# Opposition Brief — Empress Casino Joliet Corp. v. Giannoulias (No. 08-945)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2009

## Text

FILED

WV ® APR $ - 2009
OFFICE OF THE CLERK
No. 08-945 SUPREME COURT, U.S.
In the

Supreme Court of the United States

EMPRESS CASINO JOLIET CORP., ET AL., PETITIONERS,

U.

ALEXI GIANNOULIAS, ET AL., RESPONDENTS.

On Petition for a Writ of Certiorari
to the Supreme Court of Illinois

BRIEF IN OPPOSITION

WILLIAM J. MCKENNA
MarTIN J. BISHOP
JONATHAN W. GARILOUGH
Foley & Lardner LLP
321 North Clark Street
Chicago, Illinois 60654

Counsel for Respondents
Balmoral Racing Club, Inc.
& Maywood Park Trotting
Assoc., Inc.

EDWARD M. WHITE

MICHAEL J. MURRAY

Carey, Filter, White & Boland
33 West Jackson Boulevard
Chicago, Illinois 60604

Counsel for Respondent
Hawthorne Race Course, Inc.

LisA MADIGAN
Attorney General

of Illinois
MICHAEL A. SCODRO*
Solicitor General
JANE ELINOR NotTz
Deputy Solicitor Gencral
JERALD S. Post
Asst Attorney General
100 West Randolph Street
Chicago, Illinois 60601
(812) 814-8698

Counsel for Respondents
Alexi Giannoulias &
The Illinois Racing Board

*Counsel of Record

QUESTION PRESENTED

Nine riverboat casinos currently operate with
Illinois gambling licenses. State law makes clear that
they have no property interest in these licenses, but in
exchange for contributions to the public welfare and
complhance with comprehensive state gaming
regulations, their licenses exempt them from Illinois’
criminal anti-gambling laws.

Do these Illinois casinos have a property interest
for Takings Clause purposes in the undiminished value
of their gambling licenses and, even if so, is it a
“taking” of “property” to tax casinos on a fraction of the
gaming earnings derived from their licenses, where the
tax supports a recognized public purpose and requires
the payment of money, without regard to its source,
that is unaffiliated with any interest in property?

il
RULE 29.6 STATEMENT

Balmoral Racing Club, Inc. and Maywood Park
Trotting Association, Inc. are wholiy owned
subsidiaries of World Wide Wagering, Inc., a Delaware
corporation.. World Wide Wagering, Inc. has no
parent, and none of its shares is held by a publicly
traded company.

Hawthorne Race Course, Inc., an_ Illinois
corporation, has no parent and none of its shares is
held by a publicly traded company.

Petitioners and amici improperly reference
Balmoral Park Trot, Inc. as a respondent in this proceeding.
The correct entity is Balmoral Racing Club, Inc. Pet. App.
aa.

11]

TABLE OF CONTENTS

Page
QUESTION PRESENTED ......c cc cccccsees i
Pru ass 20.6 DEE MLE. wc cee tee ewe as li
TABLE OF AUTHORITI§CG .. 1... ccc vec vees 1V
a EEE: a fea Ox Oe ee Pe ee ee ee ee

REASONS FOR DENYING THE PETITION .... 10

I. This Case Does Not Pose The Question
Presented, Nor Is It A Vehicle To Revisit The
Relationship Between A “Taking” And A
ca | gene rare i gore rere ine” Harti nr tine hana gar 11

li. Petitioners Cannot Establish A _ Property
Interest In The Undiminished Value Of Their
Cr@tis LAICCNBES . 6.5 ce env evens 25

eo UR a eer ee

1V

TABLE OF AUTHORITIES
Cases: Page:

Arch-View Casino Cruises, Inc. v. Ill.
Gaming Bd.,636 N.E.2d 42

Re Re Se | er re 4
Ass'n of Bituminous Contractors, Inc. v. Apfel,

166 F’.da 1246 (D.C. Cir. 1906) .......... 20, 21
Atlas Corp. v. United States,

895 F.2d 745 (Fed. Cir. 1990) ........... 15-16
A.T. Massey Coal Co. v. Massanari,

305 F.3d 226 (4th Cir. 2002) ............ 20, 21
Bennis v. Michigan, 516 U.S. 442 (1996) ........ 32
BHA Investments, Inc. v. Jdaho,

63 P.3d 474 (Idaho 2003) ......... 15, 16, 28, 33
Bobbie Preece Facility v. Commonwealth of Ky.,

71 S.W.3d 99 (Ct. App. Ky. 2002) ........ 11, 33
Bowen v. Gillard, 483 U.S. 587 (1987) .......... 30

Bowen v. Pub. Agencies Opposed
to Soc. Sec. Entrapment, 477 U.S. 41 (1986) .. 30

Bronco Wine Co. v. Jolly,
29 Cal. Rptr. 3d 462 (Ct. App. 2005) ...... 28, 33

Vv

Brown v. Legal Found. of Wash..,
ee WG. DRO CRO) on ee eee wees ,. 42, 33

Buhmann v. Montana,
201 P.3d 70 Gviont. 2008) ............... 32, 33

Carney v. Attorney General,
890 N.E.2d 121 (Mass. 2008) .......... 32, 33

Cleveland v. United States, 531 U.S. 12 (2000) ... 29

Commonwealth Edison Co. v. United States,
271 F.3d 1327 (Fed. Cir. 2001) ....... 15, 16, 20

Connolly v. Pension Benefit Gty. Corp.,
ee Se, ee OE EE oy os oe ime ba eek eee 31

Conti v. United States,
2el £ oa looe-Gred. Car. 2002) ... 0. cc ccccves 28

Corn v. Lauderdale Lakes,
So F.o0 1006 (2 ith Cir. 19906) ... 2... sees 26

Eastern Enterprises v. Apfel,
ee see, RD ow ce cee teu en passim

Ehrlich v. Culver City, 911 P.2d 429 (Cal. 1996) .. 18
Franklin County Convention Facilities Auth.
v. Am. Premier Underwriters, Inc.,

240 F.3d 534 (6th Cir. 2001) ......... 20, 21, 22

Hawkeye Commodity Promotions, Inc. v.
Vilsack,486 F.3d 430 (8th Cir. 2007) .. 27, 28, 33

vi

Home Builders Ass’n v. City of Beavercreek,
Tee Chee OED CIO ZOGU) gcc cee cecnves 18

Home Builders Ass’n v. City of Scottsdale,
Soe © .20 Geo UAMiZ. 1967) 2. cc ew nee 18

Home Builders Ass’n of Greater Des Moines v.
West Des Moines, 644 N.W.2d 339
I ae Te ee ok vale O 15, 16

Hortonville Joint Sch. Dist. No. 1 v.
Hortonville Educ. Ass’n, 426 U.S. 482 (1976) .. 24

Tannelli v. United States,420 U.S. 770 (1975) .... 29

Kirk v. Denver Publ’g Co.,
BiG Pie see (000. LGPL) 6s cei ees 16, 17

Lingle v. Chevron U.S.A., Inc.,
ee es ee OD 5. kbp hv a os bree oe ee 26, 30

Loretto v. Teleprompter Manhattan CATV Corp.,
458 U.S. 419 (1968) ....... re re

Lucas v. S.C. Coastal Council,
a A or rere. S|

Rearvin vu. Trout, 180 U.S. 212 (1905)... .. 2. cee 29

McCarthy v. City of Leawood,
ee ee er Ce, LOOP ow eee ec ewewes 18

Vil

MEC Pennsylvania Racing, Inc. v. Pennsylvania
State Horse Racing Comm'n, 827 A.2d 580
boy Me Ae Sa) a eee

Mibbs, Inc. v. South Carolina Dep't of Revenue,
624 6.1.20 G26 (GL. TOGR) . ccc tc teees

Mitchell Arms, Inc. v. United States,

7 F.3d 212 (Ped. Cir. 1093) .......... 28, 30,

Northern Ill. Home Builders Ass’n v. County
of Du Page, 649 N.E.2d 384

ke | Rar ee ee eee 7, 13, 14,

Parella v. Retirement Bd. of the Rhode Island
Employees’ Retirement Sys., 173 F.3d 46
Pa es BD os a ee aa ke oe ate pene

Penn Cent. Transp. Co. v. City of N-Y.,

ee es re 30,

Phillips v. Wash. Legal Found.,

ve Le We. 6: re 12, 13,

Raceway Park, Inc. v. Ohio,

356 F.3d 677 (6th Cir. 2004) ......... 27, 31,

Ruckelshaus v. Monsanto Co.,

467 U.S. 986 (1984) ............. 25, 26, 29,

Smith v. Price Dev. Co..

