The opinion
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5589-16T3
LEWIS STEIN, APPROVED FOR PUBLICATION
February 6, 2019
Petitioner-Appellant,
APPELLATE DIVISION
v.
DEPARTMENT OF LAW & PUBLIC
SAFETY, NEW JERSEY RACING
COMMISSION,
Respondent-Respondent.
____________________________________
Argued January 23, 2019 – Decided February 6, 2019
Before Judges Yannotti, Rothstadt and Natali.
On appeal from the Department of Law & Public
Safety, New Jersey Racing Commission.
Lewis Stein, appellant, argued the cause pro se.
George N. Cohen, Deputy Attorney General, argued
the cause for respondent (Gurbir S. Grewal, Attorney
General, attorney; Melissa Dutton Schaffer, Assistant
Attorney General, of counsel; George N. Cohen, on
the brief).
Michael Vukcevich, Director of Legal Affairs,
attorney for amicus curiae Darby Development, LLC.
The opinion of the court was delivered by
YANNOTTI, P.J.A.D.
Lewis Stein appeals from a final decision of the New Jersey Racing
Commission (Commission), which denied his petition for the adoption of an
administrative rule allowing New Jersey residents to place wagers with New
Jersey's Account Wagering System (AWS) while physically located outside the
State. He argues that the Off-Track and Account Wagering Act (the OTAWA
or the Act), N.J.S.A. 5:5-127 to -160, does not preclude such wagering. We
disagree and affirm.
I.
In 1998, the New Jersey voters approved an amendment to the New
Jersey Constitution, which authorized the Legislature to enact "by law, the
specific kind, restrictions and control of wagering on the results of live or
simulcast running and harness horse races conducted within or outside o f this
State." N.J. Const., art. IV, § 7, ¶ 2. Thereafter, the Legislature enacted the
OTAWA. See N.J.S.A. 5:5-127 to -160.
The OTAWA authorizes the Commission to issue licenses to the New
Jersey Sports and Exposition Authority (Authority) to permit off -track
wagering at licensed off-track facilities. N.J.S.A. 5:5-130(a). "Off-track
wagering," is defined in the Act, as "pari[-]mutuel wagering at an off-track
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wagering facility as authorized under this act." N.J.S.A. 5:5-129. "Off-track
simulcasting" is "the simultaneous audio or visual transmission of horse races
conducted at in-State and out-of-State racetracks to off-track wagering
facilities and pari[-]mutuel wagering at those off-track wagering facilities on
the results of those races." Ibid.
The OTAWA also authorized the Commission to issue a license to the
Authority to establish an AWS. N.J.S.A. 5:5-139(a). The Authority is defined
in the Act as the "account wagering licensee." N.J.S.A. 5:5-129. The Act
states that "account wagering" is "a form of pari[-]mutuel wagering in which
an account holder may deposit money in an account with the account wagering
licensee and then use the account balance to pay for pari[-]mutuel wagers by
the account holder." Ibid. The AWS is "the system through which account
wagers are processed." Ibid.
The OTAWA permits New Jersey residents who are at least eighteen
years old to establish wagering accounts with the AWS. N.J.S.A. 5:5-142(a).
The Act also allows account holders to place wagers with the AWS without
having to be physically present at a New Jersey racetrack or New Jersey off-
track wagering facility. See N.J.S.A. 5:5-144(e). The account holder may
place wagers in person, by telephone, or through other electronic media such
as the internet. Ibid.
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Lewis is a New Jersey resident who has established a wagering account
with the AWS. It appears that while on vacation in Massachusetts, Lewis
attempted to place a wager through his AWS account, but he was not permitted
to do so because he was not at that time physically located in New Jersey. On
August 18, 2016, Lewis wrote to the Commission and asserted that the Act
does not preclude him from placing account wagers through the AWS from
outside the State. He requested that the Commission cease enforcing this
restriction on account wagering.
