E-Filed 09/25/2012 @ 11:28:48 AM Honorable Robert Esdale Clerk Of The Court

No. 1111617 __________________________________________ IN THE SUPREME COURT OF ALABAMA

EX PARTE HOUSTON ECONOMIC DEVELOPMENT ASSOCIATION

IN RE: STATE OF ALABAMA, ET AL., Plaintiffs, v. $283,657.68 U.S. CURRENCY ET AL., Defendants.

On Petition for a Writ of Mandamus to the Circuit Court of Houston County (CV-12-900266) STATE OF ALABAMAS OPPOSITION TO PETITIONERS MOTION TO STAY LUTHER STRANGE Alabama Attorney General Andrew L. Brasher Alabama Deputy Solicitor Genl Henry T. Reagan II Jess R. Nix Alabama Deputy Attorneys Genl OFFICE OF ATTORNEY GENERAL 501 Washington Avenue Montgomery, Alabama 36130 (334) 353-2609 (334) 242-4891 (fax) abrasher@ago.state.al.us

STATE OF ALABAMAS OPPOSITION TO PETITIONERS MOTION TO STAY HEDAs Motion to Stay should be denied. The gambling promoters in Houston County have always maintained, in the media and in court, that they believe their gambling is legal, and they only want an opportunity to prove it. See, e.g., Lord Abbett Mun. Income Fund, Inc. v. Tyson, 671 F.3d 1203, 1206 (11th Cir. 2012) (rejecting Houston County

gambling promoters argument that state [must] afford . . . a hearing prior to any enforcement action against the bingo machines). This lawsuit is what these gambling

promoters have ostensibly been asking for. HEDAs attempts to derail and delay this litigation at its very beginning underscores that the gambling promoters in Houston County already know their operations are illegal; they are just buying time until a court tells them so. There is nothing to be gained from a stay pending this Courts review of HEDAs mandamus petition on its motion to recuse Judge Michael Conaway. The underlying case is at its earliest stages, and this Court will therefore have plenty of time to review HEDAs petition before Judge Conaway

could enter any final ruling that may be adverse to HEDA. 1

While

this

Court

reviews

HEDAs

petition,

Judge

Conaway

should be allowed to hold the initial September 26 hearing and to set this case on a track for discovery and trial. Moreover, HEDAs Petition for Writ of Mandamus is erroneous on its face and its assertions contradict clearly

established Alabama law. In opposition to HEDAs Motion to Stay, the State says as follows: BACKGROUND In July, the State executed a warrant at the Center Stage casino, and seized filed The this search gambling in rem devices action was to and gambling the

proceeds, seized

forfeit by

items.

warrant

issued

Judge

Michael Conaway of the Houston County Circuit Court. The forfeiture case was assigned to Judge Anderson of the Houston County Circuit Court. The Houston Economic

Development Association (HEDA) appeared in the forfeiture case, claimed and some filed interest a in the to seized dismiss devices the and

proceeds,

motion

States

forfeiture complaint. failed to state a

The motion alleges that the State claim under 12(b)(6), insufficient

process, and numerous other grounds.

The State opposed the

motion to dismiss, and the States opposition is attached as EXHIBIT A to this opposition. HEDA Anderson propriety also on of filed a motion of from a a to recuse Circuit about Judge the

the

basis

JIC

opinion case

recusal

previous

involving

gambling in Houston County. Judge Anderson recused, as did Judges Binford and Mendheim, the next two assignees. (Pet. Ex. 9). On denied September the motion 7, to Judge recuse Conaway, as it the next to assignee, him. He

applied

explained that he was not on the court at the time of the JIC opinion and was not involved in the circumstances

giving rise to that opinion: I find that the basis for [the other judges] disqualification is distinguishable by the circumstance existing at the time of their inquiry [to JIC]. They were acknowledged recipients of an unsolicited ex parte communication sent to the Houston County Circuit and District Judges by the Houston County Commission Chairman regarding the development made the basis of the [previous] lawsuit. . . . With all due respect to the Commission, the undersigned was not a sitting judge at the time this request was made and further the issues in this case are not related to the litigation cited in the [JIC] letter. Order of September 7, 2012 (Pet. Ex. 10).

Judge Conaway set a hearing on HEDAs motion to dismiss for September 26, 2012 (Pet. Ex. 10). HEDA then filed a new motion to recuse directed at Judge Conaway specifically. this motion (Pet. was Ex. not 5). based Unlike on the the JIC

previous

motion,

opinion. Instead, it was based on allegations about Judge Conaways County who personal are friendships with persons the fact in Houston Judge

against

gambling,

that

Conaway was appointed by Governor Riley, and the fact that Judge Conaway had authorized the search of the casino. Judge Conaway denied that motion on September 20, 2012. (Pet. Ex. 13). Two days before the September 26 hearing--a hearing that has been set since September 7--HEDA has filed in this Court (1) a petition to for recuse this mandamus and (2) challenging a motion Judge for of an its

Conaways indefinite petition.