126 P.3e O45 Ciitan ZO «nn sce ees 16,

33

18

20

33

30

Vill

Sowma v. Parker, 22 A.2d 513 (Vt. 1941) ....... 33
Star Northwest, Inc. v. City of Kenmore,

No. C05-2133P, 2006 WL 2372395

(W.D. Wash. Aug. 10, 2006) ...............833
Stone v. Mississippi, 101 U.S. 814(1879)........ 29

Swisher Int'l, Inc. v. Schafer,
550 F.3d 1046 (11th Cir. 2008) .......... 20, 21

Town of Flower Mound v. Stafford Estates
Ltd. P’ship, 135 S.W.3d 620 (Tex. 2004) ...... 18

Trimen Dev. Co. v. King County,
877 Pi2da 187 CWash. 1984) ......cccnccccas 18

United States & Fed. Commc’ns Comm’n v.
Edge Broad, 509 U.S. 418 (1993) ........... 29

Uni‘ed States Fidelity & Guaranty Co. v.
McKeithen, 226 F.3d 412
eet RA, SE eh os ke 4 dee es 16, 17, 20, 22

Jnited States v. Fuller,
GOR U.D. GBS CGT) 6kk kee cine vs 26, 27, 28, 32

United States v. Rands, 389 U.S. 121 (1967) ..... 32

United States v. Sperry Corp.,
i ee te re

Unity Real Estate Co. v. Hudson,
178 F.3d 649 (3d Cir. 1999) ................ 20

1X

Vanek v. State Board of Fisheries,
OU Oe BU cc ccc cr eee 28

Webb’s Fabulous Pharmacies, Inc. v. Beckwith,
GN 12.13

Statutes and Regulations:

NE 6) rs ,or C
ES 6) 6
EC) 6
Brasees amet PWG, © UTS) dw. ce ccc ee cee 3
re
Ee 3
eg ON 3
230 ILCS 5/1.3(a) (2006) ............... iss ae
| ) 3
230 ILCS 5/54.5(a) (2006) ..............0.00065 6
mow bac O/O4.0(D) (2006) ..................... 7
me seme 20/1 OF B@g. (2006) ...............+++28

230 ILCS 10/2 (2006)

230 ILCS 10/2(b) (2006) 5

ee ee ee ee ee er ee ee ee ee a ee a er

Rive Boy. | anne nema o er:
230 ILCS 10/5(b)(1) (2O0G) .. wc ccc ccc cee wee 29
230 ILS 10/GQO) GOOG) og gic ce cide cctccees ®
230 ILCS 10/5(c)(11) (2006) .............2--. 4, 29
230 ILCS 10/5(c)(12) (2006) ...............005. 5
900 TA BT Gee ecb be xew ens eat cee 29
230 TELA TOT OD wiv o ie hv ck dk tees sexs e en 6
230 ILCS 10/7(b)(3) (2006) .............0006- 4
230 TLCS 10/Tle) COGS) ow cc cece ere nss 3
230 ILCS 10/7(g) (2006) ...... ey ereerT ro
STE FT k Ce. ib vo eke hese cee 4
290 TLCS 1077.38 (006) 5 ok cc cer ceveseuses 4
230 ILCS 10/7.3tc) (2006) ...... ccc cece ere ccs 5
396 TAS ert Ce ok ks es oe oe he ee ee 5
DOO TEATS 1S CS i oe he oa oh eee 5
FBO TLCS 10FO CHOBE cs ok nce da tencreowrinen 5

mae ELA MOV ID Cs os bo sec ete tia se eran 5

XI

230 ILCS 10/12(a-5) (2006) ........
230 ILCS 10/12(b) (2006) .........
230 ILCS 10/13 (2006) ...........
230 ILCS 10/13(a-3) (2006) ........

230 ILCS 10/13(a-4) (2006) ........

230 ILCS 10/13(a-10) (2006) ...

720 ILCS 5/28-8 (2006) .......cec:

Sied Bae. EMG BO. ccc tr cesecese

86 lll. Admin. Code

a

3000 .230(c)(2)

86 Ill. Admin. Code

Oo

3000.235

86 Ill. Admin. Code § 3000.236(b) ..
86 Ill. Admin. Code § 3000.300.....

86 Ill. Admin. Code § 3000.310.....

86 Ill. Admin. Code § 3000.320 .

86 Ill. Admin. Code

Pr

3000.1105

ts, se’

XH
Miscellaneous:

www.igh.stateil.us/annualreport /2008igh. pdf ]
www.igb.state.il.us/mics/index.pdf. ............. 5

94th Ill. Gen’l Assembly, H.R., April 26, 2006..... 3

]

BRIEF IN OPPOSITION

The certiorari petition should be denied. Quite
simply, this 1s not the case that petitioners make it out
to be. They stake their entire petition on the
provocative premise that the Illinois Supreme Court
has announced a “per se rule” exempting money from
protection under the Takings Clause. But this premise
is demonstrably false, for the court below carefully
jimited its holding to avoid such a sweeping rule.
Petitioners dedicate much of their petition to this
straw-man reading of the holding below—how it
purportedly conflicts with this Court’s case law and
implicates a split in lower court authority. But none of
this responds to the Hlinois Supreme Court’s actual
(and unremarkable) holding that the Takings Clause
does not apply here because petitioners are objecting to
a tax requiring them to pay moncy that 1s unaffiliated
with any fund or any interest in real or personal
property. This reflects precisely the distinction that
five members of this Court, relying on prior case law,
drew in Eastern Enterprises v. Apfel, and ultimately
petitioners ask this Court merely to reconsider the
application of this established distinction to the facts
here. But even this effort at error correction fails, for
much of what petitioners challenge are the Illinois
Supreme Court’s controlling conclusions of state law,
and petitioners ignore the dispositive fact that they are
part of a state-licensed, limited gambling monopoly.

This last point also raises a larger, threshold
problem that disqualifies this case as a vehicle to reach
the question presented in the petition. Petitioners
paint themselves as “disfavored” businesses forced to
subsidize more politically influential competitors in a

2

free and open market. But nothing could be further
from the truth. Unlike the “big box” stores and other
competitive market participants that petitioners
predict are next in line for a similar tax—and that
their amici seek to protect—petitioners hold revocable
licenses entitling them to operate in a limited, state-
managed gambling monopoly. These facts not only
drastically affect the traditional takings analysis
(making this an idiosyncratic case for rethinking or
even applying that analysis), but they are
independently fatal to petitioners’ takings claim
(meaning there is no way even to reach the question
that petitioners pose, were it presented). Courts refuse
to extend takings protections to laws reducing the
value of licenses, especially where, as here, state law
makes clear that the licenses are not property,
claimants operate in a field subject to comprehensive
regulation, and the State shields claimants frorn
competition from new market entrants by permitting
them to engage in conduct that the State could
eliminate entirely through its police power. Neither
petitioners nor their amici suggest that any of these
grounds is worthy of review, yet they alone require
rejection of petitioners’ takings claim.

3

STATEMENT

1. Gambling is illegal in Illinois, 720 LLCS 5/28-
3 (2006), with very limited exceptions. Since 1927,
Illinois has allowed parimutuel betting on horse
racing, 1927 Ill. Laws 28—provided operators obtain a
state license and submit to intensive state gaming
regulation, 230 ILCS 5/1 et seq. (2006)—“to benefit the
people of the State of Illinois by assisting economic
development and promoting Illinois tourism,” 230
ILCS 5/1.2 (2006). The results have been positive. Not
only do tracks contribute to the public fisc through a
daily tax on betting income, 230 ILCS 5/28.1 (2006),
but horse racing has created an estimated 37,000 jobs,
Pub. Act 94-0804 (“Act”), § 1(4). “Illinois agriculture
and other businesses * * * support and supply the
horse racing industry,” tbid., making horse racing “a
significant component within the agribusiness
industry,” 230 ILCS 5/1.2(a) (2006). Meanwhile, other
quarters, such as the show horse industry, enjoy
collateral benefits as well. 94th Ill. Gen’] Assembly,
H.R., April 26, 2006, at 65.

