markell, for example, some five years before the League relied on PASPA to seek the

TRO at issue on this motion, the Third Circuit enforced PASPA against the State of Delaware

and rejected Delaware’s argument that “its sovereign status requires that it be permitted to

implement its proposed betting scheme.” Markell, 579 F.3d at 303. Four years later, in Christie

I, both this Court and the Third Circuit concluded that PASPA was constitutional, a position

supported by both the Leagues and the United States Department of Justice. 926 F. Supp. 2d 551

(D.N.J.), aff’d, 730 F.3d 208 (3d Cir. 2013).

After the Leagues relied on PASPA to seek the TRO in this case, the Department of Jus-

tice supported the Leagues’ position and a panel of the Third Circuit reaffirmed that the statute

passed constitutional muster. NCAA v. Governor of N.J., 799 F.3d 259 (3d Cir. 2015). So, too,

did a 9-3 majority of the Third Circuit sitting en banc. NCAA v. Governor of N.J., 832 F.3d 389

(3d Cir. 2016). And even at the Supreme Court, three justices dissented and believed that some

or all of PASPA should have survived constitutional scrutiny. 138 S. Ct. at 1488-90 (Ginsburg,

J., with whom Sotomayor, J., joins, and with whom Breyer, J., joins in part, dissenting).


13

In view of the history of the constitutional challenges to PASPA and the substantial

judicial and executive branch support for the constitutionality of the statute, NJTHA’s assertion

that the Leagues acted in bad faith in “relying on what the Supreme Court decided is an

unconstitutional statute” (NJTHA Br. at 2) is specious, and should be rejected as a matter of law.

B. As A Matter Of Law, The Leagues Did Not Act In Bad Faith

In Seeking To Protect Their Rights Under PASPA Despite

Some of the Leagues Having Promoted Fantasy Sports,

Held Events In Jurisdictions Where Sports Gambling Is Licensed,

And/Or Failed To Stop Sports Betting On Events Like March Madness

NJTHA’s other predicate for its argument that the Leagues acted in bad faith in pursuing

their rights under PASPA is equally frivolous. It is nothing more than a regurgitation of the

same baseless assertion that the Leagues were not entitled to pursue the causes of action that

Congress expressly provided to them under PASPA because, according to NJTHA, some of the

Leagues simultaneously participated in and promoted fantasy sports leagues, held certain of their

events in jurisdictions, like London, Las Vegas and Canada, where sports betting is legal, failed

to prevent fans from betting on sporting events like March Madness, and/or made public state-

ments acknowledging the possibility that legalized sports gambling may be expanded. Accord-

ing to NJTHA, the sworn statements of the four professional League Commissioners, the NCAA

President and the Leagues’ in-house counsel expressing the declarants’ opinions that the spread

of state-sponsored sports wagering would likely cause irreparable harm to the Leagues were false,

and misled the Court into granting the TRO and ultimately the permanent injunction in this case.

As explained above, NJTHA has fought this fight several times before in both Christie I

and in this case, and has consistently lost it. It joined in New Jersey’s unsuccessful argument in

Christie I that the Leagues lacked Article III standing, asserting that the same sworn statements

on which NJTHA relies on this motion were false and that the Leagues were not threatened with


14

injury by the spread of state-sponsored sports gambling because some of them promoted fantasy

leagues or held events in locations that permitted legalized sports wagering. This Court rejected

that argument, finding that the evidence—including congressionally funded studies, several con-

sumer surveys, and the testimony of the defendants’ own expert witness—amply demonstrated

the likelihood that the spread of state-sponsored sports gambling would cause irreparable harm to

the Leagues. And the Third Circuit agreed, concluding: “That the Leagues have standing to

enforce a prohibition on state-licensed gambling on their athletic contests seems to us a straight-

forward conclusion, particularly given the proven stigmatizing effect of having sporting contests

associated with gambling, a link that is confirmed by commonsense and Congress’ own conclu-

sions.” NCAA v. Governor of N.J., 730 F.3d at 223-34 (emphasis added) (footnote omitted).

NJTHA reignited this fight again in this case, opposing both the TRO and the permanent

injunction with arguments that the Leagues’ claims of threatened irreparable harm were false and

hypocritical, and that the Leagues came to the Court with unclean hands because some of the

Leagues benefited from their promotion of fantasy sports, their events in jurisdictions where

sports betting is legal, and/or their alleged inability or unwillingness to stop fans from betting on

events like March Madness. Again, this Court rejected NJTHA’s assertions, holding that the

well-developed record in Christie I was “replete with evidence” demonstrating increased risk of

irreparable harm that would be a “direct result of sports wagering on plaintiffs’ games.” (ECF

No. 41, at 13:24-15:8.) And again, the Third Circuit affirmed that conclusion, expressly holding

that the Leagues had not acted improperly by asserting that they were threatened with irreparable

injury by the authorization of sports wagering in New Jersey. NCAA v. Governor of N.J., 799

F.3d at 268 (“We cannot conclude that the Leagues acted unconscionably, i.e., amorally,

abusively, or with extreme unfairness, in relation to the 2014 Law.”).