failure stay

pending

Courts

disposition

THE MOTION TO STAY SHOULD BE DENIED HEDAs motion to stay should be denied for at least two reasons. First, equity will not be served by staying this

case until the petition is ruled on. This Court will have 4

plenty

of

time

to

review

HEDAs

petition

before

Judge

Conaway could enter any final ruling adverse to HEDA, and there is no reason that Judge Conaway should not put this case on a schedule for discovery and set a date for trial while HEDAs petition is pending. Second, HEDAs arguments in favor of Judge Conaways recusal are erroneous and can be rejected by this Court without a substantive response by the State. A. There is no equitable reason to stay this case pending disposition of the petition for mandamus. The equities are firmly against granting HEDAs motion for a stay of the proceedings below, which are still at their earliest stages, pending disposition of HEDAs

mandamus petition. First, HEDA will not be prejudiced by denying its

motion for a stay. This case is still at its very early stages. Judge Conaways only orders so far have been

directed at HEDAs motions for recusal. The first hearing is scheduled for September 26. No bingo-equipment gambling forfeiture has been dismissed at such an early stage, and HEDAs motion to dismiss cannot be taken seriously. The

State has provided this Court with the States opposition to the motion to dismiss as Exhibit A, and incorporates it 5

herein. If Judge Conaway denies HEDAs motion to dismiss, there will still be plenty of time, without a stay, for this Court to rule on HEDAs mandamus petition before Judge Conaway enters any final ruling adverse to HEDA that might be called into question if he is ultimately removed. And, if a new judge is assigned, he or she will be able to reconsider Judge Conaways ruling on the motion to dismiss, grant summary judgment, or direct a verdict that is

favorable to HEDA. HEDA will not be prejudiced if Judge Conaway, as opposed to some other judge, simply puts the case on track for discovery and trial. Second, it is in the best interest of the parties and the people of Houston County that the forfeiture be put on track to proceed expeditiously to a final judgment. This lawsuit will determine whether the gambling devices at the Center Stage casino are illegal contraband or lawful

bingo. And [i]t is the policy of the constitution and laws of Alabama [to prohibit] the vicious system of lottery schemes and the evil practice of gaming, in all their

protean shapes. Barber v. Jefferson County Racing Ass'n, Inc., 960 So. 2d 599, 614 (Ala. 2006) (internal quotation marks omitted and second alteration in original). Moreover, 6

the Center Stage casino continues to operate despite the pendency of this suit, letter, despite and the Attorney the fact Generals that a

cease-and-desist

despite

Circuit Judge has found probable cause to believe that the gambling is unlawful. The people of Houston County and the parties dispute. Finally, HEDAs motion to stay is prejudicial to the State and could have been filed well before now. Judge need an expeditious judicial resolution of this

Conaway denied HEDAs first motion to recuse back in early September and set the September 26 hearing at the same

time. But HEDA did not challenge Judge Conaways order at that time. Instead, HEDA waited until the night of

September 24 to file a petition for mandamus and a motion for a stay. The State and the trial court have already prepared for the September 26 hearing, and it would be

manifestly prejudicial for that hearing to be indefinitely postponed at the last minute. The equities are firmly

against granting HEDAs motion to stay. B. HEDAs mandamus petition is erroneous and can be denied out-of-hand. The motion to stay should also be denied because HEDA is not likely to succeed on the merits of its mandamus 7

petition. HEDA has thrown the proverbial kitchen sink at Judge Conaways decision to remain on this case, and the State cannot respond in full to all the erroneous

assertions in HEDAs petition at this time. State notes that HEDAs are four lead

However, the for Judge

arguments by

Conaways precedent.

recusal

contradicted

on-point

Alabama

HEDAs primary argument is that recusal is warranted because this case has provoked extensive public and media interest in the highly contentious underlying issue of the legality of electronic bingo that has divided Houston

County. HEDA Pet. at 29. There is no allegation that Judge Conaway has taken a side in this contentious local

debate, but even if he had, a judges own overt statements regarding his views of a particular type of crime do not disqualify that crime.1
1

that

judge

from

presiding

in

cases

involving

In a previous case involving illegal gambling,

See RICHARD E. FLAMM, JUDICIAL DISQUALIFICATION: RECUSAL AND DISQUALIFICATION OF JUDGES, at 10.8 (2nd Ed. 2007) ([T]he fact that a judge may have an opinion about a particular type of crime, or about crime in generalor that he may personally believe that a particular type of crime is more heinous than othersdoes not constitute an accepted ground for disqualifying that judge from a case involving a defendant who is accused of having committed that crime.). See also United States v. Alabama, 828 F.2d 1532, 154344 (11th Cir. 1987) (A judge is not required to recuse himself merely because he holds and has expressed certain 8

the

gambling

defendants

sought

the

recusal

of

Justice

Bolin. Justice Bolin, who had previously made statements to the effect that the he was opposed to gambling, responded that such statements were not disqualifying: My position on that issue is consistent with the law of Alabama; gambling is illegal in this State. I also oppose other acts that violate the laws of the State of Alabama, such as murder, rape, and robbery, but my personal opposition to the above acts does not prevent me from fairly and unbiasedly participating in cases involving such acts. Barber v. Jefferson County Racing Assn, 960 So. 2d 599, 620 (Ala. 2006) (Bolin, J., statement of nonrecusal). See