2. In 1990, in an effort to generate additional
revenue for education, the General Assembly extended
legalized gambling to include a small number of
riverboat casinos. 230 ILCS 10/2 (2006). The
Riverboat Gambling Act (“Gambling Act”), 230 ILCS
10/1 et seg. (2006), established ten “owners licenses”
(nine are currently active) whose holders may operate
riverboat casinos in designated areas throughout the
State, with all regions of the State sharing in the
economic benefits. 230 ILCS 10/7(e) (2006). In
selecting licensees, the Gambling Act and _ its
implementing regulations require the Illinois Gaming

4

Board to consider nearly a dozen factors, Arch- View
Casino Cruises, Inc. v. Ill. Gaming Bd., 636 N.E.2d 42,
43 (lll. App. Ct. 1994), including “the highest
prospective revenue to be derived by the State,” 230
ILCS 10/7(b)(3) (2006); see Arch-View, 636 N.E.2d at
43; 86 Ill. Admin. Code § 3000.230(c)(2), and more
broadly “the interests of the citizens of Illinois,” Arch-
View, 636 N.E.2d at 46. The four petitioners are the
highest grossing of the current licensees.

a. Under Illinois law, a gambling license “does not
create a property right.” 86 Ill. Admin. Code
§ 3000.1105. ‘The license remains a “revocable
privilege,” ibid., which may not be transferred or even
pledged as security without Gaming Board approval,
86 Ill. Admin. Code § 3000.235. It is renewable upon
the payment of a fee and a determination that the
licensee continues to meet all statutory and regulatory
requirements, 230 ILCS 10/7(g) (2006), following a
consideration of any other information that the Board
deems appropriate, 86 Ill. Admin. Code § 3000.236(b).
The Board also may invoke procedures to revoke or
suspend licenses “as it sees fit,” 230 ILCS 10/5(c)(11)
(2006), and if a license is revoked or not renewed, the
Board may re-issue it to another applicant, 230 ILCS
10/7.1 (2006), or may choose simply to conduct the
former licensee’s gambling operations itself, 230 ILCS
10/7.3 (2006).

Meanwhile, license holders must adhere to
comprehensive state gambling rules. The Gambling
Act is “designed to strictly regulate the facilities,
persons, associations and _ practices relating to
gambling operations pursuant to the police powers of
the State.” 230 ILCS 10/2(b) (2006). And casino

5

owners are not the only ones who must be licensed;
those who manage the gambling must obtain
“managers licenses,” anyone who works on a casino
riverboat must obtain an “occupational license,” and
anyone who provides “any equipment, devices, or
supplies to a licensed riverboat gambling operation”
must obtain a “suppliers license.” 230 ILCS 10/7.4,
10/8, 10/9 (2006). The Gaming Board supervises all
gambling operations, and its inspectors and agents
must be present whenever gambling is in progress.
230 ILCS 10/5(b)(6), 10/7.3(c) (2006). Moreover, the
Board may exclude persons from riverboats whose
reputation it believes would call the integrity of
gambling operations into question. 230 ILCS
10/5(c)(12) (2006). And even beyond these and other
specific rules established by statute and regulation,
owner licensees must conform to a_= general,
“suitability” requirement and implement internal
control systems consistent with Board-promulgated,
“Minimum Internal Control Standards” covering over
one hundred areas of operation. 86 Ill. Admin. Code
§§ 3000.300, 3000.310, 3000.320, 3000.1105;
www.igb.state.il.us/ mics/index.pdf.

b. In addition to initial hcensing and renewal fees,
licensees are subject to a series of daily taxes, by which
the State collects a portion of the revenue derived from
its limited gaming monopoly. Each day, owners must
pay a per-capita admission tax and managers a per-
capita admission fee, both of which go in part to local
governments. 230 ILCS 10/12(a), (a-5), (b) (2006).
Owners also must pay a daily privilege tax, assessed as
a percentage of the prior day’s adjusted gross receipts
(“gross receipts less winnings paid to wagers’), which
benefits, inter alia, local governments, the State Police,

6

the Illinois Department of Human Services, and the
Education Assistance Fund. 230 [LCS 10/4, 10/13
(2006).

3. Riverboats and horse racing compete in the same
gambling industry, 230 ILCS 5/1.3(a) (2006), and by
2006 the General Assembly recognized that the
riverboats were having “a negative impact on horse
racing,” Act § i(1). Racing had experienced a 42%
decline in on-track wagering since riverboat gaming
was introduced, ibid., and this steep decline was
inflicting severe damage on the State’s breeding
industry, id. § 1(2)-(3).

The Genera! Assembly responded to counteract “the
decline of the Illinois horseracing and breeding
program, a $2.5 billion industry,” and thus to bolster
“Tilinois agriculture and other businesses that support
and supply the horse racing industry.” Act § 1(3)-(4).
The legislature had recently decreased the daily
privilege tax rates that all casinos paid (from a top
marginal rate of 70% of adjusted gross receipts down to
50%, 230 ILCS 10/13(a-3), (a-4) (2006)), and in 2006 it
passed the Act to add an additional, daily tax on casino
gambling earnings to improve horse racing tracks and
purses. The Act created the Horse Racing Equity
Trust Fund (“Fund”) to be administered by the Illinois
Racing Board. 230 ILCS 5/54.5(a) (2006). For two
years, riverboat licensees with adjusted gross receipts
in 2004 above $200 million (the four petitioners here)
would pay into the Fund each day an amount equal to

% of the prior day’s adjusted gross receipts. 230 [LCS
10/7(a) (2006). The Illinois Racing Board was required
to distribute these payments, with 60% going to
increase racing purses and the remaining 40% going to

5

“amprove, maintain, market and otherwise operate
* * * racing facilities to conduct live racing.” 230 ILCS
5/54.5(b) (2006).

Each of the petitioners chose to renew its state
owners license after the Act went into effect—Empress
in July 2006, Harrah’s in September 2007, Hollywood
in December 2006, and Elgin in June 2008—although,
in Elgin’s case, it did so after the Act’s two-year tax
period ended. See www.igb.state.il.us/annualreport
/2008igb.pdf.

4. On May 30, 2006, petitioners filed a complaint in
the Illinois courts for declaratory and injunctive relief
against the state Treasurer and the Illinois Racing
Board. R.C2. Among its claims, the complaint
challenged the Act as an unlawful taking under both
the Illinois and federal constitutions. R.C12.

On March 26, 2007, the trial court awarded
summary judgment for respondents on all of
petitioners’ theories but one; the court held that the
Act ran afoul of the Dlinois Constitution’s “Uniformity
Clause,” which hmits the State’s taxing power. Pet.
App. 39a-50a. On April 20, 2007, the court issued its
final judgment, declaring the Act unconstitutional] on
this ground and permanently enjoining respondents
from imposing or collecting the 3% tax. Pet. App. 5la-
52a (erroneously dated in the appendix as March 26,
2007).

Respondents appealed directly to the Illincis
Supreme Court, which unanimously reversed. Aftei
holding that the Act comphed with the Uniformity
Clause, Pet. App. 7a-19a, it proceeded to consider and

8

(like the trial court) reject petitioners’ alternative
claims, id. at 20a-33a.

As relevant here, the court rejected petitioners’
theory that the 3% surcharge was not a tax, but a
taking. Pet. App. 20a-Z6a. The court recognized that
calling the surcharge a “license fee,” as petitioners
urged, did not change its legal status, invoking
decisions from around the country rejecting takings
challenges to license fees, including in the specific
context of gaming hcenses. /d. at 22a-23a. The court
likewise rejected petitioners’ reliance on Northern Il.
Home Builders Ass'n v. County of Du Page, 649 N.E.2d
384 (Ill. 1995), and Eastern Enterprises v. Apfel, 524
U.S. 498 (1998). The court acknowledged that the
former found a monetary fee to be a taking, but that
fee “was inextricably tied to real property and, thus, a
takings analysis was appropriate.” Pet. App. 23a. And
although Apfel contemplates that money or other
intangibles can be the subject of a takings claim, the
court below recognized that five Justices in Apfel
refused to find a taking where, as here, the money need
not come from or impair any specific, cognizable
property interest. /d. at 24a-25a.

