Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-02406/USCOURTS-ca8-06-02406-0/pdf.json

Nature of Suit Code: 950
Nature of Suit: Contitutionality of State Statutes
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-2406

___________

Hawkeye Commodity Promotions, Inc., *

*

*

Plaintiff – Appellant, *

*

v. *

*

Thomas J. Vilsack, in his *

official capacity as Governor of *

the State of Iowa, *

*

Defendant, *

*

Thomas J. Miller, in his official * Appeal from the United States

capacity as the Attorney General * District Court for the Northern

of the State of Iowa; Kevin W. * District of Iowa.

Techau, in his official capacity *

as the Commissioner of the Iowa *

Department of Public Safety, *

*

Defendants – Appellees, *

*

Iowa Lottery Authority; *

Edward Stanek, Dr., in his *

official capacity as the Chief *

Executive Officer of the Iowa *

Lottery Authority, *

*

Defendants. *

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1

 The Honorable Linda R. Reade, Chief Judge, United States District Court for

the Northern District of Iowa.

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___________

Submitted: December 11, 2006

Filed: April 24, 2007

___________

Before BYE, COLLOTON, and BENTON, Circuit Judges.

___________

BENTON, Circuit Judge.

In March 2006, Iowa enacted legislation ending the TouchPlay lottery game.

Hawkeye Commodity Promotions, Inc., a licensed TouchPlay retailer, tried to enjoin

the law before it took effect. Hawkeye argued that the law violates the Contracts,

Takings, Equal Protection, and Due Process clauses of the federal constitution. The

district court1

 rejects these claims. See Hawkeye Commodity Promotions, Inc., v.

Miller, 432 F.Supp.2d 822 (N.D. Iowa 2006). Hawkeye appeals, reiterating those

claims and asserting that the district court should have admitted the deposition

testimony of the president of the Iowa Lottery Authority (the Lottery). This court

affirms.

I.

Following revenue shortfalls in 2000 and 2001, the Iowa General Assembly

authorized the Lottery to "establish a plan to implement the deployment of pull-tab

vending machines with video monitors." The Lottery then added the TouchPlay

game. A TouchPlay machine is "a vending machine that dispenses or prints and

dispenses lottery tickets that have been determined to be winning or losing tickets by

a predetermined pool drawing machine prior to the dispensing of the tickets." IOWA

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ADMIN. CODE r. 531-14.3. With flashing lights and captivating sounds, TouchPlay

machines resemble slot machines. Unlike slot machines, which are random,

TouchPlay is not random. Tickets are loaded into the machine electronically, and like

pull-tab tickets, the outcome of each game is predetermined.

The Lottery never owned any TouchPlay machines. They were manufactured

and distributed to retailers, who purchased or leased them. The Lottery contracted for

the manufacture of TouchPlay machines; licensed the retailers to put them in

businesses; set the number of winning tickets and the amount paid out on each

machine; collected data from the machines; and split the revenue with manufacturers

and retailers. TouchPlay began with 30 machines in May 2003, expanding rapidly:

By April 2006, more than 6,400 machines operated at 3,800 businesses across Iowa.

Hawkeye was incorporated and capitalized solely as an Iowa TouchPlay

retailer. On January 3, 2005, Hawkeye applied for an MVM (monitor vending

machines) retailer license, which was issued on January 10. Accompanying the

license were: a letter including a five-year revenue-sharing formula; door decals for

Hawkeye's machines; and, a memo entitled "Licensing Terms and Conditions (January

2005)," summarizing the applicable laws and regulations. Hawkeye owns 724

TouchPlay machines, 581 of which operated at 187 Iowa businesses in April 2006.

Hawkeye invested about $6.8 million in this venture – $4.7 million to buy the

machines, and $2.1 million in start-up and operational costs.

Responding to concerns about the "proliferation of gambling," in January 2006

Governor Thomas J. Vilsack ordered a 60-day moratorium on new TouchPlay licenses

while a task force studied it. In March the task force recommended restrictions to

protect gambling addicts and minors. Governor Vilsack extended the moratorium "to

give the Iowa Legislature time to act on the matter if it so chooses." The General

Assembly passed legislation banning TouchPlay, which the Governor signed March

20 (to be codified at Iowa Code § 99G.30A(4)). The ban took effect May 4.