also Ex parte Teds Game Enters., 893 So. 2d 376, 39192 (Ala. 2004) (See, Brown, and Stuart, JJs, statements of nonrecusal). HEDA has not pointed to any statement that Judge Conaway has made about gambling in general or this case in particular. As he explained in his September 7

order, judges frequently decide cases involving extensive

views on a general subject and [t]he fact that prior to joining the bench a judge has stated strong beliefs does not indicate that he has prejudged the legal question before him); United States v. Bauer, 84 F.3d 1549, 1560 (9th Cir. 1996) (affirming the trial courts refusal to recuse in a marijuana case where the trial court had made public statements indicating a view that marijuana distribution is a serious and pervasive social problem.); North Carolina v. Kennedy, 429 S.E.2d 449, 452 (N.C. App. 1993). 9

media coverage but the mere fact that the media or public is interested in a case is not enough to recuse. HEDAs second and related argument is that Judge

Conaway should recuse because he is purportedly associated with persons who are vocal opponents of electronic bingo, including former Governor Bob Riley and a local

businessman. HEDA Pet. at 29. It is clear that a Judges personal relationships with non-parties to a case do not require recusal. In Gary v. Crouch, 867 So. 2d 310 (Ala. 2003), for example, this Court affirmed a trial judges decision officers not to recuse from a a case involving when a police judges

suit

against

police

chief

the

brother was friends with the defendant police chief. Id. at 320. Even a though city there was testimony had spoken that with the the judges police

brother,

councilman,

chief about the plaintiff, this Court stated that [t]he trial judge . . . is not accountable for his brothers actions before the city council, and [the plaintiff] has not presented any reason to believe that the trial judge is under the sway of his brother. Id. Accord Ford v. Ford,

412 So. 2d 789, 791 (Ala. Civ. App. 1982) (trial judge was not required to recuse when he presided over a divorce case 10

involving

state

legislator staff

in also

which

member on the

of

the

legislators judges

campaign

worked

trial

campaign.).

Judge

Conaways

alleged

association

with persons who are not parties to this case is not a basis for recusal, regardless of what those non-parties do or say. HEDAs third argument is that Judge Conaway should

recuse because he issued the search warrant that the State executed at the casino. HEDA Pet. at 29. Once again, this argument is contradicted by clear precedent. It is wellsettled that a court is not disqualified from hearing

subsequent matters arising from the search.2 Both this Court and the United States Supreme Court have routinely approved of courts serving in cases where the court has had previous dealings with either the defendant or the occurrence that

See, e.g., Ex parte Brooks, 855 So. 2d 593, 596 (Ala. Crim. App. 2003) (Alabama courts have never held that a judge should disqualify himself or herself because of a prior involvement in a case in a judicial capacity); Heard v. State, 574 So. 2d 873, 87475 (Ala. Crim. App. 1990) (holding that a judge who issued a search warrant has no duty to recuse from the subsequent criminal trial); Barron v. State, 682 So. 2d 505, 506 (Ala. Crim. App. 1996) (finding that the trial court had no duty to recuse where he was the same judge who had issued the search warrant in the appellants case.). See also 46 AM. JUR.2d Judges 181 (1969) (A trial judges participation in a previous proceeding in a case does not ipso facto render him disqualified to preside at trial.).
2

11

is the subject of the subsequent case (or both).

See,

e.g., Winthrow v. Larkin, 421 U.S. 35, 56 (1975) (Judges repeatedly issue arrest warrants on the basis that there is probable cause to believe that a crime has been committed and that the person named in the warrant has committed it. Judges also preside at preliminary hearings where they must decide whether the evidence is sufficient to hold a

defendant for trial. Neither of these pretrial involvements has been thought to raise any constitutional barrier

against the judge's presiding over the criminal trial and, if the trial is without a jury, against making the

necessary determination of guilt or innocence.); FTC v. Cement Inst., 333 U.S. 683, 703 (1948) (In fact, judges frequently try the same case more than once and decide

identical issues each time, although these issues involve questions both of law and fact.); Walker v. State, 84 So. 2d 383, 384 (Ala. 1955) (holding that a trial court had no duty to recuse where the court had previously tried the same case and committed error by allowing evidence that was ruled on appeal to have been inadmissible). The rule is

that [t]he mere fact of previous participation in a trial

12

by

judge,

without

more,

furnishes

no

ground

for

disqualification.

Walker, 84 So. 2d at 384.