Finally, the court held that “[t]he plain language of
the Act belie[d]” petitioners’ claim that “the primary
intended beneficiaries of the surcharge are private
parties * * * and not the public.” Jd. at 29a. The court
explained that “the principle purpose of the Act is a
public one: to stimulate economic activity, including
the creation and maintenance of jobs and the
attraction and retention of sports and entertainment,
particularly betting on horse racing.” /d. at 30a.
Relatedly, the court rejected petitioners’ claim that

9

state law gave the tracks unfettered discretion to apply
the proceeds as they please. As a matter of Illinois
law, the court concluded, “[t]he track owners cannot
simply pocket any of the funds they receive,” as those
funds are statutorily “earmarked for specific purposes”

and “must be used by the tracks for those purposes.”
Ibid.

The court thus concluded that the Act neither
“operate[s] upon” nor “alter[s] an identifiable property
interest.” Jd. at 26a. Rather, it “involves [the State’s|
exercise of its taxing powers.” Ibid. Accordingly, “the
surcharge is not a taking of private property within the
meaning of the constitutional takings clauses.” Jbid.

The court subsequently denied rehearing, id. at
55a, but stayed its judgment pending the filing and
resolution of this petition.

10
REASONS FOR DENYING THE PETITION

The petition should be denied for several reasons.
Most obviously, the question it poses simply is not
presented in this case. The Illinois Supreme Court did
not purport to hold that money can never be the subject
of a takings claim, as petitioners repeatedly assert, see
Pet. i, 11, 12, 18, 23, and on which their petition
critically depends. The court carefully distinguished
its own prior decision recognizing that money may
form the basis of a takings challenge, and it quoted
lengthy passages from Apfel to the same effect. The
court’s actual holding is perfectly consistent with this
Court’s case law, and implicates neither of petitioners’
purported “splits” in authority. In the end, petitioners
merely ask this Court to recognize the Act as an
example of a monetary assessment that amounts toa
taking, either because it is not a “tax” at all or because
it is both a “tax” and a “taking.” See Pet. 26-30. But
even this effort at error correction fails, for it requires
the Court to ignore the dispositive fact—little
mentioned in the petition or by any of the amici—that
petitioners are licensees in a state-regulated, limited
gambling monopoly.”

Petitioners tried this same gambit below. As
respondents told the Illinois Supreme Court, petitioners
“portray themselves as purely private marketplace
competitors of the horse racing licensees, when in reality
both the plaintiff casinos and the intervenor racetracks hold
some of the very limited number of state gambling licenses,”
meaning they “are shielded from competition in a true
market by the State’s prohibition on other forms of
gambling.” Reply Brief of State Appellants at 1.

11

And petitioners’ status as licensees in the State’s
limited gambling monopoly presents’ another,
independent reason for denying the petition, consistent
with respondents’ argument below. See Reply Brief of
State Appellants at 14 (distinguishing petitioners’
takings authority, where “[tjhe business receiving the
property was not a licensee in an industry created by
the State for the purpose of meeting specific public
interests”; rather, “[iJt was, as the casinos misleadingly
attempt to portray themselves, a purely private entity
competing for the public’s entertainment dollars”).
This is because, for takings purposes, gambling and
related licensees are not entitled even to claim a
property interest in the undiminished value of their
licenses, meaning petitioners’ claim fails at the
. threshold, without reaching any of the issues raised in
the petition. See Pet. App. 23a (Illinois Supreme Court
opinion below, citing, inter alia, Bobbie Preece Facility
v. Commonwealth of Ky., 71 S.W.3d 99, 104 (Ct. App.
Ky. 2002), which concluded that “an interest which
depends totally on regulatory licensing is not a
property interest that is compensable under the
Takings Clause”).

I. This Case Does Not Pose The Question
Presented, Nor Is It A Vehicle To Revisit The
Relationship Between A “Taking” And A
“Tax.”’

The Illinois Supreme Court’s ruling neither
diverges from this Court’s precedent nor implicates any
split in authority, and petitioners claim otherwise only
by mischaracterizing that decision. In fact, the court
below did not adopt a broad rule that a “State's taking
of money from private parties is wholly outside the

12
scope of the Takings Clause,” Pet. i, so the petition’s
very premise is false. And petitioners’ fallback request
for error correction ignores key facts, chiefly that
petitioners participate in a regulated, limited gambling
monopoly.

1. As the Illinois Supreme Court acknowledged, see
supra pp. 8-9; infra pp. 13-14, specific property
interests in money may qualify as property for takings
purposes, see Brown v. Legal Found. of Wash., 538 U.S.
216, 240 (2003); Phillips v. Wash. Legal Found., 524
U.S. 156, 163-170 (1998); Webb's Fabulous Pharmacies,
Inc. v. Beckwith, 449 U.S. 155, 160-164 (1980). Thus,
petitioners’ claim that the court below announced a
“per se” or “categorical” rule to the contrary, Pet. 11,
23, 1s false.

Petitioners cite Webb’s, which struck down a
Florida law requiring that interpleader funds be
deposited in the registry of the county clerk, and the
interest earned retained by the county as income. See
449 U.S. at 156 n.1, 164-165. There, the Court relied
heavily on Florida law providing that the principal
sum deposited in the court’s registry was private
property, coupled with the “long established general
rule” that interest on interpleaded and deposited funds
follows the principal and should be allocated to the
owners of that principal. Jd. at 160, 162-163. In
Phillips, on which petitioners also rely, the Court
followed Webb’s to reach a’similar result. Under Texas
law, attorneys were required to pool certain client
deposits in an Interest on Lawyers Trust Accounts
(“IOLTA”) account. See 524 U.S. at 161-162. But the
interest on these accounts was diverted from the

clients to others. See id. at 162. The Court found that

13

the interest was the private property of the chents for
Takings Clause purposes, reasoning that the clients
owned the principal and, under Texas law, interest is
presumed to follow the underlying principal. See id. at
164-166. Finally, Brown merely confirmed the holding
in Phillips that interest income on IOLTA accounts is
client property. See 538 U.S. at 235.

The rule of Brown, Phillips, and Webb’s is that
specific property interests in money may qualify as
property for purposes of the Takings Clause, hut that
is not disputed here, where the Illinois Supreme Court
correctly determined that the need to pay money in
this case is not a taking because the Act does not
“operate upon or alter an identifiable property
interest,” in money or anything else. Pet. App. 26a.
This is also consistent with the conclusion reached by
five members of this Court in Apfel, that government
action is not a taking if it does not “target[] a specific
property interest,” “depend|[] upon any particular
property,” or (as to cash) burden a “specific, separately
identifiable fund of money.” 524 U.S. at 543 (Kennedy,
J., concurring in the judgment and dissenting in part);
id. at 554, 555 (Breyer, J., with Stevens, Souter, and
Ginsburg, -J-J., dissenting).

Petitioners seize upon a single phrase in the
decision below—that “regulatory actions requiring the
payment of money are not takings”—to erect the
straw-man argument on which much of the petition
depends. Pet. 2, 9 (quoting Pet. App. 25a). But this is
not the Illinois Supreme Court’s holding. In fact, the
court repeatedly acknowledged that the Takings
Clause can protect money alone. The court thus
distinguished its own prior decision in Northern

14

Illinois Home Builders, which applied takings
principles to a monetary fee “tied to real property,” and
quoted at length from Justice Kennedy’s concurrence
in Apfel, which acknowledged that not only “land” but
also “an intangible” and “even a bank account or
accrued interest” can form the basis of a takings claim.
Pet. App. 23a-24a (internal quotations omitted). In
short, although the court was not asked to decide
whether money alone can ever be the subject of a
takings claim, the court nevertheless made clear that
it can (consistent with its own prior case law, see Pet.
App. 23a).

Thus, petitioners’ suggestion that the decision
below runs afoul of this Court’s decisions “apply[ing]
takings analysis to personal property of all kinds,” Pet.
22, also fails. To reiterate, the Illinois Supreme Court
had no doubt that government action that
“appropriate[s], transfer[s], orencumber|s] an estate in
land (e.g., a lien on a particular piece of property), a
valuable interest in an intangible (e.g., intellectual
property), or even a bank account or accrued interest”
may violate the Takings Clause. Pet. App. 24a
(internal quotations omitted).