On August 31, 2016, Frank Zanzuccki, the Executive Director of the
Commission, responded to Lewis's letter. He explained that "[a]lthough the
Act does not specifically prohibit New Jersey account holders from placing
wagers while they are outside New Jersey . . . the [L]egislative intent was to
create an intrastate wagering system." Zanzuccki noted that since the
inception of account wagering in New Jersey, the Commission had "routinely
imposed" a condition on the Authority's account wagering license, which
precludes the Authority from "knowingly accept[ing] any wager from a New
Jersey resident account holder, where that account holder seeks to place such
wager while at a physical location outside New Jersey."
In his letter, Zanzuccki also stated that in November 2015, the
Commission became aware of the availability of new technology that allows
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the Authority to identify the geographical source of an account wager.
Thereafter, the Commission imposed an additional condition on the Authority's
account wagering license, which requires the installation of "advanced geo -
location software and controls" in the AWS. Zanzuccki wrote that the purpose
of the software was to "ensure that only intrastate wagers are accepted by the
account wagering licensee consistent with the requirements of the Act."
On February 23, 2017, Lewis filed a petition with the Commission for
rulemaking pursuant to N.J.S.A. 52:14B-4(f). As noted, Lewis sought the
adoption of a rule permitting AWS account holders to place wagers with the
AWS while temporarily located outside the State. In the alternative, Lewis
asked the Commission to "declare" that is permissible for New Jersey resident
AWS account holders to open wagering accounts with account-wagering
systems operated in other states or nationally, for use while the account holder
is located outside of New Jersey.
At its April 21, 2017 meeting, the Commissioner referred the matter for
further deliberations for an additional period, not to exceed ninety days. See
49 N.J.R. 1261(a) (May 15, 2017). On May 15, 2017, the Commission
published notice of the petition in the New Jersey Register. See ibid.
By letter dated July 14, 2017, Michael Vukcevich, Director of
Regulatory Affairs for Darby Development, LLC (Darby), commented on
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Stein's petition. He noted that Darby "manages the business affairs of the
[AWS], and also serves as management agent [for] the New Jersey
Thoroughbred Horsemen's Association, Inc." in its racing-related interests.
Vukcevich also noted that in December 2016, the Commission had authorized
the continuation of account wagering in 2017, but "as in prior years imposed a
prohibition against the accept[ance] of account wagers from resident account
holders while outside New Jersey."
Vukcevich stated that Darby "continue[d] to maintain that this restriction
makes no sense legally or practically, and should be revisited as it [has a
negative impact upon] the business interests of the [AWS] and interest ed
industry participants." According to Vukcevich, because of the restriction,
many "of our patrons . . . establish[] permanent wagering accounts, through
out-of-state operators," and this "provides no benefit to our racing industry."
He stated that this has resulted in the loss of customers and revenues "which
would otherwise inure to the benefit of" the State.
On July 18, 2017, John Hindman, Senior Vice President and General
Counsel of ODS Technologies, L.P., d/b/a TVG Network (TVG) wrote to the
Commission and joined in Darby's comments. Hindman stated that TVG
provides the AWS with account wagering services. He asserted that the
restriction on out-of-state access to the AWS causes customer frustration, and
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has resulted in significant business losses for the system. Hindman stated that
TVG is concerned that the "restriction unduly hinders New Jersey racing
interests from providing customers with a competitive product and customer
experience."
At its meeting on July 19, 2017, the Commission considered Stein's
petition. Zanzuccki stated that the Commission had received legal advice in
executive session and, based on that advice, the petition should be denied. He
asserted that adoption of the proposed rule "would be inconsistent with
existing law[,] which requires" that the AWS "be an intra-state system only."
Stein then addressed the Commission. He said no provision in the Act
prohibits account holders from placing wagers with the AWS while located
outside the State. Zanzuccki responded by stating that the Commission was
required to comply with the law, "as we know it and understand it."
Vukcevich also addressed the Commission. He said the Commission should
proceed with the rule-making process, since that would allow members of the
public and the racing industry to comment on the restriction.
The Commission voted to deny the petition. By letter dated July 24,
2017, Zanzuccki informed Stein that the Commission had denied his petition
"based upon legal advice." Thereafter, the Commission published notice of its
action in the New Jersey Register. See 49 N.J.R. 2817(a) (Aug. 21, 2017).