HEDAs fourth argument appears to be that Judge Conaway should recuse because of the prior JIC finding of

disqualification as to Houston County circuit judges and because those other judges have recused. HEDA Pet. at 29. Judge Conaway has already explained that those JIC findings do not apply to him because he was not on the court at the time of the ex parte communication that motivated the JIC opinion. In short, HEDAs mandamus petition does not have a

strong likelihood of success such that the underlying case should be stayed pending this Courts ruling. Instead, it is the kind of mandamus petition that can be rejected outof-hand. CONCLUSION HEDAs Motion to Stay should be denied. Respectfully submitted, LUTHER STRANGE Alabama Attorney General By: s/ Andrew L. Brasher Andrew L. Brasher Alabama Deputy Solicitor General 13

OF COUNSEL: Andrew L. Brasher Alabama Deputy Solicitor General Henry T. Reagan II Jess R. Nix Alabama Deputies Attorney General OFFICE OF ATTORNEY GENERAL 501 Washington Avenue Montgomery, Alabama 36130 (334) 353-2187 (334) 242-4891 (fax) abrasher@ago.state.al.us

14

CERTIFICATE OF SERVICE I hereby certify that on the 25th day of September, 2012, a copy of the above and foregoing document has been filed with the Clerk of the Court using the Appellate

Courts e-Filing System (ACES) which will send notification of such filing to all parties of record, has been emailed where noted, and mailed via U.S. Mail where noted. Honorable J. Michael Conaway Circuit Judge Houston County Courthouse P.O. Drawer 6406 Dothan, Alabama 36302 William C. White II PARKMAN & WHITE, LLC 192 9 Third Avenue North, Ste. 700 Birmingham, AL 35203 wwhite@parkmanlawfirm.com Ernest H. Hornsby Ashton Ott FARMER, PRICE, HORNSBY & WEATHERFORD, L.L.P. P. O. Drawer 2228 Dothan, AL 36302 ehornsby@fphw-law.com aott@fphw-law.com Center Stage Alabama, Inc. 111 E. Main Street Dothan, AL 36301 Nova Gaming c/o CT Corporation 2 North Jackson Street, Suite 605 Montgomery, AL 36104 15

Imperium Group, LLC 2462 Promwood Loop, Apt. 11 Montgomery, AL 36106 Gateway Gaming, LLC 2229 First Ave. N. Birmingham, AL 35203 Fox Gaming, LLC 2055 Boggs Road Duluth, GA 30096 Firefox Systems, LLC 643 Sheridon Place Birmingham, AL 35214 Segway Gaming Systems of Alabama 1575 Industrial Pike Road Gastonia, NC 28052 Segway Gaming Systems of Alabama F. Lane Finch, Jr. 2001 Park Place, Suite 1200 Birmingham, AL 35203 /s Andrew L. Brasher

OF COUNSEL

16

Exhibit A

AlaFile E-Notice

38-CV-2012-900266.00 Judge: J. MICHAEL CONAWAY To: REAGAN HENRY THEODORE II sreagan@ago.state.al.us

NOTICE OF ELECTRONIC FILING

IN THE CIRCUIT COURT OF HOUSTON COUNTY, ALABAMA THE STATE OF ALABAMA V. CENTER STAGE ALABAMA, INC. 38-CV-2012-900266.00 The following matter was FILED on 9/6/2012 3:49:19 PM C001 THE STATE OF ALABAMA MOTION TO DISMISS AND LIMITED APPEARANCE [Filer: NIX JESS RANDALL] Notice Date: 9/6/2012 3:49:19 PM

CARLA H. WOODALL CIRCUIT COURT CLERK HOUSTON COUNTY, ALABAMA 114 NORTH OATES STREET DOTHAN, AL 36302 334-677-4859

ELECTRONICALLY FILED 9/6/2012 3:49 PM CV-2012-900266.00 CIRCUIT COURT OF HOUSTON COUNTY, ALABAMA CARLA H. WOODALL, CLERK

IN THE CIRCUIT COURT OF HOUSTON COUNTY, ALABAMA

STATE OF ALABAMA by and through Attorney General Luther Strange Petitioner, vs. $283,657.68 U.S. Currency, et al Defendants

) ) ) ) ) ) ) ) ) ) )

Case Number CV-2012-900266

STATE OF ALABAMAS RESPONSE IN OPPOSITION TO MOTIONS TO DISMISS FILED BY HEDA AND BARON AMERICA, LLC This case represents just the latest chapter in the continuing effort of casino gambling to gain an illegal presence in Alabama by claiming that slot machines and other forms of gambling suddenly become legal as long as you call it bingo. Those behind the Center Stage casino ask this Court to sanction that ruse by dismissing the States action to forfeit contraband based on nothing more than the mere assertion that every form of gambling at Center Stage had a bingo label and was therefore lawful. But this effort to exalt form over substance violates the Alabama Supreme Courts clear mandate that [i]t is the policy of the constitution and laws of Alabama to prohibit the vicious system of lottery schemes and the evil practice of gaming, in all their protean shapes. Barber v. Jefferson County Racing Assn, Inc., 960 So. 2d 599, 614 (Ala. 2006) (emphasis in original, citations and textual marking omitted). A label is not dispositive because what matters is the substance of the transaction, rather than its form. Id. at 611. At trial, the State will certainly present more than sufficient evidence to support its claims. Until then, this Court cannot decide whether the gambling at Center Stage was lawful based on nothing more than assertions, and a dismissal at the pleading stage is therefore improper.