2. Petitioners’ mischaracterization of the decision
below is also essential to their claim that this case
implicates two splits in lower court authority—one
over “whether, and in what circumstances, a state’s
taking of money from private persons may constitute
a ‘taking’ in the constitutional sense,” and another over
the proper application of Apfel. Pet. 10-11, 15. Again,
the I[llinois Supreme Court did not hold that
government action requiring the payment of money is
never a “taking”; it merely rejected petitioners’ effort to

i)

claim a tax—which petitioners may pay from any
source and does not deprive them of any recognized
property interest in specific funds—as a taking.
Petitioners cannot marshal a single case at odds with
this principle. To the contrary, the distinction between
specific property interests in money (which may qualify
for Takings Clause protections), and _ general
obligations to pay a tax, whatever the source of funds
(which do not), explains the result in every case in
petitioners’ first alleged split. And even if there were
a split as petitioners describe it, with some courts
announcing a per se takings exception for cases
involving money and others applying something short
of a per se rule, the Illinois Supreme Court is already
in the latter camp, which is the one that petitioners
favor. See supra pp. 8-9, 13-14. The second suggested
split fares no better, for every court to address the
issue has concluded that five members of the Apfel
Court rejected the view, which petitioners seek to
resurrect here, that a general liability to pay money is
an unconstitutional taking. We consider each
purported split in turn.

To manufacture the first, petitioners substantially
overstate the holdings of Commonwealth Edison Co. v.
United States, 271 F.3d 1327 (Fed. Cir. 2001) (en banc);
Atlas Corp. v. United States, 895 F.2d 745 (Fed. Cir.
1990); BHA Investments, Inc. v. Idaho, 63 P.3d 474
(Idaho 2003); and Home Builders Ass’n of Greater Des
Moines v. West Des Moines, 644 N.W.2d 339 (lowa
2002). Petitioners claim that these decisions
announced a “per se rule” that the required payment of
money can never be a taking. Pet. 11. But in reality,
each court merely declined to apply a takings analysis
to a general obligation to pay money. See

16

Commonwealth Edison, 271 F.3d at 1338-1340
(upholding requirement that utilities pay special
assessment toward remediation of environmentally
contaminated facilities); Atlas Corp., 895 F.2d at 756-
758 (upholding law requiring uranium producers to
fund clean-up of uranium tailings piles); BHA
Investments, 63 P.3d at 480-481 (upholding
requirement that buyer of state liquor license pay
State 10% of purchase price as transfer fee); Home
Builders Ass'n, 644 N.W.2d at 351 (upholding law
requiring builders and developers to pay fees, as
condition of obtaining permits, to maintain local park
system). In not one of these cases did the challengers
argue that the assessments targeted a property
interest in money, much less did the court hold that
such an interest cannot form the basis of a takings
claim. In language that petitioners omit, the Federal
Circuit in Commonwealth Edison thus made “clear
that a fund of money can be property protected under
the Takings Clause,” 271 F.3d at 1338 (citing Phillips
and Webb’s), while “the mere imposition of an
obligation to pay money, as here, does not give rise” to
a takings claim, id. at 1340.

Because none of these decisions questions the
settled principle that specific property interests in
money can be the subject of an unlawful taking, they
do not conflict with Smith v. Price Dev. Co., 125 P.3d
945 (Utah 2005); Kirk v. Denver Publ’g Co., 818 P.2d
262 (Colo. 1991); or United States Fidelity & Guaranty
Co. v. McKeithen, 226 F.3d 412 (5th Cir. 2000), as
petitioners contend. See Pet. 11-12. In each case, the
court found an unconstitutional taking only after first
finding that the government appropriated money
protected by a _ specific property interest. The

17

provisions at issue did not merely impose “an ordinary
hability to pay money,” Apfel, 524 U.S. at 554 (Breyer,
J.), but instead “target|ed] a specific property interest,”
id. at 543 (Kennedy, J.). Accordingly, these decisions
are perfectly in line with the Illinois Supreme Court’s
decision below and with the lower court cases discussed
above.

Kirk and Smith struck down laws providing States
with a share of certain punitive or exemplary damages
awards. See Kirk, 818 P.3d at 266; Smith, 125 P.3d at
948. As these courts recognized, the payments
depleted plaintiffs’ specific, identifiable property
interest in favorable htigation judgments. In Kirk,
state law recognized a property interest in exemplary
damages. See 818 P.3d at 267, 272-273. And the law
in Smith was, “for all intents and purposes, identical to
the provision invalidated” in Kirk. 125 P.3d at 952. It
“gave the State no interest in the judgment entered by
the district court,’ while the plaintiffs “owned the
entire punitive damages judgment” and thus had a
“vested property interest therein.” Jd. at 950, 952.
Likewise, the law invalidated in United States Fidelity
imposed a retroactive burden on insurers who
contributed (or who once had contributed) to a state
workers’ compensation fund. See 226 F.3d at 414-415.
“The assessments against [the] plaintiffs ar[o]se from
the specific fund of benefits they pa[id] to’claimants in
Louisiana each year” and were “charged by the
insurers against the fund of reserves set aside from the
premiums collected under specific insurance policies.”
Id. at 420. The insurers’ monetary obligation therefore
“refer[red] to an identifiable property interest or fund,”
tbid., and was properly characterized as protected
property for takings purposes.

18

Petitioners’ reliance on state court decisions
striking down fees, assessments, and exactions is
equally misplaced. See Pet. 14 & n.8 (citing Town of
Flower Mound v. Stafford Estates Ltd. P’ship, 135
S.W.3d 620 (Tex. 2004); Home Builders Ass’n v. City of
Beavercreek, 729 N.E.2d 349 (Ohio 2000); EKhrlich v.
Culver City, 911 P.2d 429 (Cal. 1996); Trimen Dev. Co.
v. King County, 877 P.2d 187 (Wash. 1994)). In each,
the money due was tied directly to the development of
a parcel of real property. The Illinois Supreme Court’s
ruling is fully consistent with these decisions, for it
specifically recognized that assessments “inextricably
tied to real property” are subject to a takings analysis.
Pet. App. 23a (distinguishing its decision in Northern
Illinois Home Builders Ass’n).°

The basis for petitioners’ second alleged split is
purported “uncertainty” surrounding this Court’s
decision in Apfel. Pet. 15. But there is no uncertainty
over the single dimension of Apfel at issue here.

° Petitioners cite Home Builders Ass'n v. City of

Scottsdale, 930 P.2d 993 (Ariz. 1997), and McCarthy v. City
of Leawood, 894 P.2d 836 (Kan. 1995), in a footnote. See
Pet. 14-15 n.8. Rut the challengers in both cases waived
their takings claims. See Scottsdale, 930 P.2d at 999-1000;
McCarthy, 894 P.2d at 580. Even so, Scottsdale indicated
that, had a takings claim been preserved, the court would
have applied a takings analysis. See 930 P.2d at 1000. And
although the court in McCarthy suggested that a takings
analysis might not be applicable, see 894 P.2d at 580, this
statement was dicta because the challengers had forfeited
their takings claim

19

{In his concurrence, Justice Kennedy rejected the
plurality’s determination that the Coal Act, which
required former plant operators to fund retiree health
benefits, “takes property.” 524 U.S. at 539-540.
Although the Coal Act “imposeled] a staggering
financial burden” on former employers, Justice
Kennedy recognized that, under this Court’s prior
decisions, a statute that “is indifferent as to how the
regulated entity elects to comply or the property it uses
to do so” is not a “taking.” Jd. at 540.

Four other members of the Court agreed that the
“Takings Clause [did] not apply.” Jd. at 554 (Breyer,
J., with Stevens, Souter, and Ginsburg, Jd.,
dissenting). These Justices recognized that the
contrary rule would make every tax a “taking”; it
would cast doubt on any law that “creat[es] burdens for
some that directly benefit others” and thus subject
every tax to a takings challenge. Jd. at 556 (internal
quotations emitted); see also ibid. (“If the Clause
applies when the government simply orders A to pay B,
why does it not apply when the government simply
orders A to pay the government, i.e., when it assesses
a tax?’). A majority of the Court thus reaffirmed the
rule that, in Justice Kennedy’s words, an obligation to
pay money does not “implicate the Takings Clause” if
it does not “relate to a specific property interest.” Id.
at 544 (Kennedy, -/.).