15

Having litigated and lost this issue in both Christie I and in this case, NJTHA is barred by

the doctrines of collateral estoppel and law of the case from relitigating the issue anew. See, e.g.,

Henglein v. Colt Indus. Operating Corp., 260 F.3d 201, 209 (3d Cir. 2001) (litigant barred from

relitigating an issue under doctrine of collateral estoppel where, as here, (i) the same issue was

previously adjudicated, (ii) the issue was actually litigated, (iii) the previous determination was

necessary to the decision, and (iv) the party being precluded from relitigating the issue was fully

represented in the prior action); In re Continental Airlines, Inc., 279 F.3d 226, 232-33 (3d Cir.

2002) (precluding relitigation of an issue that was “properly presented and ably and vigorously

argued,” and explaining that the law of the case doctrine ensures that court decisions on rules of

law “continue to govern the same issues in subsequent stages in the same case”) (internal

quotations omitted); Izzo v. Township of Raritan, No. 15-1262 (MAS) (TJB), 2016 WL 4107686,

at *2-3 (D.N.J. July 28, 2016) (Shipp, J.) (dismissing claims based on law of the case doctrine,

pursuant to which “a court generally should not reconsider issues of law decided in earlier stages

of the same litigation”).

Moreover, even if this Court were inclined to revisit this well-worn argument once again,

it is clear that this is not one of the “rare exceptions” in which an enjoined party may recover

provable damages in excess of the amount of the bond securing temporary injunctive relief.

Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 804 (3d Cir. 1989). Unlike the

Leagues in this case, the plaintiffs in the two cases on which NJTHA relies to support its claim to

exceed the bond amount had made intentionally and demonstrably false statements of objective

fact to secure the injunctive relief they sought. In Don Post Studios, Inc. v. Cinema Secrets, Inc.,

148 F. Supp. 2d 572 (E.D. Pa. 2001), for instance, the “plaintiffs filed a frivolous, objectively

unreasonable lawsuit and sought an injunction on the basis of a copyright that plaintiffs knew to


16

be invalid.” Id. at 575-76. Likewise, in qad. inc. v. ALN Assocs., Inc., 781 F. Supp. 561 (N.D.

Ill. 1992), the plaintiff based its request for a preliminary injunction on copyrights that it did not

actually own, and engaged in “egregious” copyright misuse and deception of the court. Id. at

562-63.

The outright factual falsehoods in those two cases bear no resemblance to the statements

made by the four professional League Commissioners, the NCAA President and the Leagues’

in-house counsel on which NJTHA bases its claim of bad faith. Those statements are

expressions of the concern about the risks to which the Leagues would be increasingly exposed if

state-sponsored sports gambling were spread in violation of PASPA. And, as this Court and the

Third Circuit recognized, those expressions of concern were fully supported by congressionally

funded studies, by consumer surveys, as well as by common sense and by the irrefutable fact that

even New Jersey’s sports wagering law exempts college sporting events that take place in New

Jersey or in which any New Jersey college team participates, regardless of where the event takes

place. As this Court observed when it granted the TRO, that exemption for New Jersey college

sporting events “belies any argument that [the Leagues] are not injured by gambling on their

games.” (ECF No. 41, at 15:3-8.)

* * *

In sum, NJTHA’s argument that the Leagues acted in bad faith in pursuing their rights

under PASPA and in seeking the TRO in this matter temporarily to protect those rights should be

flatly rejected as a matter of law. Any recovery to which NJTHA might be entitled is therefore

capped at the $3.4 million amount of the TRO bond, and any demand for an amount above $3.4

million should be denied.


17

III. NJTHA IS NOT ENTITLED TO RECOVER ANYTHING UNDER

THE BOND BECAUSE, AS A MATTER OF LAW, IT WAS NOT

“WRONGFULLY ENJOINED” BY THE TRO

Before NJTHA would be entitled to recover any amount from the TRO bond, it must be

“found to have been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c). As NJTHA

concedes, “a party is wrongfully enjoined when it had a right all along to do what it was enjoined

from doing.” (NJTHA Br. at 31 (quoting Latuszewski v. VALIC Fin. Advisors, Inc., 393 F.

App’x 962, 966 (3d Cir. 2010)).) NJTHA has not demonstrated that, given the state of the law

on PASPA in 2014, it had a right to operate a sports betting venue at Monmouth Park in October

and November 2014, when it was restrained by the TRO from doing so. That the Supreme Court

struck down PASPA more than three years later in 2018 is insufficient to summarily conclude

that NJTHA had the right to operate a sports book in 2014.

In Coyne-Delany Co. v. Capital Development Board, 717 F.2d 385 (7th Cir. 1983), a

decision on which NJTHA relies, Judge Posner explained that “the district court has unques-

tioned power in an appropriate case . . . not to award damages on an injunction bond even though

the grant of the injunction was reversed.” Id. at 390. In determining whether a party was

“wrongfully enjoined or restrained” for purposes of recovery on a bond under Rule 65(c), Judge

Posner wrote, “a change in the law” is a “legitimate consideration” that may counsel against such

recovery. Id. at 392. In Coyne-Delany Co., the federal district court had relied on a state

intermediate appellate court decision to grant preliminary injunctive relief. The state

intermediate appellate court decision was subsequently reversed by the state’s highest appellate

court, and the federal district court’s preliminary injunctive relief was then vacated.