Factual Background In late July of 2012, the State of Alabama obtained and executed a search warrant to seize gambling machines, servers, money used as bets or stakes, and related items from Center Stage, a casino-style gambling hall offering various forms of electronic gambling. On due application, the neutral magistrate found that the State had probable cause to believe that the gambling at issue was not in conformity with Amendment 569, and violated Alabamas broad prohibitions against gambling and slot machines. The Court therefore issued the search warrant, and that warrant was executed on July 25, 2012. On August 2, 2012, the return and inventory were properly filed with the Court. On July 26, 2012, the State filed this action seeking forfeiture of the machines, servers and related equipment seized, along with the seized cash that had been used as bets or stakes in the gambling at issue. In its Complaint, the State pled that the seized property, currency, and gambling records were illegal contraband under Alabama criminal law. With respect to the currency, the State pled that it was in violation of the law of the State of Alabama, and was used as bets or stakes in gambling activity in violation of a law of the State of Alabama concerning gambling, in violation of and contrary to Section 13A-12-20, et seq., including Section 13A-1230, Code of Alabama, (1975). Complaint at 11. With respect to the seized property, the State pled that it constituted gambling devices and slot machines in violation of the law of the State of Alabama, and contrary to Section 13A-12-20, et. seq., including Section 13A-12-30, Code of Alabama, (1975). Complaint at 23.

ARGUMENT I. THE STATE HAS STATED A CLAIM UPON WHICH RELIEF MAY BE GRANTED "When the trial court is called upon to consider a Rule 12(b)(6) motion, it must examine the allegations in the complaint, ... and construe it so as to resolve all doubts concerning [its] sufficiency in favor of the [claimant]. A.W. v. Wood, 57 So. 3d 751, 760-61 (Ala. 2010), quoting Hightower & Co. v. United States Fid. & Guar. Co., 527 So. 2d 698, 70203 (Ala. 1988). In so doing, the court does not consider whether the claimant will ultimately prevail, only whether he has stated a claim under which he may possibly prevail. Fontenot v. Bramlett, 470 So. 2d 669, 671 (Ala. 1985), citing First Natl Bank v. Gilbert Imported Hardwoods, Inc., 398 So. 2d 258 (Ala. 1981), and Karagan v. City of Mobile, 420 So. 2d 57 (Ala. 1982). There is no evidence presently before the Court and for good reason: the time for presentation of evidence is at summary judgment or trial. Ultimately, the evidence in this case will show, among other things, that Amendment 569 requires 100% of the net proceeds from bingo games to go to charity, but there were outside for-profit investors in Center Stage who expected to earn a return on their investment through bingo proceeds. The Amendment also prohibits a bingo operator from paying any compensation or salary to any individual or entity for any services performed relating to operating or conducting any bingo game, but the evidence will show that employees were being paid with bingo proceeds. Likewise, although Amendment 569 limits bingo to being played for one five-hour session one day a week, the evidence will show that the Center Stage casino offered games seven days a week for 16 hours a day Monday through Saturday and seven hours on Sunday. Numerous other inconsistencies between this operation and the governing law will likewise be shown at trial.

But again, this is not the trial stage, and the State was not required to plead all of those facts in its forfeiture petition. Instead, it was required to provide notice that it was seeking forfeiture of this equipment pursuant to Ala. Code 13A-12-20, et seq., and it has done so. This fully complies with the pleading obligations of Ala. R. Civ. P. 8. While all of HEDAs 12(b)(6) arguments are meritless, many of them are also procedurally improper because they rely on matters outside the States forfeiture petition. A motion to dismiss pursuant to Rule 12(b)(6) contemplates only the determination of whether the plaintiff's complaint states a claim upon which relief can be granted, and matters outside the pleadings never should be considered in deciding whether to grant such a motion. Brindley v. Cullman Reg'l Med. Ctr., 709 So. 2d 1261, 1263-64 (Ala. Civ. App. 1998), citingHales v. First Nat'l Bank of Mobile, 380 So. 2d 797 (Ala. 1980). Despite this prohibition, HEDA asks this Court to consider the Houston County local rules related to bingo (attached as Exhibit A to HEDAs Motion), HEDAs bingo permit that it obtained pursuant to those local rules (attached as Exhibit B to HEDAs Motion), and correspondence between HEDAs attorney and the State. Motion to Dismiss at 6-7, 10. HEDA also argues that some of the seized property belonged to entities not involved in the gambling activities. All of these facts are matters outside the pleadings that it would be improper for this Court to consider in a Rule 12(b) motion. Even if HEDAs 12(b)(6) arguments were not procedurally improper, they have no merit, for at least the following reasons. A. HEDAs due process rights have not been violated. Failing to recognize that the contraband and not HEDA is the defendant in this in rem proceeding, HEDA claims that its due process rights were violated because HEDA is being denied the requirement of adequate notice of the factual basis and elements of the alleged

