Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 1 of 18 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION COMMODITAS GEORGIA, LLC vs. Plaintiff, NATHAN DEAL, Governor of the State of Georgia, in his official capacity; SAMEUL S. OLENS, Attorney General of the State of Georgia, in his official capacity, Defendants Case No.: COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF COMPLAINT FOR DECLARATORY JUDGMENT AND INJUNCTIVE RELIEF Plaintiff Commoditas Georgia, LLC brings this action seeking a judicial declaration that certain provisions of House Bill 487 concerning the ownership, operation, and revenue division of bona fide coin operated amusement machines are unconstitutional. Plaintiff further requests injunctive relief staying the enforcement of certain provisions that infringe upon the Plaintiffs rights to freely contract. 1. This action challenges Georgia House Bill 487 (HB 487, attached as Exhibit A). In HB 487, Georgia creates a comprehensive system that regulates the business of coin operated amusement machines. Among other things, HB 487establishes a licensing scheme, and provides for the disposition of certain revenues from coin operated amusement machines. 1
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 2 of 18 2. Governor Nathan Deal signed HB 487 on April 10, 2013. Certain provisions of the law took effect on April 10, 2013, and certain provisions are scheduled to take effect on July 1, 2013. 3. If allowed to take effect, HB 487 will significantly harm the operators of coin operated amusement machines for the following reasons: a. HB 487 violates the Contracts Clause of the United States Constitution, which provides that [n]o State shall... pass any... law impairing the obligation of contracts.... U.S. Const. Art. I, 10, Cl. 1. b. HB 487 violates Art. I, 1, Para. X of the Georgia Constitution, which provides that No bill of attainder, ex post facto law, retroactive law, or laws impairing the obligation of contract or making irrevocable grant of special privileges or immunities shall be passed. c. HB 487 violates the due process clause of the Georgia Constitution, Art. I, Sec. I, Para. I, which states No person shall be deprived of life, liberty, or property except by due process of law. 4. Plaintiff, Commoditas Georgia LLC, is a limited liability company registered with the Georgia Secretary of State. Commoditas Georgia LLC was formed by a consortium of individuals who operate Class B coin operated amusement machines at their business locations in Georgia. 2
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 3 of 18 5. Defendant Nathan Deal is the Governor of Georgia. According to the Georgia Constitution, "[t]he chief executive powers" are "vested in the Governor." Ga. Const. Art. 5 2, I. Under Georgia law, the Governor "shall provide for the defense of any action... the result of which is of interest to the state because of any claim inconsistent with the state's sovereignty, jurisdiction, or rights." O.C.G.A. 45-12-26. As such, Defendant Deal is responsible for the enforcement of HB 487 in the State of Georgia and is an appropriate defendant in this case. Defendant Deal is sued in his official capacity. 6. Defendant Samuel S. Olens is the Attorney General of Georgia. According to the Georgia Constitution, the Attorney General is "the legal advisor of the executive department" and "shall perform such... duties as shall be required by law." Ga. Const. Art. 5, 3, IV; See also O.C.G.A. 45-15-3 (detailing Attorney General's powers and duties). As such, Defendant Olens is responsible for the enforcement of HB 487 in the State of Georgia and is an appropriate defendant in this case. Defendant Olens is sued in his official capacity. 7. Plaintiff and its members will suffer serious and irreparable violations of their constitutional rights and civil liberties if HB 487 is allowed to take effect. 3
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 4 of 18 8. This Court has subject matter jurisdiction under 28 U.S.C. 1331 and 1343 over Plaintiffs' claims under the U.S. Constitution, which are brought under 42 U.S.C. 1983. 9. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. 1331 because this action arises under the U.S. Constitution and laws of the United States, and pursuant to 28 U.S.C. 1343 because this action seeks to redress the deprivation, under color of state law, of Plaintiffs' civil rights and to secure equitable or other relief for the violation of those rights. 10. This Court has supplemental jurisdiction over Plaintiffs' state law claim pursuant to 28 U.S.C. 1367 because it is so related to the federal claims that it forms part of the same case or controversy under Article III of the U.S. Constitution. 11. This Court has jurisdiction to grant declaratory relief pursuant to 28 U.S.C. 2201 and 2202, and Federal Rule of Civil Procedure Rule 57. 12. Venue is proper in this District under 28 U.S.C. 1391(b). Defendants are sued in their official capacity and their residences are all located within this District and this Division. 13. An active and justiciable controversy exists regarding the constitutionality of HB 487. 4
