Court Opinion

ID: 4151717
Source: CourtListenerOpinion
Date Created: 2017-03-10 15:06:18.532564+00
Date Added: 2024-06-11T14:24:09.786961
License: Public Domain

IN THE SUPREME COURT OF IOWA
                                No. 16–1146

                            Filed March 10, 2017

EUGENE J. KOPECKY,

      Appellant,

vs.

IOWA RACING AND GAMING COMMISSION,

      Appellee.

      Appeal from the Iowa District Court for Linn County, Ian K.

Thornhill, Judge.

      A citizen appeals a district court judgment affirming the Iowa

Racing and Gaming Commission’s declaratory order. AFFIRMED.

      Eugene J. Kopecky of Ackley, Kopecky & Kingergy, L.L.P., Cedar

Rapids, pro se appellant.

      Thomas J. Miller, Attorney General, David M. Ranscht and

Jeffrey C. Peterzalek, Assistant Attorneys General, for appellee.
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WIGGINS, Justice.

      A citizen appeals from the district court’s ruling on judicial review.

The district court affirmed the Iowa Racing and Gaming Commission’s

declaratory order in which the Commission used its rules to conclude

that its authority under Iowa Code chapter 99F permits it to consider the

economic effect of a new gaming operation on existing gaming facilities

when deciding whether to issue a new gaming license. On appeal, we

hold the rule allowing the Commission to consider the economic effect of

a new gaming operation on existing gaming facilities when deciding

whether to issue a new gaming license is not “[b]eyond the authority

delegated to the agency by any provision of law or in violation of any

provision of law” under section 17A.19(10)(b) (2015).

      I. Background Facts and Proceedings.

      In March 2013, the citizens of Linn County approved a referendum

to permit gambling games in the county.              Soon thereafter, an

organization in Linn County applied to the Commission for a license to

operate a new gambling structure.         The Commission ordered two

independent market feasibility studies, and both studies concluded the

casino market in Iowa was not underserved, and a new casino would

cannibalize revenue from existing gambling facilities.     Relying on the

market studies and citing the significant economic impact granting a new

gambling license could have on existing facilities, the Commission denied

the organization’s application in April 2014.

      On March 9, 2015, Eugene Kopecky, a resident of Linn County,

filed a petition for declaratory order with the Commission. Kopecky was

not associated with the organization whose application for a license was

denied in 2014. In his petition, he stated he “plans to file an application

with the [Commission] to secure a gambling license to conduct gambling
                                     3

games in a licensed gambling structure in Linn County, Iowa.” However,

he believed it would “serve no purpose for [him] to file an application for

a license” because the Commission denied a previous application due to

“the negative impact on existing license holders in other Iowa counties.”

      Kopecky contended the Commission’s consideration of that factor

in denying an application is “contrary to Chapter 99F of the Iowa Code”

and that it is necessary to determine the proper meaning and

construction of the Code as it relates to issuing a gaming license when

the residents of a county have approved a gambling referendum. Thus,

Kopecky asked the Commission to answer two questions:

      Question Number One:

              Whether or not the [Commission] can use the
              existence of a gambling license in one county, or the
              impact on an existing gambling license in one Iowa
              county, when considering whether or not to issue a
              gambling license in another (different) Iowa county?

      Question Number Two:

              If the [Commission] has adopted administrative rules
              that are contrary to Chapter 99F of the Iowa Code are
              those administrative rules null and void?

He asserted the answer to question one is no, and the answer to question
two is yes.

      On April 9, the Iowa Gaming Association (IGA), an association

comprised of eighteen existing gambling licensees, intervened in the

declaratory order proceedings because the answers to Kopecky’s

questions would affect the existing licensees. In its brief in support of its

petition for intervention, the IGA asserted that the Commission has

broad powers to regulate all gambling operations under Iowa Code

chapter 99F and that Kopecky misinterpreted the Code as well as the
                                     4

Commission’s rules. After hearing oral argument from Kopecky and the

IGA at its June meeting, the Commission announced its decision.