offense, that was allegedly committed. Motion to Dismiss at 6. However, this is an action against the seized property and not a criminal prosecution, and neither is it an in personam civil action against any entity. Further, civil forfeiture actions are governed by the notice pleading requirements of Rule 8 and the States Complaint satisfies those requirements. As set forth in the Complaint, the State has alleged that the seized property and currency that are the defendant property in this case were used in illegal gambling operations, making them subject to seizure as contraband under Alabama criminal law. No cause of action criminal or civil has been pled against HEDA, and cases discussing due process rights of criminal defendants are irrelevant here. On a related note, throughout its Motion HEDA complains that the State has not filed criminal charges against anyone resulting from the seizure of the property at Center Stage. The State notes that its investigation into the matter is on-going, and that the statute of limitations for bringing any such charges will not run for many months. The State will make decisions regarding whether and when to charge people with criminal charges as its investigation develops. For now, it is sufficient to note that not a single Alabama case or statute has ever required criminal charges as a prerequisite to a forfeiture action under Ala. Code13A-12-20, et seq. B. The Houston County local rules regulating bingo do not require dismissal of this action. HEDA seeks dispositive protection for its illegal activity in the rules adopted by the Houston County Commission for the regulation of bingo. Motion to Dismiss at 6-7. Whether HEDA is even in compliance with those rules involves factual disputes outside the pleadings and is an issue for summary judgment or trial. It certainly cannot be decided on a motion to dismiss at the pleading stage. Moreover, unfortunately for HEDA, those rules are void because they are contrary to and inconsistent with the Alabama Constitution, Alabama Constitutional Amendment
5

569, the enabling legislation passed in connection with Constitutional Amendment 569, and Alabama public policy. 1. The local rules can only authorize the playing of the game traditionally known as bingo, but the games being played on the seized machines are not bingo. Alabama has a strong public policy against gambling that begins with its Constitution. Section 65 states that the legislature has no power to authorize lotteries or gift enterprises for any purposes and requires the legislature to pass laws to prohibit the sale of lottery or gift enterprise tickets, or tickets in any scheme in the nature of a lottery. The elements of a prohibited lottery are a prize, awarded by chance, and for consideration. City of Piedmont v. Evans, 642 So. 2d 435, 436 (Ala. 1994), citing Pepsi Cola Bottling Co. of Luverne, Inc. v. CocaCola Bottling Co., Andalusia, 534 So. 2d 295 (Ala. 1988). Bingo for prizes is a lottery. Id. As a result, a constitutional amendment is required to authorize bingo games. Bingo is only authorized in Houston County if it is conducted in strict compliance with Constitutional Amendment 569. That amendment states that the operation of bingo games for prizes or money by certain nonprofit organizations and certain private clubs for charitable, educational, or other lawful purposes shall be legal in Houston County. Consistent with the Amendment, the enabling legislation passed by the State legislature to implement the amendment defines bingo as [t]he game, commonly known as bingo, where numbers or symbols on a card are matched with numbers or symbols selected at random. Act No. 95-420 at 1(a).1 Thus, [t]he only lottery legalized by the passage and ratification of Amendment No. [569] was and is the lottery of bingo. City of Piedmont v. Evans, 642 So. 2d 435, 436 (Ala. 1994) (construing similar language in Calhoun Countys bingo amendment); see also Barber v. Cornerstone Community Outreach, Inc., 42 So. 3d 65, 78-80 (construing similar language in

For the Courts convenience, copy of the enabling legislation is attached hereto as Exhibit A.

Lowndes Countys bingo amendment). Local authorities have no power under Alabama law to expand the definition of bingo beyond the traditional game. Id. As alleged in its Complaint and as the State will prove at trial, the games played on the seized machines were not the game traditionally known as bingo. As a result, the gambling interests cannot rely upon the local rules to give these games safe harbor. A preliminary Rule 12(b)(6) motion, however, is not the appropriate vehicle for resolving this merits issue. 2. To the extent the local rules authorize games beyond the game traditionally known as bingo, they are void because they are contrary to and inconsistent with the Alabama Constitution, Alabama Constitutional Amendment 569, the enabling legislation passed in connection with Constitutional Amendment 569, and Alabama public policy. Even though the local rules cannot by law authorize any game beyond the game commonly known as bingo, they attempt to do just that. They declare that all forms of the game known as bingo, including but not limited to, media forms of bingo, are subject to licensure and regulation in Houston County. Houston County, Alabama Resolution 10-10 at 3.2 The local rules are thus effectively trying to authorize a game that is not, in fact, bingo for the purposes of the Alabama Constitution. Indeed, the local rules admit that Amendment 569 does not authorize the games the rulemakers arguably attempted to authorize because the Amendment does not contemplate the impact of the technological evolution in computer technology upon the game of bingo and current media forms of bingo that have emerged from said technological advances. Resolution 10-10 at 3. Worse yet, the local rules purport to exempt machines purporting to play bingo from the Alabama Codes statewide prohibition on slot machines. Resolution 10-10 at 6. HEDAs reliance upon the rules reveals that their purported authorization of media bingo is nothing more than an attempted end-run around the States