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This appeal followed. We thereafter granted Darby's motion for permission to
appear as amicus curiae.
II.
On appeal, Stein argues that the Commission erred by denying his
petition. He contends the Commission has the authority under the OTAWA to
adopt a rule allowing account holders to place wagers with the AWS while the
account holders are located out of State.
We note initially that appellate review of a final decision of an
administrative agency is limited. In re Stallworth, 208 N.J. 182, 194 (2011)
(quoting Henry v. Rahway State Prison, 81 N.J. 571, 579 (1980)). An agency's
final decision will be upheld "unless there is a clear showing that it is
arbitrary, capricious, or unreasonable, or that it lacks fair support in the
record." J.B. v. N.J. State Parole Bd., 229 N.J. 21, 43 (2017) (quoting In re
Herrmann, 192 N.J. 19, 27-28 (2007)).
"In determining whether [an] agency['s] action is arbitrary, capricious, or
unreasonable," we consider:
(1) whether the agency's action violates express or
implied legislative policies . . .; (2) whether the record
contains substantial evidence to support the findings
on which the agency based its action; and (3) whether
in applying the legislative policies to the facts, the
agency clearly erred in reaching a conclusion that
could not reasonably have been made on a showing of
the relevant factors.
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[In re Stallworth, 208 N.J. at 194 (quoting In re
Carter, 191 N.J. 474, 482-83 (2007)).]
When considering these criteria, the court must give "substantial
deference to the agency's expertise and superior knowledge of a particular
field." In re Herrmann, 192 N.J. at 28 (citing In re License Issued to Zahl, 186
N.J. 341, 353 (2006); Brady v. Bd. of Review, 152 N.J. 197, 210 (1997);
Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992)). We are
not bound, however, "by [an] agency's interpretation of a statute or its
determination of a strictly legal issue." Lavezzi v. State, 219 N.J. 163, 172
(2014) (alteration in original) (quoting Norfolk S. Ry. Co. v. Intermodal
Props., LLC, 215 N.J. 142, 165 (2013)). We review an agency's legal
conclusions de novo. Ibid.
It is well-established that the court's role in interpreting a statute is to
ascertain the intent of the Legislature, and the best indicator of legislative
intent is the language of the statute. DiProspero v. Penn, 183 N.J. 477, 492
(2005) (citing Frugis v. Bracigliano, 177 N.J. 250, 280 (2003)). We must give
the statutory language its "ordinary meaning and significance." Ibid. (citing
Lane v. Holderman, 23 N.J. 304, 313 (1957)). "If the [statute's] plain language
leads to a clear and unambiguous result, then [the] interpretative process is
over." Spade v. Select Comfort Corp., 232 N.J. 504, 515 (2018) (quoting
Johnson v. Roselle EZ Quick LLC, 226 N.J. 370, 386 (2016)).
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As noted, Stein argues that the OTAWA does not expressly prohibit
account holders from placing wagers with the AWS from locations outside of
New Jersey. We disagree. The Act provides, "[a] person shall not place an
account wager from within this State except in accordance with this act
through the account wagering licensee, and no entity, other than the account
wagering licensee, shall accept an account wager from a person within this
State." N.J.S.A. 5:5-142(a) (emphasis added). The Act further provides that
"[a]ll persons accepting account wagers on behalf of the account wagering
licensee shall do so at a location within this State." N.J.S.A. 5:5-142(l)
(emphasis added).
We are convinced that these statutory provisions make clear the
Legislature intended to limit the placement and acceptance of account wagers
from account holders who are "within this State." The repeated use of the
phrase "within this State" in N.J.S.A. 5:5-142(a) and (l) shows that the
Legislature intended to establish an account wagering system, conducted
within this State, by New Jersey resident account holders who are physically
present here. The Commission correctly determined that the Legislature
intended the AWS to be an "intra-state" system of wagering.
Furthermore, as Zanzuccki explained in his letter to Stein dated August
31, 2016, the Commission has followed this interpretation of the Act
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consistently since the establishment of the AWS. An agency's interpretation of
a statute is not binding on the court, but it is entitled to "substantial deference"
where, as here, "the Legislature has entrusted the agency with" responsibility
for the statute's enforcement. See Miah v. Ahmed, 179 N.J. 511, 524 (2004)
(citing Matturri v. Bd. of Trs. of the Judicial Ret. Sys., 173 N.J. 368, 381
(2002)).