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On April 5, Hawkeye sued for declaratory and injunctive relief, invoking the

Contracts, Takings, Equal Protection, and Due Process clauses of the United States

Constitution. An expedited trial occurred April 12, with testimony by affidavit.

Hawkeye later moved to re-open the record to add the deposition of Dr. Edward J.

Stanek, president of the Lottery. On April 26, the district court denied the motion and

issued a decision. This court reviews the district court's factual findings for clear

error, and its legal and constitutional conclusions de novo. Daggitt v. United Food

& Commercial Workers Int'l Union, Local 304A, 245 F.3d 981, 986 (8th Cir. 2001).

II.

No state shall pass any law "impairing the Obligation of Contracts." U.S.

CONST. art. I, § 10, cl. 1. Hawkeye's main argument is that SF 2330 (the bill number

of the TouchPlay law) "completely destroyed" Hawkeye's contracts with the Lottery,

and with over 200 Iowa businesses.

Much of Hawkeye's discussion addresses its license. Hawkeye emphasizes at

length that its license could not be terminated without good cause, 60 days' notice, and

a hearing. IOWA ADMIN.CODE r. 531-14.1 to -14.20. But Hawkeye's license has not

been terminated; Hawkeye still has its license. The Licensing Terms and Conditions,

which Hawkeye agreed to in its application, state: "If a provision in this document

conflicts with an applicable statutory or regulatory provision, the statutory or

regulatory provision preempts the conflicting provision in this document." The

abolition of TouchPlay did not trigger the administrative rules governing Hawkeye's

license.

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A.

A three-part test determines whether a statute violates the Contracts Clause.

"The first question is whether the state law has, in fact, operated as a substantial

impairment on pre-existing contractual relationships." Equip. Mfrs. Inst. v. Janklow,

300 F.3d 842, 850 (8th Cir. 2002). This question "has three components: whether

there is a contractual relationship, whether a change in law impairs that contractual

relationship, and whether the impairment is substantial." Gen. Motors Corp. v.

Romein, 503 U.S. 181, 186 (1992).

i.

The parties appear to assume that the existence of a contract is governed by

state law. Indeed, the district court looks only to Iowa law, finding an implied-in-fact

unilateral contract of indefinite duration, which either party could cancel at any time.

See Hawkeye, 432 F.Supp.2d at 843-46. But "whether a contract was made is a

federal question for purposes of Contract Clause analysis." Romein, 503 U.S. at 187

(citing Irving Trust Co. v. Day, 314 U.S. 556, 561 (1942)).

In Stone v. Mississippi, 101 U.S. 814 (1880), the Supreme Court rejected a

private company's Contracts Clause challenge to the state's cancellation of its lottery

charter.

Any one, therefore, who accepts a lottery charter does so with the

implied understanding that the people, in their sovereign capacity, and

through their properly constituted agencies, may resume it at any time

when the public good shall require, whether it be paid for or not. All that

one can get by such a charter is a suspension of certain governmental

rights in his favor, subject to withdrawal at will. He has in legal effect

nothing more than a license to enjoy the privilege on the terms named for

the specified time, unless it be sooner abrogated by the sovereign power

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of the State. It is a permit, good as against existing laws, but subject to

further legislative and constitutional control or withdrawal.

Id. at 821. In Douglas v. Kentucky, 168 U.S. 488, 502 (1897), the Supreme Court said

flatly, "a lottery grant is not, in any sense, a contract within the meaning of the

Constitution of the United States, but is simply a gratuity and license, which the State,

under its police powers, and for the protection of the public morals, may at any time

revoke, and forbid the further conduct of the lottery."

This court is "bound to decide for ourselves whether a contract was made, what

are its terms and conditions, and whether the state has, by later legislation, impaired

its obligation. This involves an appraisal of the statutes of the states and the decisions

of its highest courts." Ind. ex rel. Anderson v. Brand, 303 U.S. 95, 100 (1938). In

Romein, 503 U.S. at 187, the Supreme Court adopted the state supreme court's holding

that workers' compensation benefits were not an implied term of a contract. Looking

to Indiana law, the Court in Brand, 303 U.S. at 104, concluded, "the petitioner had a

valid contract with the respondent."