9

There is no lack of “uniform|ity]” among lower
courts on this score. Pet. 15. In every one of
petitioners’ cases, the court drew precisely the same
conclusion—that five members of this Court rejected
the takings theory in Apfel because there was no
connection between the employers’ monetary obligation

20

and any specific, identifiable property interest. See
A.T. Massey Coal Co. v. Massanari, 305 F.3d 226, 237
n.17 (4th Cir. 2002): Commonwealth Edison, 271 F.3d
at 1339: Franklin County Convention Facilities Auth.
v. Am. Premier Underwriters, Inc., 240 F.3d 534, 551
(6th Cir. 2001); United States Fidelity, 226 F.3d at 420;
Unity Real Estate Co. v. Hudson, 178 F.3d 649, 674 (3d
Cir. 1999); Parella v. Retirement Bd. of tlhe Khode
Island Employees’ Retirement Sys., 173 F.3¢c 46, 58 (1st
Cir. 1999); Ass’n of Bituminous Contrac:ors, Inc. uv.
Apfel, 156 F.3d 1246, 1254 n.5 (D.C. Cir. 1998). In its
decision below, the Illinois Supreme Court merely
echoed this universally accepted understanding. See
Pet. App. 25a.

To be sure, Justice Kennedy and the plurality had
different reasons for finding the Coal Act
unconstitutional, and thus courts have quibbled over
what precedential weight to afford Apfel. Some have
treated the votes of Justice Kennedy and the four
dissenters as a holding. See, e.g., Commonwealth
Edison, 271 F.3d at 1389 (“We agree with the
prevailing view that we are obligated to follow the
views of that majority.”); see also id. at 1339 n.10
(collecting cases). Others have given the decision
somewhat narrower effect. ‘See Swisher Int'l, Inc. v.
Schafer, 550 F.3d 1046, 1054 & n.5 (11th Cir. 2008)
(declining to decide whether concurring opinion is
binding precedent but “agree[ing] with Justice
Kennedy that the takings analysis is not an
appropriate analysis for the constitutional evaluation
of an obligation imposed by Congress merely to pay
mone"); A.J. Massey, 305 F.3d at 237 (Apfel
“manuates judgment for * * * plaintiffs only if they
stand in a substantially identical position to Eastern

2]

Enterprises with respect to both the plurality and
Justice Kennedy’s concurrence.”) (internal quotations
omitted). But the Illinois Supreme Court is in the
latter camp in any event. It did not purport to be
bound by the conclusion reached by the concurrence
and dissent in Apfel; it merely rejected petitioners’
attempt to use Apfel affirmatively to find a taking. See
Pet. App. 23a-25a.

In fact, no court has ever done what petitioners
asked the Illinois Supreme Court to do—adopt the
Apfel plurality’s reasoning and, on that basis,
invalidate a law as an unconstitutional taking based
on reasoning that five Justices expressly rejected. See
Brief of Plaintiffs-Appellees at 38-39. Rather, courts
have properly recognized that this part of the plurality
opinion cannot be binding. See, e.g., Swisher Intl, 550
F.3d at 1054 n.5. And therefore no court has held, as
petitioners urge, that after Apfel government action
creating a general obligation to pay money violates the
Takings Clause.

Indeed, while petitioners trumpet Ass’n_ of
Bituminous Contractors, see Pet. 16-17, the challengers
in that case did not even forward a takings claim, see
156 F.3d at 1254. And the court there recognized that
Apfel “renders takings claims Jess attractive to litigants
because of the possibility that the five dissenters on the
takings issue could form a majority in a later case.” Id.
at 1254 n.5. Likewise, in A.7. Massey and Franklin
County Convention Facility (cited at Pet. 17), courts
declined to find a Takings Clause violation—or any
other constitutional harm—under Apfel because the
plaintiffs were not “ina substantially identical position
to” the coal operators. A.7. Massey, 305 F.3d at 237;

22

accord Franklin County Convention Facility, 240 F.3d
at 552 (reasoning that Apfel lacks “precedential weight
beyond its own facts”). Finally, while the Fifth Circuit
identified a Takings Clause violation in United States
Fidelity, the court acknowledged that the Apfel
plurality’s “takings clause rationale was accepted by
only four justices” and carefully reconciled its decision
with the concurrence, concluding that a “taking must
refer to an identifiable property interest or fund.” 226
F.3d at 419-420.

In short, petitioners cannot identify a single case
whose holding would spelJ victory for them here, and
thus the resolution of any uncertainty regarding Apfel
cannot inure in their favor. Accordingly, even ifit were
necessary for this Court to clarify the precedential
effect of Apfel (and it is not), this case does not provide
a vehicle to do so.

3. Ultimately, petitioners appear to concede the
distinction the Court has drawn—and the [Illinois
Supreme Court acknowledged below—between a
general obligation to pay money, like a tax (not a
taking) and an obligation to pay part of a specifically
identified property ‘nterest in money (a taking). But
petitioners and their amici nevertheless urge the Court
to use this case to previde an example of an assessment
that is not truly a tax, see Pet. 26-27, or of a tax that is
also a taking, see id. at 27-30. This effort also fails.
Petitioners rely chiefly on their claim that, unlike a
proper tax, the Act demands money from a small
number of casinos and eventually gives it to a small
number of their compet) ors, not for the public good but
for “essentially any purpose” that track owners desire.
Pet. 26-29. Petitioners (in line with their amici) thus

23

compare themselves to “big box” stores forced to
subsidize more politically potent “local retailers.” Id.
at 30. But this is wrong for several reasons.

First and most obviously, petitioners are not open
market competitors. They are licensees in a small,
regulated gambling industry, which the State could
eliminate entirely under its police powers and that
continues to exist only so long as the industry as a
whole yields substantial public benefits—including
jobs, revenue, and tourism. The Takings Clause does
not apply where, as here, the State merely reduces or
eliminates value that the State itself has created for
private parties, as petitioners themselves recognized
below. See Brief of Plaintiffs-Appellees at 60 n.30
(arguing that racetracks “had no night to [a] monopoly”
on lawful gambling in Illinois, “[aJnd the State
committed no wrong in taking it away from them, in
order to promote tourism in the communities with
riverboats and to raise * * * revenue”); see also infra
pp. 32-33. ‘The 3% tax is no more than a reduction in
part of the value that the —tate-regulated gambling
monopoly creates for its few licensees, in response to
the negative effect that casinos are having on another
part of that monopoly. Indeed, the Act is an effort to
sustain the gambling industry by ensuring the
continued viability of its racing component, with its
critical employment and other benefits. See supra p. 3.
And the tax currently apples to only four casinos
because it is a progressive tax, and these are the four
highest grossing (of only nine total). Moreover, quite
unlike the “big box” example, petitioners undeniably
“receive something in return” for the tax. Pet. 28. The
State’s gambling industry remains healthy enough to
provide its anticipated public benefits, meaning

24

petitioners retain the valuable right to pursue super-
competitive profits in Illinois’ limited gambling
monopoly.

Second, the Illinois Supreme Court expressly
rejected petitioners’ argument that the tax serves no
public purpose, and that track owners have unfettered
discretion to spend its proceeds. Applying its “plain
language,” the Illinois Supreme Court held that “the
principle purpose of the Act is a public one’—“to
stimulate economic activity, including the creation and
maintenance of jobs and the attraction of sports and
entertainment”—and, in addition, that “[t]he track
owners cannot simply pocket any of the funds they
received,” as those funds are statutorily “earmarked for
specific purposes and must be used for those purposes”
as a matter of [lhnois law. Pet. App. 29a-30a. These
conclusions of state law are dispositive here. See, e.g.,
Hortonville Joint Sch. Dist. No. 1 v. Hortonville Educ.
Ass'n, 426 U.S. 482, 488 (1976).