Darby argues, however, that other provisions of the Act indicate that the
Legislature never intended to bar New Jersey resident account holders from
placing wagers with the AWS while physically located outside the State. In
support of this argument, Darby cites N.J.S.A. 5:5-144, which states that an
"account wagering licensee may accept account wagers only from" New Jersey
residents and "only" in the following manner:
a. The account wager shall be placed directly with the
account wagering licensee by the holder of the
wagering account.
b. The account holder placing the account wager shall
provide the licensee with the correct personal
identification number of the holder of the wagering
account.
c. A licensee may not accept an account wager, or
series of wagers, in an amount in excess of funds on
deposit in the wagering account of the holder placing
the wager. . . .
d. Only the holder of the wagering account shall place
an account wager. Unless otherwise approved by the
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[C]omission, no person, corporation or other entity
shall directly or indirectly act as an intermediary,
transmitter or agent in the placing of wagers for a
holder of a wagering account; provided, however, that
the use of credit or debit cards specifically approved
by the licensee or the use of checks, money orders or
negotiable orders of withdrawal or the use of
telephonic, computer or electronic means by the
account holder to place such wagers shall not be
prohibited.
The conditions in N.J.S.A. 5:5-144 are, however, not the only conditions
established for the placement of account wagers with the AWS. As we have
explained, N.J.S.A. 5:5-142(a) provides that account holders may only place
wagers "from within this State." Moreover, N.J.S.A. 5:5-142 requires account
holders to be New Jersey residents, who are at least eighteen years old, and
establishes other conditions for the establishment of wagering accounts.
Darby also cites N.J.S.A. 5:5-142(k), which states: "For the purposes of
this act and notwithstanding any other law to the contrary, all messages o r
orders to place account wagers received by the licensee on behalf of a
participating permit holder shall be deemed made to a place within this State."
Darby interprets this statute to mean that any account wager placed by an
account holder while located outside New Jersey will be deemed to have been
"made to a place within this State."
The statute does not, however, refer to wagers by account holders. It
refers to "wagers received by the licensee on behalf of a participating permit
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holder." See ibid. As noted previously, under the OTAWA, the licensee is the
Authority. N.J.S.A. 5:5-129. In addition, the Act defines the term "permit
holder" as "the holder of an annual permit to conduct a horse race meeting
issued by the [C]ommission." Ibid. Therefore, N.J.S.A. 5:5-142(k) applies to
a limited category of wagers, and cannot be interpreted as a declaration that all
wagers placed by account holders while located outside New Jersey are
deemed to have been "made to a place within this State."
In responding to Stein's appeal, the Attorney General also notes that the
OTAWA should be interpreted in accordance with relevant provisions of
federal law, including the Interstate Horseracing Act of 1978 (IHA), 15 U.S.C.
§§ 3001 to 3007. The IHA was enacted "to regulate interstate commerce with
respect to wagering on horseracing, in order to further the horseracing and
legal off-track betting industries in the United States." 15 U.S.C. § 3001(b).
Among other things, the IHA provides that the states "have the primary
responsibility for determining what forms of gambling may legally take place
within their borders." 15 U.S.C. § 3001(a)(1).
The IHA also provides that: "in the limited area of interstate off-track
wagering on horseraces, there is a need for Federal action to ensure states will
continue to cooperate with one another in the acceptance of legal interstate
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wagers." 15 U.S.C. § 3001(a)(3). The IHA defines an "interstate off-track
wager" as
a legal wager placed or accepted in one State with
respect to the outcome of a horserace taking place in
another State and includes pari-mutuel wagers, where
lawful in each State involved, placed or transmitted by
an individual in one State via telephone or other
electronic media and accepted by an off-track betting
system in the same or another State, as well as the
combination of any pari-mutuel wagering pools[.]
[15 U.S.C. § 3002(3).]