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 5 of 18 14. The stated purpose of HB 487 is To amend Title 48 of the Official Code of Georgia Annotated, relating to revenue and taxation, so as to transfer responsibility for administration and enforcement of provisions relating to coin operated amusement machines from the Department of Revenue to the Georgia Lottery Corporation; to amend Chapter 27 of Title 50 of the Official Code of Georgia Annotated, relating to a lottery for education, so as to provide for such transfer of responsibility; to provide for findings of the General Assembly; to revise provisions relating to such administration and enforcement; to provide for licensing of operators; to create the Class B machine operators advisory board; to provide for a Class B accounting terminal; to provide for procedures, conditions, and limitations; to provide for fees and penalties; to provide for disposition of certain revenues; to amend Part 1 of Article 2 of Chapter 12 of Title 16 of the Official Code of Georgia Annotated, relating to improper use of coin operated amusement machines, so as to change certain provisions relating to definitions; to amend various other provisions of the Official Code of Georgia Annotated so as to conform related cross-references; to state legislative intent with respect to the effect of this Act on maritime vessels; to provide for an effective date; to provide for an automatic repeal upon a finding of unconstitutionality; to repeal conflicting laws; and for other purposes. (Exhibit A). 5
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 6 of 18 15. HB 487 Part I, Section 101, re-designates Chapter 17 of Title 48 as a new Article 3 of Chapter 27 of Title 50. Some of the new provisions of Article 3 of Chapter 27 of Title 50 are as follows: a. 50-27-70(a) The General Assembly... is enacting the procedural enhancements of this article which will aid in the enforcement of the tax obligations that arise from the operation of bona fide coin operated amusement machine businesses as well as prevent unauthorized cash payouts. b. 50-27-70(b)(4) 'Class B machine' means a bona fide coin operated amusement machine that allows a successful player to accrue points on the machine and carry over points won on one play to a subsequent play or plays.... c. 50-27-70(8) 'Location owner or location operator' means an owner or operator of a business where one or more bona fide coin operated amusement machines are available for commercial use and play by the public. d. 50-27-70(10) 'Master license' means the certificate which every owner of a bona fide coin operated amusement machine must purchase and display in the owner's or operator's place of business where the machine 6
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 7 of 18 is located for commercial use by the public for play in order to legally operate the machine in the state. e. 50-27-70 (b)(11) Net receipts means the entire amount of moneys received from the public for play of an amusement machine, minus the amount of expenses for noncash redemption of winnings from the amusement machine, and minus the amount of moneys refunded to the public for bona fide malfunctions of the amusement machine. f. 50-27-70(b)(12) 'Operator' means any person, individual, firm, company, association, corporation, or other business entity who that exhibits, displays, or permits to be exhibited or displayed, in a place of business other than his own, any bona fide coin operated amusement machine in this state. g. 50-27-70(b)(13) 'Owner' means any person, individual, firm, company, association, corporation, or other business entity owning any bona fide coin operated amusement machine in this state. h. 50-27-71(a) Every owner, except an owner holding a bona fide coin operated amusement machine solely for personal use or resale, who offers others the opportunity to play for a charge, whether directly or indirectly, any bona fide coin operated amusement machine shall pay annual master license fees to the corporation.... 7
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 8 of 18 i. 50-27-87(b)(1) No bona fide coin operated amusement machine, its parts, or software or hardware shall be placed or leased in any location owner's or location operator's establishment except by a master licensee and only if the owner or agent of the location owner or location operator has entered into a written agreement with a master licensee for placement of the bona fide coin operated amusement machine.... j. 50-27-87.1 Provides that the following is an unfair method of competition: (1) Until the corporation certifies that the Class B accounting terminal authorized by Code Section 50-27-101 is implemented [on or before July 1, 2014], a master licensee, location owner, or location operator retaining more than 50 percent of the net monthly proceeds for the operation of a Class B machine; k. 50-27-102 (a) Upon successful implementation and certification of the Class B accounting terminal under the provisions of Code Section 50-27- 101, and for the first fiscal year thereafter, the corporation shall: (1) Retain 5 percent of the net receipts; (2) Provide, within five business days of receipt, 47.5 percent of the net receipts to the location owner and location operator for the cost associated with allowing the Class B machines to be placed; and 8