      The   Commission    answered       Kopecky’s   first   question   in   the

affirmative, concluding Iowa Code chapter 99F and the administrative

rules “allow and/or require” it to consider the impact on an existing

casino in one county when considering whether or not to issue a

gambling license in another county. With respect to Kopecky’s second

question, the Commission determined it did not have jurisdiction to

answer the question, as it is within the court’s purview to determine

whether an administrative rule is null and void.             The Commission

subsequently filed a written declaratory order memorializing the decision

it announced at the meeting.

      Kopecky sought judicial review.       He requested the district court

find the Commission’s ruling regarding the criteria it may consider in

licensure decisions was in error.    Kopecky also requested the district

court hold any administrative rule of the Commission that is contrary to

chapter 99F null and void. The district court affirmed the Commission’s

declaratory order in its entirety. On this appeal, Kopecky only challenges

the district court ruling regarding question one.

      II. Issue.

      We must decide whether the Commission can enact a rule allowing

it to consider the economic effect of a new gaming operation on existing

gaming facilities when deciding whether to issue a new gaming license.

      III. Scope of Review.

      Iowa Code section 17A.19(10) governs judicial review of an agency

action.   Renda v. Iowa Civil Rights Comm’n, 784 N.W.2d 8, 10 (Iowa

2010).    “The district court may grant relief if the agency action has

prejudiced the substantial rights of the petitioner and if the agency
                                    5

action meets one of the enumerated criteria contained in section

17A.19(10)(a) through (n).” Id. In reviewing the decision of the district

court, we must apply the standards set forth in Iowa Code section

17A.19(10) to determine whether we reach the same result as the district

court.    Auen v. Alcoholic Beverages Div., 679 N.W.2d 586, 589 (Iowa

2004).

         Although the legislature has granted the Commission broad

rulemaking authority, we are not firmly convinced the legislature vested

the Commission with the authority to interpret our statutes when it

enacts its rules.   See Renda, 784 N.W.2d at 13.      Accordingly, we will

overturn the Commission’s rule allowing it to consider the economic

effect of a new gaming operation on existing gaming facilities when

deciding whether to issue a new gaming license if the rule is “[b]eyond

the authority delegated to the agency by any provision of law or in

violation of any provision of law.” Iowa Code § 17A.19(10)(b).

         IV. Discussion and Analysis.

         The Iowa legislature has vested the Commission with broad

authority to regulate gambling operations in our state. Alfredo v. Iowa

Racing & Gaming Comm’n, 555 N.W.2d 827, 831 (Iowa 1996) (“The

legislature has empowered and obligated the commission to regulate all

gambling operations governed by Iowa Code chapter 99F . . . and to

adopt rules pursuant to that mandate.”); see also Iowa Code § 99F.4.

The Commission has supervisory authority and “full jurisdiction over” all

gambling operations governed by chapter 99F. Iowa Code § 99F.4.

         At issue in this case are two specific powers the legislature

conferred on the Commission: first, the power “[t]o license qualified

sponsoring organizations,” and second, the power “[t]o investigate

applicants and determine the eligibility of applicants for a license and to
                                          6

select among competing applicants for a license the applicant which best

serves the interests of the citizens of Iowa.” Id. § 99F.4(1)–(2). To enforce

these powers, the Commission must “adopt rules pursuant to chapter

17A.” Id. § 99F.4. It also has the power “[t]o take any other action as

may be reasonable or appropriate to enforce [chapter 99F and the

Commission’s rules].” Id. § 99F.4(13).

       Under chapter 99F, the Commission has the exclusive authority to

issue licenses. The Code contains several criteria applicants must meet

to demonstrate eligibility for a license. See, e.g., id. §§ 99F.6, .7(8). The

Commission “shall issue a license for a period of not more than three

years” only if it is “satisfied that this chapter and its rules . . . have been

or will be complied with.”     Id. § 99F.7(1).            The Commission has also

adopted a rule containing seven criteria it considers when granting a

license. Iowa Admin. Code r. 491—1.7. Ultimately, the legislature gave

the Commission the authority to “decide the number, location, and type of

gambling structures and excursion gambling boats licensed under this

chapter.” Iowa Code § 99F.7(1) (emphasis added).