Thus, under the IHA, a legal wager may be placed in one state via telephone or
other electronic media, and accepted by the off-track betting system in another
state if the wagering is "lawful in each [s]tate involved," see ibid., and the
consent required under 15 U.S.C. § 3004 is obtained.
The IHA therefore allows New Jersey to authorize account holders to
place wagers with the AWS while physically located outside New Jersey if the
state where the wager is placed permits such wagering. However, in the
OTAWA, the Legislature chose to establish an intra-state account wagering
system, which is available only to qualifying New Jersey residents when they
are physically located in this State.
By doing so, the Legislature relieved the Authority of the responsibility
for determining whether an account holder is placing the wager from a stat e
where such wagering is legal. In view of the number of states from which
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such wagers could be placed, the Legislature's decision to establish an intra-
state system of account wagering was reasonable.
As noted previously, in his petition, Stein asked the Commission to
declare that it is the policy of this State that New Jersey residents may open
wagering accounts with account-wagering systems in other states or nationally,
which the account holders can use while located outside of New Jersey. The
Commission did not expressly discuss this request, and on appeal Stein has not
presented any arguments specifically addressing this issue. Suffice it to say,
however, there is no provision in the OTAWA which supports the declaration
of such a policy.
We accordingly conclude that the Commission did not err by denying
Stein's petition for rulemaking. The Commission's determination that New
Jersey's AWS is an intra-state system, available only for wagering by New
Jersey residents while located within this State, is consistent the relevant
provisions of the OTAWA. The Commission's decision is not arbitrary,
capricious, or unreasonable.
III.
Stein further argues that if the OTAWA is interpreted to preclude
account holders from placing wagers with the AWS while located outside of
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New Jersey, the Act violates the Commerce Clause of the United States
Constitution. Again, we disagree.
"It has long been accepted that the Commerce Clause not only grants
Congress the authority to regulate commerce among the States, but also
directly limits the power of the States to discriminate against interstate
commerce." New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 273 (1988)
(citing Hughes v. Oklahoma, 441 U.S. 322, 326 (1979); H. P. Hood & Sons,
Inc. v. Du Mond, 336 U.S. 525, 534-35 (1949); Welton v. Missouri, 91 U.S.
275 (1876)). "This 'negative' aspect of the Commerce Clause prohibits
economic protectionism–that is, regulatory measures designed to benefit in-
state economic interests by burdening out-of-state competitors." Id. at 273-74
(citing Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 270-73 (1984); H. P.
Hood & Sons, 336 U.S. at 532-33; Guy v. Baltimore, 100 U.S. 434, 443
(1880)).
"[I]n all but the narrowest circumstances, state laws violate the
Commerce Clause if they mandate 'differential treatment of in-state and out-of-
state economic interests that benefits the former and burdens the latter.'"
Granholm v. Heald, 544 U.S. 460, 472 (2005) (quoting Or. Waste Sys., Inc. v.
Dep't of Envtl. Quality of Or., 511 U.S. 93, 99 (1994)). However, "[w]here [a]
statute regulates evenhandedly to effectuate a legitimate local public interest,
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and its effects on interstate commerce are only incidental, it will be upheld
unless the burden imposed on such commerce is clearly excessive in relation to
the putative local benefits." Philadelphia v. New Jersey, 437 U.S. 617, 624
(1978) (quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970)). "The
crucial inquiry, therefore, must be directed to determining whether [the statute]
is basically a protectionist measure, or whether it can fairly be viewed as a law
directed to legitimate local concerns, with effects upon interstate commerce
that are only incidental." Ibid.
Applying these principles, we conclude that the OTAWA does not
violate the Commerce Clause. The OTAWA neither regulates nor attempts to
regulate off-track betting systems operated by other states or similar
nationwide wagering websites. Rather, the OTAWA regulates the AWS and
off-track wagers placed by New Jersey residents with New Jersey's account
wagering system.
The OTAWA is not a protectionist measure, and it is directed solely to
legitimate local concerns. If the OTAWA has an effect on interstate
commerce, it is incidental and the resulting burden is not "clearly excessive"
when considered in light of the benefits of establishing an AWS that is
available to New Jersey residents for wagering while they are located in this
State.
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Affirmed.
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