The State has not attached a copy of the local rules as an exhibit because HEDA attached a copy to its motion. The States citations are to the local rules as paginated in HEDAs exhibit.
2

anti-gambling laws that is squarely prohibited by established precedent and the Alabama Constitution. The Commission lacks the authority to exempt Houston County from the statewide criminal code and thereby create a zone of lawlessness in Houston County. Nor does it have the authority to expand the narrow scope of Amendment 569 beyond the traditional game of bingo, because an ordinance cannot prevail in conflict with state law except by provision of the state law itself. The public policy of the state, if any, respecting the subject matter of the ordinance must be considered, since an ordinance inconsistent with the states policy as written in its statutes is void. Barrett v. State, 705 So. 2d 529, 532 (Ala. 1996), quoting McQuillan, Municipal Corporations, 20.41 (3d ed. Rev. 1988). Nothing in Amendment 569 authorizes the Commission to expand the definition of bingo, and the State has a strong public policy against gambling. See Barber, 960 So. 2d at 614, quoting Opinion of the Justices No. 83, 31 So. 2d 753, 754 (Ala. 1947), quoting Johnson v. State, 3 So. 790, 791 (Ala. 1887) (It is the policy of the constitution and laws of Alabama [to prohibit] the vicious system of lottery schemes and the evil practice of gaming, in all their protean shapes.). The Commission lacks the authority to pass an ordinance that broadens the scope of the narrow exception to the prohibition of lotteries in the Alabama Constitution. Barrett v. State, 705 So. 2d 529, 532 (Ala. 1996). As the Alabama Supreme Court has consistently held, Alabamas local bingo amendments authorize only the game commonly or traditionally known as bingo, and local authorities cannot authorize anything else. Cornerstone, 42 So. 3d at 86. For confirmation that the local rules attempt to expand Amendment 569s authorization beyond the traditional game known as bingo, one need only look at the provision in them that declares the equipment used to play this newly legalized game of media bingo is exempt from

the criminal laws of the State of Alabama. According to the rules, Bingo Equipment and Supplies include dispensers, readers, electronic player stations, player terminals, central computer servers containing random number generators and other processing capabilities for remote player terminals, electronic consoles capable of providing game results in different display modes, telephones and telephone circuits, telephones, cables and other telecommunication circuits, and satellites and related transmitting and receiving equipment. Resolution 10-10 at 6. The rules then direct that such equipment shall not be deemed to be for any purpose a gambling device or slot machine within the meaning of the Code of Alabama 1975, Sections 13A-12-20(5) and (10) or any other provision of law, whether now in effect or hereafter enacted. Resolution 10-10 at 6. Nothing in Amendment 569 or any other provision of law gives the Houston County Commission the power to deprive either law enforcement or this Court from enforcing the criminal laws of this State. [A] municipalitys legislative authority is subordinate to the

Constitution of Alabama 1901 and the provisions of the Alabama Code meaning municipalities may only adopt ordinances not inconsistent with the laws of the state. Foster v. State, 705 So. 2d 534, 538 (Ala. 1997), quoting Ala. Code 11-45-1. The County Commission had no more authority to exempt such equipment from the criminal laws of this State than to exempt cocaine or marijuana from the States drug laws. 3. Even if the local rules were valid, on information and belief, the Court cannot decide at the pleading stage whether HEDAs operations are even in compliance with those rules. Even if one assumed the local rules could have some field of operation, the rules would still not provide a basis to dismiss this forfeiture action. Whether HEDA is operating in

compliance with those rules involves facts which are not only disputed, but are not even before the Court at this stage. Even under the illegal local rules, a bingo permit does not authorize any and every game that may be labeled as bingo. Holding a permit does not prove that the gambling at issue was the gambling authorized by that permit. Nor does it prove whether the permit was lawfully obtained. Resolving whether HEDA is in fact qualified to hold its permit and was acting within the scope of that permit involves matters well outside the Complaint and outside the scope of a 12(b) motion. C. Even if the State seized some property that was not used in illegal gambling, that is no reason to dismiss this lawsuit. HEDA argues that the State seized property that was not used in what HEDA calls charity bingo operations. Motion to Dismiss at 6-7. HEDA does not identify what property falls in this category, and the State has alleged in its Complaint that all of the property it seized was used in illegal gambling operations, and that all of the cash seized was used as bets or stakes in illegal gambling activity. Such factual disputes cannot be resolved on the pleadings on a motion to dismiss. The States averments must be taken as true on a Rule 12(b)(6) motion. D. The States Complaint satisfied the notice pleading requirements of Rule 8, and there are no heightened pleading requirements applicable to civil forfeiture petitions. Under Rule 8(a)(1), the States Complaint was required to contain a short and plain statement of the claim showing that the pleader is entitled to relief. The Complaint meets this standard. HEDAs argument that the Complaint fails to provide notice of even the most basic allegations as to how the Property has violated any law, or which of the eleven code sections was violated seeks to impose a higher standard than the notice pleading standard. Motion to Dismiss at 7. The States Complaint puts any party interested in the property on notice that it