       Kopecky first asserts the Code confers duties on the Commission

to “assure that every Iowa county that does not want gambling is free

from gambling,” and “assure that every Iowa county that wants to have

gambling shall have gambling . . . under the direct supervision and

regulation of the commission.” In other words, he contends that once

voters approve a gambling games referendum, the Commission must

issue a license to a qualified applicant and cannot enact a rule with other

criteria to deny a license to an applicant.                However, the clear and

unambiguous language of section 99F.7(11) makes Kopecky’s assertion

untenable. See ABC Disposal Sys., Inc. v. Dep’t of Nat. Res., 681 N.W.2d
596,   603   (Iowa 2004)     (“If   the       statute’s    language   is   clear   and
                                    7

unambiguous, we apply a plain and rational meaning consistent with the

subject matter of the statute.”).

      Prior to the Commission issuing a license for a gambling structure

in a particular county, the electorate must approve a referendum to

permit gambling games in the county. The Iowa Code provides,

      A license to conduct gambling games in a county shall be
      issued only if the county electorate approves the conduct of
      the gambling games as provided in this subsection. . . . If a
      majority of the county voters voting on the proposition favor
      the conduct of gambling games, the commission may issue
      one or more licenses as provided in this chapter. If a
      majority of the county voters voting on the proposition do not
      favor the conduct of gambling games, a license to conduct
      gambling games in the county shall not be issued.

Iowa Code § 99F.7(11)(a) (emphasis added).

      “When the term ‘shall’ appears in a statute, it generally connotes

the imposition of a mandatory duty.”      Ramirez-Trujillo v. Quality Egg,

L.L.C., 878 N.W.2d 759, 771 (Iowa 2016). When the legislature uses the

term “may” in a statute, it is usually permissive. Iowa Nat’l Indus. Loan

Co. v. Iowa State Dep’t of Revenue, 224 N.W.2d 437, 440 (Iowa 1974).

Additionally, the Iowa Code contains rules of statutory construction,

which provide that in statutes enacted after July 1, 1971, the word

“shall” imposes a duty, and the word “may” confers a power, unless

otherwise specified by the legislature. Iowa Code § 4.1(30).

      Given the proximity of the words “may” and “shall” in section

99F.7(11)(a), we conclude the intent of the legislature could not have

been for “may” to mean the same thing as “shall.”        If the legislature

intended to impose a duty on the Commission to issue a license following

an affirmative referendum, it would have used the word “shall,” as it did

to impose a duty on the Commission to not issue a license to conduct
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gambling games in a county in which the majority of voters disapprove a

referendum for gambling games.

        Accordingly,    we   disagree   with   Kopecky   and   conclude    the

Commission has the power to issue a license following an affirmative

gambling games referendum, but is not required to do so.

        Kopecky’s second assertion is the Commission could not enact a

rule allowing it to consider the economic effect of a new gaming operation

on existing gaming facilities when deciding whether to issue a new

gaming license.        The rule the Commission uses to decide whether it

grants or denies a gaming license lists seven criteria the Commission

considers. Iowa Admin. Code r. 491—1.7.

        One criterion of the rule requires the Commission to consider the

economic impact a new gambling operation might have on existing

gambling facilities.     Id. r. 491—1.7(3).    The rule provides, in relevant

part,

        Economic impact and development.          The commission will
        consider:

              a. The amount of revenue to be provided by the
        proposed facility to the state and local communities through
        direct taxation on the facility’s operation and indirect
        revenues from tourism, ancillary businesses, creation of new
        industry, and taxes on employees and patrons.               The
        commission may engage an independent firm proficient in
        market feasibility studies in the industry for specific analysis
        of any application to determine the potential market of any
        proposed facility as well as the impact on existing licensees.