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 9 of 18 (3) Provide, within five business days of receipt, 47.5 percent of the net receipts to the operator holding the Class B master license for the cost of securing, operating, and monitoring the machines. (b) In each fiscal year after the implementation and certification required by subsection (a) of this Code Section, the corporation's share shall increase 1 percent, taken evenly from the location owner or location operator and the operator, to a maximum of 10 percent. (Exhibit A) 16. HB 487 Part III, Section 3-1 also provides that (b) If any section of this Act is determined to be unconstitutional by a final decision of an appellate court of competent jurisdiction or by the trial court of competent jurisdiction if no appeal is made, with the exception of subsection (g) of Code Section 50-27- 78 and Section 2-1 of this Act, this Act shall stand repealed by operation of law. 17. Plaintiff is an organization comprised of individuals and entities that operate bona fide coin operated amusement machines that are classified under HB 487 as Class B machines. (50-27-70(b)(4)). 18. Typically, bona fide coin operated amusement machines are owned by individuals or entities that then place those machines in various locations throughout Georgia. These locations are generally owned by another individual or entity. The two parties then create a contract, operating 9
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 10 of 18 agreement, or some understanding of profit sharing for use of the owner s machine at the operator s location. 19. Under the nomenclature of HB 487, the individuals and entities who comprise Plaintiff are classified as a location operator, (50-27-70(8)), operator. (50-27-70(b)(12)). 20. Prior to the enactment of HB 487, Plaintiff and its members were free to fully exercise their freedoms rights to contract and engage in a free market of commerce. This allowed the parties to reach contracts, operating agreements, and understandings in a competitive and unrestricted manner. 21. Prior to the enactment of HB 487, operators typically would negotiate contracts with owners for the placement of bona fide coin operated amusement machines, in which the owner of the machine would be compensated on the basis of a percentage of the net revenue from each machine. Each operator was free to negotiate the percentage rate that would be paid to the owner of the machine. Percentage rates that would be paid to owners ranged from 10% to 30% of the net revenue of each machine. 22. Prior to the enactment of HB 487, contracts between owners and operators could be in writing, but frequently the contracts were not in writing. 10
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 11 of 18 23. HB 487 dramatically changes the relationship between the owners and operators of bona fide coin operated amusement devices. In pertinent part, HB 487 imposed the following: a. Mandates that owners and operators of bona fide coin operated amusement devices must have written contractual agreements; (50-27- 87(b)(1)); b. Mandates that owners and operators must split profits evenly at fifty percent for a certain period of time; (50-27-87.1); and c. Mandates that owners and operators share equally in the net receipts from the operation of bona fide coin operated amusement machines; (50-27- 102(a) and (b). 24. The scope of HB 487 is draconian; bona fide coin operated amusement machines include, without limitation, pinball machines, console machines, video games, crane machines, claw machines, pusher machines, bowling machines, novelty arcade machines, foosball or table soccer machines, miniature race track games, miniature football games, miniature golf games, target or shooting gallery machines, basket ball machines, shuffleboard games, kiddie ride games, skeeball machines, air hockey machines, rolldown machines, trivia machines, trivia machines, laser games, simulator games, 11
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 12 of 18 virtual reality machines, maze games, racing games, coin operated pool tables, coin operated billiard tables, and even jukeboxes. 25. The legislative findings set forth in HB 487 set forth no reason for restricting machine owners and operators from freely engaging in commerce and from negotiating and entering into contracts. Prior to HB 487 s enactment, Georgia law placed absolutely no restrictions on the ability of owners and operators of bona fide coin operated amusement machines to freely engage in commerce by negotiating the fee to be paid for the placement of a bona fide coin operated amusement machine at the operator s premises. 26. Commoditas Georgia LLC is a consortium of like-minded and similarly situated individuals who all or operate locations currently featuring bona fide coin operated amusement machines. 27. Currently, the members of Commoditas Georgia, LLC have contracts (primarily oral contracts) or the use of bona fide coin operated amusement machines setting the compensation for the owner at rates ranging between 10% to 30% of net revenue from each machine. 28. The members of Commoditas Georgia, LLC are receiving demands from owners that they enter into new written contracts that contain the terms of compensation required by HB 487. 12