Finally, petitioners claim that the Act requires
payments “drawn :rom a specified corpus of gross
receipts’—making it more like a taking than a general
obligation to pay—because casinos “must make daily
payments of a specified portion of the prior day’s
adjusted gross receipts for a two-year period.” Pet. 18,
27. Petitioners compare this to the tax man hovering
behind their dealers to seize 3% of each day’s take. See
Pet. 27. But the Act merely taxes an amount equal to
3% of adjusted gross receipts. It is entirely “indifferent
as to how the regulated entity elects to comply or the
property it uses to do so.” Apfel, 524 U.S. at 540
(Kennedy, /.). Petitioners’ reliance on the requirement
that they remit their payment by 3 p.m. the following

25

day is equally misplaced, for this is nothing more than
an easily administrable, bright-line rule (like having to
pay personal income tax by the close of business on
April 15). As a matter of fact, it is the same deadline
that all riverboat casinos must meet in paying the
daily privilege tax that petitioners do not challenge,
see 230 ILCS 10/13(a-10) (2006), and is akin to the race
tracks’ daily payment obligation. See supra pp. 3, 5-6.

In sum, this case does not present the question set
out in the petition, implicates no split in authority, and
1s a far cry from the case that petitioners describe in
which free market participants are forced to subsidize
their more politically powerful competitors.

Il. Petitioners Cannot Establish A Property
Interest In The Undiminished Value Of Their
Gambling Licenses.

Even if this case presented the question that
petitioners pose, and the question were otherwise
worthy of review, the fact that petitioners are licensees
in a state-regulated, limited gambling monopoly puts
that question out of reach, for these circumstances
alone require affirmance of the judgment below.

1. To prevail on their Takings Claim, petitioners
first must establish a protected property interest. See,
e.g., Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1000-
1001 (1984). Only then does one ask whether the Act
“effect[s] a taking” of that interest. Jbid. Here,
petitioners assume that they have a property interest
in avoiding the 3% tax on their adjusted gross receipts.
But this ignores that these receipts are returns on
gambling licenses, and that such government-issued
licenses (and financial returns thereon) are not

26

property within the meaning of the Takings Clause.’
This alone is grounds to reject petitioners’ takings
claim, although it is not an issue presented in the
petition or worthy of certiorari review, for it applies
only to the small subset of cases involving government
licensees, especially licensees in heavily regulated,
limited monopolies subject to outright prohibition
under the State’s police power, and it implicates no
alleged split in authority.

“

Whether something is protected property “is
determined by reference to existing rules or
understandings that stem from an independent source
such as state law.” Phillips, 524 U.S. at 164 (internal
quotations omitted). Accordingly, when determining
whether a license is property for purposes of the
Takings Clause, courts rely on state law for indicia of
property ownership, inquiring whether the license may
be transferred, assigned, or sold; whether the license
holder has the right to exclude others—as
demonstrated by the extent of the government’s power
to regulate the underlying activity—-as well as to
revoke, suspend, or modify the license; and whether
the government has provided by statute or regulation
that the hcense does not confer a property right. See
Ruckelshaus, 467 U.S. at 1002-1003; United States v.
Fuller, 409 U.S. 488, 494 (1973).

* That a license is not property under the Takings
Clause does not mean that it cannot qualify for procedural
due process protections. Property “is defined much more
narrowly” for takings than for duc process purposes. Corn
vu. Lauderdale Lakes, 95 F.3d 1066, 1075 (11th Cir. 1996);
see also Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 540
(2005).

27

Applying these principles, this and other courts
have held that government-issued licenses and permits
generally do not create property interests protected by
the Takings Clause and, as a result, that government
action that diminishes the value of those licenses and
permits—including, as here, by taxing a portion of the
earnings realized on them—cannot be the subject of a
takings claim. Thus, in Raceway Park, Inc. v. Ohio,
356 F.3d 677 (6th Cir. 2004), the court held that horse-
track owners had no property interest in their
wagering revenues, for purposes of a takings challenge
to an Ohio law redistributing a share of those revenues
to competing tracks. See id. at 683. Based on its
review of state law, the court concluded that “there is
no long-standing right to the revenues earned from
gambling on horse racing.” Id. at 682-683; see also
Hawkeye Commodity Promotions, Inc. v. Vilsack, 486
F.3d 430, 439-440 (8th Cir. 2007) (licensed lottery
machine owner lacked property interest for takings
purposes in state-issued license and, accordingly, in
“continued operation of its enterprise,” where lowa law
provided that possession of lottery machine license “is
a privilege personal to that person or entity and is not
a legal right” and prohibited licensees from selling,
assigning, or transferring their licenses) (internal
quotations and citation omitted).

And in Fuller, claimants had no property interest in
grazing permits issued for neighboring land under the
Taylor Grazing Act, and therefore no right to
compensation for the component of their own land
value attributable to the right to graze on the adjoining
federal property. The permits were revocable, and
Congress made clear that they “shall not create any

28

right, title, interest or estate in or to the lands.” 409
U.S. at 489 (quoting statute).

Other cases are to the same effect, finding no
property right in the undiminished value of a
government-issued license, and therefore sustaining
laws reducing that value. See, e.g., Conti v. United
States, 291 F.3d 1334, 1341-1342 (Fed. Cir. 2002)
(fishing permit); Vanek v. State Board of Fisheries, 193
P.3d 283, 293 (Ak. 2008) (same); BHA Investments, 63
at 480-481 (liquor license); Bronco Wine Co. v. Jolly, 29
Cal. Rptr. 3d 462, 495-496 (Ct. App. 2005) (certificates
of approval for wine labels); MEC Pennsylvania
Racing, Inc. v. Pennsylvania State Horse Racing
Comm'n, 827 A.2d 580, 593 (Pa. Commw. Ct. 2003)
(horse-racing license). In short, the Takings Clause
simply is not implicated where, as here, the alleged
“taking” of money “is associated with a [license] or
permit” that is not itself protected property. BHA
Investments, 63 P.3d at 481; accord Mitchell Arms, Inc.
uv. United States, 7 F.3d 212, 216 (Fed. Cir. 1993). The
State has not confiscated petitioners’ boats; it has
assessed a tax limited by its terms to a small
percentage of earnings derived from petitioners’
participation in a limited gambling monopoly—a
monopoly in which petitioners have no property right
to participate at all.

As in Hawkeye Commodity Promotions, Fuller, and
other cases, Illinois law expressly denies casino
licensees a “property right” in their licenses. See 86 III.
Admin. Code § 3000.1105. The license is a “revocable
privilege,” and holders may not assign, transfer or sell
their licenses without state approval, see 86 Ill.
Admin. Code §§ 3000.235, 3000.1105—all strikes

29

against finding a property interest, see, e.g.,
Ruckelshaus, 467 U.S. at 1002-1003. As is the fact
that these licensees lack the right to exclude others—in
fact, the Gaming Board has exclusive control over the
issuance of the licenses, see 230 ILCS 10/5(b)(1), 10/7
(2006), and may revoke or suspend them as the Board
“see[s] fit,” 230 ILCS 10/5(c)(11).

2. It is thus enough to defeat petitioners’ takings
claim that the Act taxes a small share of the value of
petitioners’ gambling licenses, a value in which
petitioners have no property interest for takings
purposes. But other facts ignored by the petition are
themseives independentiy fatal to petitioners’ claim.
Petitioners are willing participants in a heavily
regulated industry subject to complete elimination
under the police power (and all but one opted to renew
their license while the Act was in effect, see supra p. 7).
Gambling “could be, and frequently has been, banned
altogether.” United States & Fed. Commc’ns Comm’n
v. Edge Broad. Co., 509 U.S. 418, 426 (1993); accord
Marvin v. Trout, 199 U:S. 212, 224 (1905). In addition,
“sambling activitics are normally matters of state
concern,” Jannelli v. United States, 420 U.S. 770, 790
(1975), and “[t]he power of the State to enact laws to
suppress gambling cannot be doubted,” Marvin, 199
U.S. at 224; see also Cleveland v. United States, 531
U.S. 12, 21 (2000) (Louisiana gaming statute “licenses
** * ongagement in pursuits that private actors may
not undertake without official authorization”).
Historically, an entity that accepts a state-issued
gambling license obtains no more than “a suspension
of certain governmental rights in their favor, subject to
withdrawal at will.” Stone v. Mississippi, 101 U.S. 814,
821 (1879).