              ....

              c. The viability and overall net benefit of the proposed
        operation to the state gaming industry, taking into
        consideration:

              ....
                                     9
           (2) Impact on existing operators’ adjusted gross
      revenue versus existing operators’ ratio of adjusted gross
      revenue to investment.

            ....

           (4) Percent of projected adjusted gross revenue from
      underserved markets.

             (5) Percent of projected adjusted gross revenue from
      existing Iowa operators.

            ....

            d. The benefits to Iowa tourism.

            e. The    number    and      quality     of      employment
      opportunities for Iowans.

            f. The development and sale of Iowa products.

Id. We disagree with Kopecky’s second assertion.

      In our review of chapter 99F, we find it replete with provisions

indicating the legislature’s intent that the Commission can consider the

economic effect of a new gaming operation on existing gaming facilities

when deciding whether to issue a new gaming license.                 First, the

Commission issues licenses to qualified sponsoring organizations to

conduct gambling games. Iowa Code § 99F.5(1). The legislature requires

a qualified sponsoring organization to distribute “at least three percent of
the adjusted gross receipts for each license year” “for educational, civic,

public, charitable, patriotic, or religious uses.”        Id. § 99F.5(1).   The

legislature’s requirement that the qualified sponsoring organizations

distribute funds back into the community, rather than taking the funds

as profit, evidences a legislative intent that the economic impact and

development on the state is an important function of legalized gambling

in Iowa.

      Second, the legislature has recognized that having too many

gambling establishments is not consistent with the intent to provide
                                    10

economic development funds to grow the Iowa economy. One section of

the Code prohibits the establishment of a gaming facility in Polk County.

Id. § 99F.4C.   We perceive the purpose of this section was to protect

Prairie Meadows Racetrack and Casino, an established facility in Polk

County. Another provision of the Code protects counties with racetracks

from competition by excursion boats unless the excursion boats can

meet certain legislative conditions.     Id. § 99F.7(2)(b).    These Code

provisions also evidence a legislative intent that the legislature does not

want a new gambling facility to cannibalize an existing gambling facility

because the economic impact on an existing facility is an important

aspect of furthering economic development in this state.

      Third, gambling facilities are required to promote the development

of the Iowa economy. The Code requires an excursion gambling boat to

use “Iowa resources, goods and services in the operation” of the facility.

Id. § 99F.7(5). The Code also mandates “[a]n applicant shall make every

effort to ensure that a substantial number of the staff and entertainers

employed are residents of Iowa” and “[a] section is reserved for promotion

and sale of arts, crafts, and gifts native to and made in Iowa.”         Id.

§ 99F.7(6)(a)–(b).   Finally, the Code sets a special minimum wage for

gambling facility workers. Id. § 99F.7(7). These sections also indicate a

legislative intent that the economic impact of a new facility on an existing

facility is an important aspect of furthering economic development.

      In summary, one of the reasons the gaming industry exists in Iowa

is to further the economic development of the community in which the

facility is located, which in turn affects the state as a whole. In order to

insure the continued economic development of our state, the legislature

and the Commission deem it important to make sure an existing

gambling facility remains viable when the Commission issues a new
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license. A closed gambling facility, together with a loss of jobs, has an

adverse effect on economic development in our state.

      Accordingly, the Commission’s consideration of the economic effect

of a new gaming operation on existing gaming facilities when deciding

whether to issue a new gaming license is not “beyond the authority

delegated to the agency by any provision of law or in violation of any

provision of law” and does not violate Iowa Code section 17A.19(10)(b).

      V. Disposition.

      We affirm the judgment of the district court affirming the

Commission’s declaratory order in its entirety. We reach this conclusion

because the rule allowing the Commission to consider the economic

effect of a new gaming operation on existing gaming facilities when

deciding whether to issue a new gaming license is not “[b]eyond the

authority delegated to the agency by any provision of law or in violation

of any provision of law” under section 17A.19(10)(b).

      AFFIRMED.

      All justices concur except Hecht and Zager, JJ., who take no part.