Stone and Douglas are clear: A lottery "grant" or "charter" is not protected by

the Contracts Clause. Hawkeye responds that Stone and Douglas, while "certainly

good law," involve "an entirely different circumstance." On the contrary, Stone and

Douglas are not distinguishable: in both cases, the legislature allowed a private party

to operate a lottery, which was later nullified (in Stone, by the state's Reconstruction

constitution; in Douglas, by act of the legislature and then by amendment to the state

constitution). That fairly describes the history of TouchPlay in Iowa. Whatever

agreement existed between Hawkeye and the Lottery is not protected by the Contracts

Clause of the federal constitution.

ii.

As to the location contracts, it is undisputed on appeal – and this court decides

– that they are contracts within the Contracts Clause, and are impaired by SF 2330.

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This court therefore asks whether the impairment of Hawkeye's contracts – with its

locations and with the Lottery (assuming the district court is correct that they are

protected by the Contracts Clause) – is substantial.

iii.

Substantial impairment depends on "the extent to which the [parties'] reasonable

contract expectations have been disrupted. Reasonable expectations are affected by

the regulated nature of an industry in which a party is contracting." In re: Workers'

Comp. Refund Western Nat'l Mut. Ins. Co., 46 F.3d 813, 819 (8th Cir. 1995)

(citations omitted). "In determining the extent of the impairment, we are to determine

whether the industry the complaining party has entered has been regulated in the past."

Energy Reserves Group v. Kan. Power & Light Co., 459 U.S. 400, 411 (1983).

Like Hawkeye, the public utility in Energy Reserves was "operating in a heavily

regulated industry. State authority to regulate natural gas prices is well established."

Id. at 414 (citations omitted). State authority to regulate gambling is similarly wellestablished: "No one would question that [the State] has the power to regulate

gambling in the interest of the public health, safety, and general welfare." Neb.

Messenger Servs. Ass'n v. Thone, 611 F.2d 250, 251-52 (8th Cir. 1979) (quoting the

district court to uphold a Nebraska statute prohibiting service fees on pari-mutuel

betting against federal constitutional challenges).

In this case, the contracts themselves demonstrate Hawkeye's diminished

contract expectations. The location contracts provide:

In consideration of the sum of $10.00, Proprietor hereby grants unto

HCP [Hawkeye] the exclusive right for five (5) years to install and

maintain all Monitor Vending Machines, Lottery Touchplay, and lottery

vending machines as may be allowed by law or promulgated regulation

. . ..

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(emphasis added). In regard to any agreement with the Lottery, the Licensing Terms

and Conditions memorandum that Hawkeye agreed to in January 2005 state at the top

of the first page:

The provisions of Iowa Code chapter 99G, 531 Iowa Administrative

Code, and any other applicable statutory or regulatory provisions are

herein incorporated by reference. If a provision in this document

conflicts with an applicable statutory or regulatory provision, the

statutory or regulatory provisions preempts the conflicting provision in

this document.

Likewise, the contracts in Energy Reserves "expressly recognize the existence of

extensive regulation by providing that any contractual terms are subject to relevant

present and future state and federal law." Id. at 416. This court holds that, like the

plaintiff in Energy Reserves, Hawkeye's "reasonable expectations have not been

impaired." Id. SF 2330 does not substantially impair any Lottery or location

contracts. Hawkeye's Contracts Clause argument fails on the first prong of Janklow.

B.

Alternatively, assuming a substantial impairment, the second and third prongs

of the Contracts Clause analysis come into play. The second prong of the three-part

test is whether the state has a "significant and legitimate public purpose behind the

regulation." Janklow, 300 F.3d at 850. If, as Hawkeye claims, "the State offers no

significant and legitimate public purpose for abolishing TouchPlay while continuing

all other lottery games," then SF 2330 is unconstitutional under the Contract Clause.

The state has the burden to show this purpose. Id. at 859-60.