30

Even petitioners must concede, as they did below,
that Illinois is “not required to allow gambling” at all.
Brief of Plaintiffs-Appellees at 64. Rather than
banning it altogether, however, the General Assembly
authorizes gambling in limited circumstances, subject
to comprehensive regulation and provided it continues
to yield public benefits. See supra pp. 3-6, 23. Such
comprehensive regulation is inconsistent with a
takings claim for several reasons. It suggests that any
rights in the property have not “vested,” Bowen v. Pub.
Agencies Opposed to Soc. Sec. Entrapmeni, 477 U.S. 41,
55 (1986), or that the property amounts to a gratuity
that the government may alter or revoke, see Bowen v.
Gillard, 483 U.S. 587, 604 (1987). Such intrusive
regulation is also incompatible with a reasonable,
investment-backed expectation that the claimant will
enjoy a continued right to the property, meaning the
claimant cannot satisfy the ad hoc, factual inquiry for
regulatory action that diminishes the property’s value
by restricting its use. See Lingle v. Chevron, 544 U.S.
528, 538-539 (2005) (citing Penn Cent. Transp. Co. v.
City of N.Y., 438 U.S. 104, 124 (1978)); see also
Ruckelshaus, 467 U.S. at 1005; Mitchell Arms, 7 F.3d
at 216 (takings claim “cannot arise in an area
voluntarily entered into and one which, from the start,
is subject to pervasive Government control”) (internal
quotations and citation omitted).° For one or more of

* Because petitioners willingly entered an industry
that is both highly regulated and subject to outright
prohibition, there was no interference with their
investment-backed expectations, a fact that is alone
dispositive of their .akings claim. See, e.g., Ruckelshaus,
467 U.S. at 1006-1007. Should the two remaining “Penn

31

these reasons, “[tJ]hose who do business in the
regulated field,” hike petitioners here, “cannot object if
the legislative scheme is buttressed by subsequent
amendments to achieve the legislative end.” Connolly
v. Pension Benefit Guarantee Corp., 475 U.S. 211, 227
(1986) Ganternal quotations omitted).

Central” factors for identifying a reguiatory taking warrant
consideration, they, too, counsel against a “taking” here.
First, as to the “character of the governmental action,” Penni
Central, 438 U.S. at 124, the Act was an effort by the State
to protect and preserve its horse-racing industry, and courts
have long rejected takings challenges to such legislative
““adjust[ments of] the benefits and burdens of economic life
to promote the common good,” Raceway Park, 356 F.3d at
684 (quoting Connolly v. Pension Benefit Gty. Corp., 475
U.S. 211, 225 (1986)). Second, as for “[t]he economic impact
of the regulation on the claimant,” Penn Central, 438 U.S.
at 124, the 3% tax is reasonably related to the
encouragement of horse racing and, at worst, means that
petitioners’ gambling revenues are not as much as they
would have liked, see Raceway Park, 356 F.3d at 685-686 &
n.6. Finally, to the extent that petitioners would allege a
categorical taking, applicable where there has been a
“permanent physical invasion,” Loretto v. Teleprompter
Manhattan CATV Corp., 458 U.S. 419, 426 (1982), or a
deprivation of “all economically beneficial uses” of property,
Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019 (1992),
this Court has rejected application of Loretto to an exaction
of money, recognizing that “[ijt is artificial to view
deductions of a percentage of a monetary award as physical
appropriations of property. Unlike real or personal
property, money is fungible.” United States v. Sperry Corp.,
493 U.S. 52, 62 n. 9 (1989).

32

Nor is the government required to pay for value
that it creates, see Fuller, 409 U.S. at 492, or “that it
might have destroyed under the exercise of
governmental authority other than the power of
eminent domain,” such as the police power, ibid.; see
also Bennis v. Michigan, 516 U.S. 442, 452 (1996).
Thus, in Fuller, claimants’ land enjoyed added value
because it bordered federal property for which grazing
permits were available, but this additional value was
not compensable on a takings theory, for “[t]hat is a
value which the government itself created and hence in
fairness should not be required to pay.” 409 U.S. at
491, 493 (internal quotations omitted). Acontrary rule
would require compensation for “the value of a right
that the Government * * * can grant or withhold as it
chooses,” like the value that Illinois creates for
licensees in its limited gambling monopoly. /d. at 493
(internal quotations and citation omitted). If an
industry “can be abolished at any time that the
Legislature may deem proper for the safeguarding and
protection of the public welfare,” Carney v. Attorney |
General, 890 N.E.2d 121, 132 (Mass. 2008) (internal
quotations omitted), “claimants operating in such fields
should expect that the government can effectively
regulate them out of business,” Buhmann v. Montana,
201 P.3d 70, 91 (Mont. 2008), and have no right “to
compensation where the government chooses to modify
the program that created the benefit in the first place,”
Carney, 890 N.E.2d at 132.

In the same manner, because Congress has the
power “completely to regulate navigable streams,” any
compensation due upon condemnation of riparian land
must omit the land’s value as a port site. United States
v. Rands, 389 U.S. 121, 125 (1967). “[T]hese rights and

33

values are not assertable against the supenior rights of
the United States” and thus “need not be paid for when
appropriated by” the federal government; in fact, to
require payment for such “value would be to create
private claims in the public domain.” Jd. at 125-126
(internal quotations omitted).

It is therefore no surprise that courts routinely
reject takings claims by gambling enterprises,
including claims like petitioners’ that arise from a tax
on wagering revenues or other restrictions limitiag the
profitability of a gambling hcense. See, e.g., Raceway
Park, 356 F.3d 685-687 (state law requiring racetracks
to contribute part of their wagering revenues for
redistribution to other racetracks); Star Northwest, Inc.
v. City of Kenmore, No. C05-2133P, 2006 WL 2372395,
at *3-*4 (W.D. Wash. Aug. 10, 2006) (municipal
ordinance banning card rooms); Carney, 890 N.E.2d at
132 (state law banning parimutuel dog racing); Mibbs,
Inc. v. South Carolina Dep’t of Revenue, 524 S.E.2d
626, 628 (S.C. 1999) (cou sy ban on cash payouts from
video poker machines); ou vma v. Parker, 22 A.2d 513,
516 (Vt. 1941) (state law banning slot machines);
Preece Facility, 71 S.W.3d at 104 (denial of renewal
application for lhcense to operate charitable gaming
establishment). A gambling industry participant’s
“expectations in its * * * business” must be “discounted
by” “the heavily regulated nature of gambling.”
Hawkeye, 486 F.3d at 442; see also Mitchell Arms, 7
F.3d at 216 (same for firearms exportation); BHA
Investments, 63 P.3d at 480 (same for lquor sales);
Bronco, 29 Cal. Rptr. 3d at 498 (same); BuAmann, 201
P.3d at 91 (same for exotic game farming). (And the
Illinois Supreme Court relied on Preece Facility and
other cases in this line for its judgment below. See Pet.

34

App. 22a-23a.) For this reason, too, petitioners’
takings claim fails because petitioners belong to a
heavily-regulated state gambling monopoly, an
independent ground having nothing to do with the
issues petitioners seek to have this Court consider.

* * *

In short, petitioners do not participate in an open,
competitive market. They are state licensees exempt
from Illinois’ anti-gambling laws—allowed to offer
casino gambling in exchange for their submission to
intensive regulation (backed by the threat of license
suspension, revocation, or non-renewal) and ongoing
financial and other contributions to the public welfare.
Alone or in combination, these facts require affirmance
of the Illinois Supreme Court’s judgment, making this
case a singularly flawed vehicle for addressing the
question that the petition presents, were that question
even implicated by the decision below.

35

CONCLUSION

The petition for a writ of certiorari should be

denied.
Respectfully submitted,

WILLIAM J. MCKENNA
MARTIN J. BISHOP
JONATHAN W. GARLOUGH
Foley & Lardner LLP
321 North Clark Street
Chicago, Illinois 60654

Counsel for Respondents
Balmoral Racing Club, Inc.
& Maywood Park Trotting
Assoc., Inc.

EDWARD M. WHITE

MICHAEL J. MURRAY

Carey, Filter, White & Boland
33 West Jackson Boulevard
Chicago, Illinois 60604

Counsel for Respondent
Hawthorne Race Course, Inc.

April 9, 2009

LisA MADIGAN
Attorney General

of Illinois
MICHAEL A. SCODRO*
Solicitor General
JANE ELINOR NOTZ
Deputy Solicitor General
JERALD S. POST
Ass't Attorney General
100 West Randolph Street
Chicago, Illinois 60601
(312) 814-8698

Counsel for Respondents

Alexi Giannoulias &
The Illinois Racing Board

*Counsel of Record

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_0098%3A02. Public record. Not legal advice.