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 13 of 18 29. On July 1, 2013, the members of Commoditas Georgia LLC shall be forced into entering into these contracts or risk losing the ability to offer bona fide coin operated amusement machines at their locations. DECLARATORY JUDGMENT and INJUNCTIVE RELIEF 30. An actual and substantial controversy exists between Plaintiff and Defendants as to their respective legal rights and duties. Plaintiff faces an imminent threat of harm if HB 487 is enforced, and that this law violates the U.S. and Georgia Constitutions. Defendants are obligated to enforce this law unless it is found to be illegal. 31. In violating Plaintiff s rights under the U.S. and Georgia Constitutions, Defendants have acted and will be acting under color of law. 32. If HB 487 goes into effect, it will cause irreparable injury to Plaintiff and its members. 33. Plaintiff has no plain, speedy, and adequate remedy at law against HB 487 other than the relief requested in this Complaint. 34. Plaintiff and its members will suffer irreparable injury if an injunction is not issued. Plaintiff has no adequate remedy at law. 35. Plaintiff is entitled to a declaration that HB 487 is unconstitutional on its face and to an order preliminarily and permanently enjoining its enforcement. 13
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 14 of 18 COUNT ONE VIOLATION OF US CONSTITUTION CONTRACT CLAUSE 36. The foregoing allegations are repeated and incorporated as though fully set forth herein. 37. The Contract Clause of the United States Constitution provides that [n]o State shall... pass any... law impairing the obligation of contracts.... U.S. Const. art. I, 10, cl.1. 38. The contracts and agreements between the individuals and stores owners and machine owners are contracts within the meaning of the Contracts Clause. 39. Defendants are responsible for the enforcement of HB 487, and through its enforcement will cause the deprivation of rights, privileges and immunities secured under the Contracts Clause. COUNT TWO IMPAIRMENT OF CONTRACT CLAIM UNDER GEORGIA CONSTITUTION 40. The foregoing allegations are repeated and incorporated as though fully set forth herein. 41. HB 487 violates Art. I, 1, Para. X of the Georgia Constitution, which provides that No bill of attainder, ex post facto law, retroactive law, or laws impairing the obligation of contract or making irrevocable grant of special privileges or immunities shall be passed. 14
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 15 of 18 42. The contracts and agreements between the individuals and stores owners and machine owners are contracts within the meaning of the Impairment Contracts Clause in the Georgia Constitution. 43. Defendants are responsible for the enforcement of HB 487, and through its enforcement will cause the deprivation of rights, privileges and immunities secured under the Impairments of Contracts Clause in the Georgia Constitution. COUNT THREE DUE PROCESS CLAIM UNDER GEORGIA CONSTITUTION 44. The foregoing allegations are repeated and incorporated as though fully set forth herein. 45. HB 487 violates the due process clause of the Georgia Constitution, Art. I, Sec. I, Para. I, which states No person shall be deprived of life, liberty, or property except by due process of law. 46. The contracts and agreements between the individuals and stores owners and machine owners constitute property interests protected by the Due Process clause of the Georgia Constitution. 47. Defendants are responsible for the enforcement of HB 487, and through its enforcement will cause the deprivation of rights, privileges and immunities secured under the Due Process clause of the Georgia Constitution. 15
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 16 of 18 COUNT FOUR ATTORNEYS FEES AND COSTS 48. The foregoing allegations are repeated and incorporated as though fully set forth herein. 49. Plaintiff is entitled to costs of suit, reasonable attorneys' fees and expenses as provided by 42 U S. C. 1988, including any and all attorneys' fees and other expenses. WHEREFORE, Plaintiff respectfully requests that this Honorable Court: (A) (B) Assume jurisdiction over this matter; Declare that HB 487 is unconstitutional in its entirety; (C) Enjoin Defendants from enforcing HB 487; (D) Grant Plaintiff costs of suit and reasonable attorneys fees and other expenses pursuant ot 28 U.S.C. 1988; and (E) Grant any other relief the Court deems just and proper 16
Case 1:13-cv-02131-HLM Document 1 Filed 06/26/13 Page 17 of 18 This June 25, 2013. /s Kelly R. Burke Ga. Bar No. 095613 Burke Lasseter LLC 2006 Karl Drive, Suite 100 Warner Robins, GA 31088 Ofc. 478-287-6969 Fax 888-933-9336 E-mail: kellly@burkelasseter.com /s Charles E. Cox, Jr. Charles E. Cox, Jr., LLC Ga. Bar No. 192305 Attorney for Plaintiff Post Office Box 67 Macon, Georgia 31202-0067 Telephone: (478) 757-2990 Facsimile: (478) 757-2991 E-mail: charles@cecoxjr.com 17
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