In the instant case, the state of the law on PASPA in 2014 was clear. The Third Circuit

had repeatedly determined PASPA to be constitutional, and this Court was bound by that


18

determination when deciding whether to grant the TRO. Indeed, the statute’s constitutionality

was not even at issue in the TRO proceedings. Rather, the issue in 2014 was whether New

Jersey’s “partial repeal” of its sports wagering prohibitions was an authorization on sports

betting, and this Court found that it was such an authorization—a finding that was subsequently

affirmed by a panel of the Third Circuit, the Third Circuit sitting en banc, and the United States

Supreme Court. The Supreme Court changed the law only in May 2018, more than three years

after this Court issued the TRO.

Given the state of the law in 2014, NJTHA did not have a right to operate a sports book at

Monmouth Park in October 2014, and this Court did not wrongfully enjoined NJTHA from

operating such a sports book during the four-week pendency of the TRO. Accordingly,

NJTHA’s motion to recover any damages on the bond should be denied.

IV. NJTHA HAS NOT PROVEN THE EXISTENCE OR AMOUNT

OF ANY ALLEGED DAMAGES DURING THE FOUR WEEKS

THAT IT WAS RESTRAINED BY THE TRO

Finally, even if NJTHA were wrongfully enjoined by the TRO from operating a sports

book at Monmouth Park during the four weeks between October 24, 2014, and November 21,

2014, it is not automatically entitled to recover the full $3.4 million of the bond. As the authori-

ties on which NJTHA relies explain, the bond amount is the ceiling for NJTHA’s potential

recovery—not a predetermined fixed amount for recovery—and NJTHA bears the burden to

prove its actual damages. See Global NAPs, Inc. v. Verizon New England, Inc., 489 F.3d 13, 23

(1st Cir. 2007) (explaining that an enjoined party may require the bond “so as to recover prova-

ble damages up to the amount of the security”); Sprint Commc’ns Co., 335 F.3d at 240 (noting

that a party seeking preliminary relief must determine “whether it wants to expose itself to

liability up to the bond amount”); Coyne-Delaney Co., 717 F.2d at 392 (“[W]e are not prepared


19

to hold that [the enjoined party] is entitled as a matter of law to its costs and injunction damages

up to the limit of the bond.”); see also 13 James Wm. Moore, Moore’s Federal Practice § 65.53

(3d ed. 2018) (noting that the presumption of recovering against the bond applies only to

“provable damages up to the amount of the bond”). Indeed, bond recovery proceedings often

involve discovery and fact-finding to ensure that the party seeking recovery has carried its

burden and that a proper amount is being awarded. See, e.g., Latuszewski, 393 F. App’x at 967

(noting that party seeking recovery on a bond must present “sufficient and particularized

evidence” of its damages); Astrazeneca LP v. Breath Ltd., No. 08-cv-1512 (RMB) (AMD), Dkt.

No. 1237, at 6-7 (D.N.J. Aug. 6, 2015) (setting bond litigation schedule with several months of

briefing and discovery, followed by a damages trial).

NJTHA’s assertion that the amount of its putative losses during the pendency of the TRO

has already been litigated is simply wrong. As previously stated, when this Court ordered the

bond in October 2014, it noted that it was “set[ting] the bond on the high side to avoid any

potential loss to defendants.” (ECF No. 41, at 19:6-16.) No discovery was obtained to test

NJTHA’s alleged predictions as to its likely profits from a sports book at Monmouth Park in the

autumn of 2014. If this Court were inclined to permit NJTHA to recover its alleged losses

during the pendency of the TRO from the amount of the bond, the Leagues would be entitled to

discovery of the factual bases for those claimed losses.

Accordingly, this Court should not summarily grant NJTHA the full $3.4 million bond

amount as a matter of law.


20

Conclusion

For the foregoing reasons, NJTHA’s motion to recover nearly $150 million in alleged

damages should be denied in its entirety.

DATED: July 16, 2018

Of Counsel:

Jeffrey A. Mishkin

Anthony J. Dreyer

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

Four Times Square

New York, New York 10036-6522

(212) 735-3000

Paul D. Clement

Erin E. Murphy

KIRKLAND & ELLIS LLP

665 Fifteenth Street, N.W.

Washington, D.C. 20005

(202) 879-5000

Respectfully Submitted,

MCCARTER & ENGLISH, LLP

By: /s/ Richard Hernandez

William J. O’Shaughnessy

Richard Hernandez

Four Gateway Center

100 Mulberry Street

Newark, New Jersey 07102

(973) 622-4444

Attorneys for Plaintiffs National Collegiate

Athletic Association, National Basketball

Association, National Football League,

National Hockey League, and Office of the

Commissioner of Baseball


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