The state identifies the need "to curb the expansion of gambling" as the purpose

of SF 2330. Gambling is illegal in Iowa. IOWA CODE § 725.7. Gambling in Iowa is

permissible only if authorized by a specific statutory exception. See, e.g., IOWA

CODE §§ 725.14, .15 (ban on gambling does not apply to pari-mutuel betting

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regulated by the state racing and gaming commission, or to state lottery games

regulated by the Iowa Lottery Authority). Existing at the sufferance of the

Legislature, gambling is a heavily regulated industry in Iowa. See IOWA CODE §§

99G.1-.42; IOWA ADMIN. CODE r. 531-1.1 to -20.23. The regulation of gambling –

including its expansion and contraction – is a significant and legitimate public purpose

for SF 2330.

The third prong is "whether the adjustment of the 'rights and responsibilities of

contracting parties [is based] upon reasonable conditions and [is] of a character

appropriate to the public purpose justifying [the legislation's] adoption.'" Janklow,

300 F.3d at 850 (alteration in original). This court finds that it is. TouchPlay began

with 30 machines in bars and fraternal clubs in May 2003. Within three years, more

than 6,400 machines functioned in nearly 3,000 Iowa business of all sorts, including

grocery stores, restaurants, gas stations, truck stops, convenience stores, bowling

alleys, and laundromats. As TouchPlay expanded, the public became concerned about

protecting minors and compulsive gamblers. A state's police power encompasses

controlling gambling, even to the point of abolishing a particular lottery game. See,

e.g., Stone, 101 U.S. at 818 (the police power "extends to all matters affecting the

public health or the public morals. Neither can it be denied that lotteries are proper

subjects for the exercise of this power.") (citations omitted); Douglas, 168 U.S. at

502; Neb. Messenger, 611 F.2d at 251-52.

Iowa's abolition of TouchPlay does not violate the Contracts Clause.

III.

Private property shall not "be taken for public use, without just compensation."

U.S. CONST. amend. V. Hawkeye considers SF 2330 a legislative taking of its

property (i.e., the TouchPlay machines, its overall "business," the Lottery contract,

and the location contracts).

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A.

First, Hawkeye must show property interests protected by the Takings Clause.

See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001-03 (1984). See also Tex.

State Bank v. United States, 423 F.3d 1370, 1378 (Fed. Cir. 2005) ("'bedrock

requirement' of any successful takings challenge" is that the "plaintiffs must identify

a property interest cognizable under the Fifth Amendment.") The Constitution

"protects rather than creates property interests." Phillips v. Wash. Legal Found., 524

U.S. 156, 164 (1998). This court therefore looks to Iowa law to evaluate Hawkeye's

property interests. See Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577

(1972) ("the existence of a property interest is determined by reference to 'existing

rules or understandings that stem from an independent source such as state law.'").

No doubt the machines are property under the Takings Clause. Hawkeye also

claims a property interest in its TouchPlay business, and continued operation of its

enterprise. The district court finds (and the state does not dispute) that Hawkeye "has

some property interest" in the business itself. Hawkeye, 432 F.Supp.2d at 852 (citing

Kimball Laundry Co. v. United States, 338 U.S. 1, 5 (1949) (Takings Clause protects

"intangible" business assets like trade routes, goodwill, and earning power)).

As to the continued operation of the business, Hawkeye's participation in

TouchPlay required an MVM license. "The possession of an MVM license . . . is a

privilege personal to that person or entity and is not a legal right." IOWA ADMIN.

CODE r. 531-14.12. As the district court explains, because Hawkeye's MVM license

cannot be sold, assigned, or transferred, it "lacks the indicia of a property interest."

See IOWA ADMIN CODE r. 531-14.6 ("MVM licenses may not be transferred to any

other person or entity . . .."). See generally Cent. States Theatre Corp. v. Sar, 66

N.W.2d 450, 455 (Iowa 1954) ("when a business is inherently illegal [e.g., liquor,

tobacco] a permit to operate may be granted or refused at the will of the licensing

body, is a privilege rather than a property right") (bracketed text added); Smith v.

