The Litigation Solution

The second choice that is currently available to Colorado is to follow the lead of Minnesota and sue Internet casinos in state court under existing state laws. This section will first examine Minnesota’s litigation strategy of combining federal gambling laws with state consumer protection laws in order to get a civil injunction against an Internet-based sports gambling operation. The analysis will then close with a description of the two primary problems with Minnesota’s approach, namely the limitations on extraterritorial application of United States law and the enforcement problems inherent in judgments against foreign defendants.

30 On July 18, 1995, the Minnesota Attorney General’s office filed suit against Granite Gate Resorts, Inc. (“Granite Gate”). Granite Gate, a Nevada corporation, was operating a web site that advertised a sports wagering service [64] and a service that, for a fee, would provide tips on projected winners of upcoming sporting events. [65] Granite Gate claimed that its services were legal and thus made no restrictions concerning who could access their services. [66]

The Minnesota Attorney General sought an injunction against Granite Gate, a form of relief made available by the consumer protection laws of Minnesota. [67] The complaint alleged that Granite Gate was violating § 18 U.S.C. 1084 by permitting Minnesota residents to transmit bets or wagers, or information on bets or wagers, by the use of a wire communication in foreign or interstate commerce. [68] The complaint further alleged that because the services that Granite Gate offered were illegal under § 18 U.S.C. 1084, Granite Gate “engaged in false advertising deceptive trade practices and consumer fraud by representing that their sports handicapping service and proposed sports bookmaking service are lawful.” [69] Thus, Minnesota’s theory of its case was that Granite Gate’s services were illegal (under federal law), that Granite Gate advertised to prospective customers that its services were legal, and that these representations made by Granite Gate were, therefore, in violation of the consumer protection laws of Minnesota.

The Attorney General also claimed that Minnesota’s courts had personal jurisdiction over Granite Gate. [70] Both the District Court and the Minnesota Appeals Court agreed with the Attorney General that Granite Gate, via its web-site, had solicited a nationwide clientele that would include Minnesota residents, and such solicitations constituted purposeful availment of the benefits of conducting business in the forum state of Minnesota, thus granting Minnesota’s courts jurisdiction to hear the case. [71]

Minnesota’s arguments in State ex rel Humprey appear to provide a powerful weapon for states that want to shut down Internet casinos. However, there are two limitations, one theoretical and the other practical, that prevent this solution from giving Colorado an effective method of resolving the tensions between Internet gambling and the Limited Gaming Act.

The first weakness of Minnesota’s solution is that the state’s arguments about the underlying federal law may not be interpreted the same way in Colorado. Federal law, in its current state, probably does not prohibit Internet casinos located overseas from operating on the Internet. Both domestic and international law place limits on a nation’s prescriptive jurisdiction, [72] and Minnesota’s use of federal law may violate these limits, as will be shown.

35The role of the Federal Courts in cases that involve international law concerns is: “to enforce the Constitution, laws, and treaties of the United States, not to conform the law of the land to norms of customary international law.” [73] Where there are inconsistencies between what a domestic statute and customary international law requires, the court is bound to apply the domestic statute, even where the application of the statute might violate norms of customary international law. [74] In such instances, the “inconsistent statute simply modifies or supersedes customary international law to the extent of the inconsistency.” [75] At first glance these statements appear to bolster Minnesota’s argument. If applying federal gambling statutes to foreign Internet casinos violates customary international law, then so be it. The Minnesota court must apply the United States’ law, even if doing so would violate precepts of international law.

Unfortunately, such an argument overlooks one problem: the Supreme Court long ago created an exception to this rule. The exception states that “an act of congress ought never to be construed to violate the law of nations, if any other possible construction remains . . . .” [76] Thus, United States courts have required that, for domestic law to have extraterritorial application, there must be some specific and express intent by the legislature for the law to have such an effect. The provision of federal law that Minnesota used in State ex rel Humphrey prohibits the knowing use of “a wire communication facility for the transmission in interstate or foreign commerce ” of various types of gambling information. [77] The term “foreign commerce” by itself, however, has been ruled by the Fifth Circuit not to provide sufficient legislative intent so that a law would have extraterritorial effect. [78]

The second weakness in Minnesota’s approach is the purely practical problem of enforcing judgments against foreign Internet casinos. Minnesota’s Attorney General sought both an injunction and monetary damages against Granite Gate. [79] Although the defendant in State ex rel Humphrey was a Nevada corporation, most Internet casinos today are located in foreign countries. The likelihood of enforcing a judgment against such international entities is small. If the Internet casino has assets in the United States, the Full Faith and Credit Clause of the U.S. Constitution and other laws, such as the Uniform Respect of Foreign Judgments Act, make it relatively easy to attach those assets in the United States. However, if there are no assets located in the United States, the state must then go to the foreign jurisdiction where the Internet casino is located and attempt to enforce the judgment there. Needless to say, foreign jurisdictions will most likely fail to enforce a judgment based on an activity that, although adjudged illegal in the United States, is not considered illegal in the foreign jurisdiction.