Iowa Liquor Control Comm'n, 169 N.W.2d 803, 807 (Iowa 1969) (upholding the

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revocation of a liquor license because "a license to sell beer, is a privilege granted by

the state and is in no sense a property right."); Alfredo v. Iowa Racing & Gaming

Comm'n, 555 N.W.2d 827, 832 n.2 (Iowa 1996) (dicta, property rights in a gambling

license may exist only when statute expressly identifies the license as a right, as

opposed to a privilege). Cf. Cleveland v. United States, 531 U.S. 12 (2000) (state

video-poker license is not property under the federal mail fraud statute, 18 U.S.C. §

1341). Hawkeye does not have a property right in the continuation of its TouchPlay

business for Takings Clause purposes.

As to Hawkeye's property-in-contracts argument, the district court holds that

because the location contracts "allow for termination of the contract due to a change

in law or regulation," they "do not constitute a property interest for the purposes of the

takings clause." Hawkeye, 432 F.Supp.2d at 854. The January 2005 Licensing

Terms and Conditions say, "If a provision in this document conflicts with an

applicable statutory or regulatory provision, the statutory or regulatory provisions

preempts the conflicting provision in this document." Contract rights are "a form of

private property" in Iowa, but to qualify as a "protectable property interest" under the

Takings Clause, "a contract must establish rights more substantial in nature than a

mere unilateral expectation of continued rights or benefits." Crippen v. City of Cedar

Rapids, 618 N.W.2d 562, 572 (Iowa 2000). Hawkeye's expectation that its contracts

would not be modified or nullified by the state is undermined by: (1) its participation

in a heavily regulated industry (gambling); (2) the "as may be allowed by law or

promulgated regulation" language in the location contracts; (3) the analogous

language in the Licensing Terms and Conditions; and, (4) the experience of its owners

with South Carolina's video-poker ban. See Armstrong v. Collins, 621 S.E.2d 368

(S.C. Ct. App. 2005). Hawkeye's contracts are not a cognizable property interest

under Iowa law for Takings Clause purposes.

B.

Having identified Hawkeye's property interests (the machines and the

TouchPlay business itself), the issue becomes whether Hawkeye suffered a taking

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without just compensation. Two kinds of takings are: (1) per se, involving the "direct

government appropriation of or physical invasion of private property"; and (2)

regulatory, where a regulation affecting private property "goes too far." Lingle v.

Chevron U.S.A., Inc., 544 U.S. 528, 537-38 (2005) (quoting Pa. Coal Co. v. Mahon,

260 U.S. 393, 415 (1922)).

This case is not a per se taking. Hawkeye did not suffer a "permanent physical

invasion." Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982).

Nor does the statute constitute a total regulatory taking in which Hawkeye has "been

called upon to sacrifice all economically beneficial uses in the name of the common

good." Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019 (1992) (emphasis in

original). The parties dispute whether Lucas applies to non-real property. The district

court holds that it does not. Hawkeye, 432 F.Supp.2d at 855. Lucas involved land,

not personal property. And the Court in Lucas recognized that landowners have

different expectations than owners of personal property about the potential impact of

government regulation:

And in the case of personal property, by virtue of the state's traditionally

high degree of control over commercial dealings, he ought to be aware

of the possibility that new regulation might even render his property

economically worthless (at least if the property's only economically

productive use is sale or manufacture for sale).

Id. at 1027-28. The Supreme Court since has held that Lucas requires compensation

"when a regulation deprives on owner of 'all economically beneficial uses' of his

land." Tahoe-Sierra Pres. Council, Inc., v. Tahoe Reg'l Planning Agency, 535 U.S.

302, 330 (2002). The Court emphasized that Lucas "was limited to 'the extraordinary

circumstance when no productive or economically beneficial use of land is

permitted.'" Id. And this court has held that Lucas does not apply to a claimed

property interest in the right to prepay a loan. See Parkridge Investors Ltd. P'ship v.

Farmers Home Admin., 13 F.3d 1192, 1199 (8th Cir. 1994). Thus, it appears that

Lucas protects real property only.

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2

 Hawkeye objects in passing to this factual finding. Mr. Armstrong's affidavit,

which the district court considered, states that the machines "have virtually no market

value outside Iowa," not that the machines have no salvage value, as Hawkeye now

contends. The district court's finding is not clearly erroneous. See FED R. CIV. P.

52(a) ("findings of fact . . . shall not be set aside unless clearly erroneous").

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Even if Lucas applies to non-real property, Hawkeye still owns 724 working

TouchPlay machines. Even without TouchPlay, Hawkeye may take them to another

state (or nation) that allows monitor-vending-machine gambling. Hawkeye's President

states in an affidavit that the machines "have virtually no market value outside Iowa."

But the district court finds that Hawkeye "could sell TouchPlay machines (e.g. salvage

value) or reconfigure the TouchPlay machines for a different use." Hawkeye, 432

F.Supp.2d at 856.2

 SF 2330 did not deprive Hawkeye of "all economically beneficial

uses" of its property.

Hawkeye next proposes that SF 2330 is a regulatory taking without just

compensation under Penn Central Transportation Co. v. New York City, 438 U.S. 104

(1978). Penn Central provides "no set formula" to determine when the Fifth

Amendment requires compensation. "Whether a particular restriction amounts to a

taking depends on the circumstances of each case." Outdoor Graphics, Inc. v. City

of Burlington, 103 F.3d 690, 694 (8th Cir. 1996). Factors to consider in this "ad hoc,

factual inquiry" include: "(1) the economic impact of the regulation on the claimant;

(2) the extent to which the regulation has interfered with distinct, investment-backed

expectations; and (3) the character of the government regulation." Id. The first two

factors are"primary"; the third "may be relevant in determining whether a taking has

occurred." Lingle, 544 U.S. at 538-39.

Weighing the Penn Central factors, the district court concludes that "the cost

of banning TouchPlay machines must not be borne by the public." Hawkeye, 432

F.Supp.2d at 858. This court agrees. As to the first prong, SF 2330 had a

"devastating economic impact" on its multi-million-dollar TouchPlay investment. But

in terms of the second prong, Hawkeye's expectations in its TouchPlay business are

discounted by: (1) the heavily regulated nature of gambling in Iowa; (2) the "as may

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be allowed by law or promulgated regulation" language in the location contracts; (3)

the statement in the Licensing Terms and Conditions that, "If a provision in this

document conflicts with an applicable statutory or regulatory provision, the statutory

or regulatory provisions preempts the conflicting provision in this document"; and, (4)

the owners' experience with South Carolina's video-poker ban. No doubt Hawkeye

hoped that the Legislature would not stringently regulate or abolish TouchPlay before

calendar year 2009 when it would have recouped its investment. However, a

"'reasonable investment-backed expectation' must be more than a 'unilateral

expectation or an abstract need.'" Ruckelshaus, 467 U.S. at 1005.

As to the third prong, the district court is correct that SF 2330 "will only

prevent a specific use of TouchPlay Machines," and that usage is "a single stick in the

bundle of property rights." Hawkeye, 432 F.Supp.2d at 857. SF 2330 may deprive

Hawkeye's TouchPlay machines of their most immediately profitable use, but

Hawkeye still "has the right to possess, lease and sell" the machines. Id. As to

Hawkeye's business, Hawkeye can still use its trade routes and goodwill in any legal

business other than TouchPlay. Under Penn Central, SF 2330 is not a regulatory

taking of Hawkeye's property.

IV.

States shall not deprive any person of "life, liberty, or property, without due

process of law", or of "the equal protection of the laws." U.S. CONST. amend. XIV,

§ 1. Hawkeye argues that SF 2330 violates both provisions.

A.

"When an equal protection claim is neither based on a 'suspect class' or

grounded in a fundamental right, it is subject to a rational basis review." Gilmore v.

County of Douglas, 406 F.3d 935, 937 (8th Cir. 2005). SF 2330 implicates neither.

For social and economic legislation like SF 2330, "the Equal Protection Clause allows

the States wide latitude, and the Constitution presumes that even improvident

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decisions will eventually be rectified by the democratic process." City of Cleburne

v. Cleburne Living Ctr., 473 U.S. 432, 440 (1985). As to SF 2330, therefore, the

Constitution requires merely that "there is a plausible public policy reason for the

classification, the legislative facts on which the classification is apparently based may

have been considered to be true by the governmental decisionmaker, and the

relationship of the classification to its goal is not so attenuated as to render the

distinction arbitrary or irrational." Nordlinger v. Hahn, 505 U.S. 1, 11 (1992).

First, Hawkeye must show that it is "similarly situated to another group for

purposes of the challenged government action." Carter v. Arkansas, 392 F.3d 965,

969 (8th Cir. 2004). Hawkeye contends that TouchPlay is similar to all other lottery

games, and even to non-lottery amusement devices that dispense tickets redeemable

for prizes instead of cash. The district court concludes otherwise. Hawkeye, 432

F.Supp.2d at 860. But the district court allows that "even if" TouchPlay is sufficiently

similar to other forms of gambling that SF 2330 does not affect, Hawkeye still must

negate "'every conceivable basis which might support' the classification." Id. (quoting

Gilmore, 473 F.3d at 939).

Hawkeye claims that "Appellees have been unable to offer" a reason for

banning TouchPlay. To the contrary, the Governor imposed a moratorium on new

TouchPlay licenses because of concerns about the "proliferation of gambling," and

appointed a task force to study ways to protect minors and compulsive gamblers.

Regulating gambling is a legitimate public purpose. The Legislature chose to ban

TouchPlay entirely. The district court is correct that this "incremental reform of the

gaming industry" is not "so attenuated to its asserted purpose that the distinction it

draws is wholly arbitrary and irrational." Id.; Nordlinger, 505 U.S. at 11.

 Hawkeye also attacks the district court's speculation that "perhaps" the purpose

of SF 2330 "might have been" "in part" TouchPlay's "inadequate safeguards." Id.

The Equal Protection Clause "does not demand for the purpose of rational-basis

review that a legislature or governing decision maker actually articulate at any time

the purpose or rationale supporting its classification." Nordlinger, 505 U.S. at 15.

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Hawkeye cites statistics that most compulsive gambling happens in casinos, and that

there are only two confirmed cases of minors using TouchPlay machines. But "a

legislative choice is not subject to courtroom fact-finding and may be based on

rational speculation unsupported by evidence or empirical data." FCC v. Beach

Communications, Inc., 508 U.S. 307, 315 (1993). The district court properly rejects

Hawkeye's equal protection claim.

B.

Hawkeye asserts that SF 2330 also "cannot satisfy rational basis review" under

the Due Process Clause. The burden is on Hawkeye "to establish that the legislature

has acted in an arbitrary or irrational way." Koster v. City of Davenport, 183 F.3d

762, 768 (8th Cir. 1999). As discussed, SF 2330 is neither arbitrary nor irrational, and

serves a legitimate public purpose. Hawkeye's due process argument fails.

V.

On April 5, Hawkeye sued for a permanent injunction against SF 2330, before

it took effect May 4. Hawkeye asked the district court to "schedule oral argument on

the instant Motion for Preliminary Injunctive Relief on the earliest date available . .

.." During an April 6 teleconference, Hawkeye learned that Dr. Edward J. Stanek, the

Lottery president since 1985, could not testify at trial on April 12. Hawkeye

mentioned the possibility of his testifying by affidavit or video, but at trial presented

no testimony from Dr. Stanek. Two weeks later, Hawkeye moved to add his

deposition to the record. The next day (April 26), the district court denied Hawkeye's

motion, and issued its decision and order. Hawkeye appeals.

The "motion to reopen to submit additional proof is addressed to [the trial

judge's] sound discretion." Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S.

321, 331 (1971). This court reviews for abuse of discretion. Gathright v. St. Louis

Teacher's Credit Union, 97 F.3d 266, 268 (8th Cir. 1996).

Appellate Case: 06-2406 Page: 16 Date Filed: 04/24/2007 Entry ID: 3301984
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Hawkeye requested an expedited trial, knowing one week in advance that Dr.

Stanek would be unavailable on the trial date. His deposition does not contain

"testimony on the critical contract interpretation issues then pending before the court,"

as Hawkeye claims. He would add no significant information to the record, which

already contained his extensive testimony in the form of "Answers to TouchPlay

Questions posed by Oversight Committees" of the Legislature. The district court did

not abuse its discretion by denying Hawkeye's motion to re-open.

VI.

The judgment of the district court is affirmed.

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Appellate Case: 06-2406 Page: 17 Date Filed: 04/24/2007 Entry ID: 3301984