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was seized because it was used in illegal gambling activity under Alabama law, which is all that Rule 8 requires. Discovery is the proper avenue for obtaining further information about the States case. HEDA states that a more rigorous pleading standard similar to that found in Rule 9(b) should be required, and argues for a similar extension of heightened pleading standards like that contained in Rule 9(b). Id. Such an extension is unsupported by any case law in this State and would fundamentally change how civil forfeiture actions have been conducted in this State for decades. This Court should decline HEDAs invitation to overturn such settled precedent. E. The State supported the search warrant with an affidavit establishing probable cause. On the day that it seized the property, the State furnished a copy of the search warrant and inventory list of all seized property to HEDAs counsel. Within a few days after the raid, it provided the Court that issued the warrant with a return describing the property that had been seized. By performing these two acts, the State fully satisfied its obligations under Alabama Rule of Criminal Procedure 3.11. HEDA has not identified any authority requiring the State to furnish it with the search warrant affidavit. See Motion to Dismiss at 10. HEDA misstates the relief that it would be due even if there were some issue with the warrant or affidavit. HEDA argues that if the seized evidence were due to be suppressed in a criminal action then this civil forfeiture petition would also be due to be dismissed. This is incorrect under Alabama Rule of Criminal Procedure 3.13. That rule provides that the only way a person is entitled to have seized property returned is if he or she is entitled to lawful possession of such property. In other words, even if HEDA could prove that the property was seized in violation of the Fourth Amendment and therefore could not be used as evidence in a

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criminal action, HEDA would still have to prove that it was entitled to lawful possession of the property before the State would be required to return it. As the committee comment to Rule 3.13 provides, [o]f course, if the property seized is contraband, it can be lawfully held even if the property is subject to the exclusionary rules and does not have to be returned. Ala. R. Crim. P. 3.13 Commentary (emphasis added). The United States Supreme Court has also endorsed this rule, holding that per se contraband does not need to be returned even though it was improperly seized and could not be used as evidence in a criminal proceeding because of the exclusionary rule. See Trupiano v. United States, 334 U.S. 699, 710 (1948); accord United States v. Van Cauwenberghe, 934 F.2d 1048, 1061 (9th Cir. 1991) (A motion for return of property ... may be denied if the defendant is not entitled to lawful possession of the seized property, the property is contraband or subject to forfeiture or the government's need for the property as evidence continues.). HEDA has not and cannot prove that it is lawfully entitled to possession of the seized property. Accordingly, the State is not required to return it. F. Rule 64 does not require a pre-seizure hearing when the State seizes illegal contraband pursuant to its police power. Rule 64 applies to seizures that occur [a]t the commencement of and during the course of an action. But there was no civil action in existence when this contraband was seized meaning that, by its plain language, Rule 64 does not apply. Further, a review of the Committee Comments reveals that Rule 64 was designed to cover a situation where a creditor attempted to seize the property of a debtor prior to the entry of judgment. See Committee Comments on 1973 Adoption (This revision of ARCP 64 responds to the need to strike a reasonable balance between the creditors right to enforce his remedy and the debtors right to procedural due process.). The most-discussed case in the 1973 Comments, Fuentes v. Shevin, 407 U.S. 67
12

(1972), involved the Supreme Court holding that Florida and Pennsylvania statutes which allowed private party creditors to seize property from debtors without a hearing violated due process. The Comments indicate that Rule 64 was revised following Fuentes and two related cases so as to keep this aspect of Alabama law current with the latest pronouncements of the United States Supreme Court. The current controlling pronouncement[ ] of the United States Supreme Court is not Fuentes, but rather Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 679 (1974), in which the Court allowed seizure without an advance hearing because seizure served the significant governmental purpose[ ] of allowing Puerto Rico to assert in rem jurisdiction over the property in order to conduct forfeiture proceedings. Indeed, the Eleventh Circuit has recently held, in connection with Alabamas enforcement of its gambling laws in Houston County, that Calero-Toledo is the controlling case and that we have no trouble concluding that the due process clause does not afford an entity without an ownership interest a hearing in the face of threatened seizure. Lord Abbett Mun. Income Fund, Inc. v. Tyson, 671 F.3d 1203, 1208 (11th Cir. 2012). The State is not a private party. It is also not a creditor of the entities holding an interest in the seized property. The State seized the property at issue while executing a search warrant issued under Alabama criminal law, and did so pursuant to its police power. Consistent with applicable criminal law and decades of precedent, the State developed probable cause that the seized property was illegal, obtained a search warrant, and then seized the property pursuant to that search warrant. As a result, it was not required to follow the procedures set forth in Rule 64 governing prejudgment attachment in a civil case. HEDA has cited no authority, and the State is aware of none, where Rule 64 has been held to apply to contraband found and seized by the State

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during the execution of a search warrant, and only then made the subject of a later-filed civil forfeiture action. II. HEDAs Arguments Under Rule 12(b)(2), (4), and (5) are premature, rest on a mistaken legal premise, and, in any event, are moot. HEDA also requests a dismissal pursuant to Rule 12(b)(2), (4), and (5) for lack of personal jurisdiction, insufficient process, and insufficient service of process. Motion to Dismiss at 3-5. The central premise of HEDAs arguments is that the State was required to serve HEDA with a copy of the summons and complaint pursuant to Rule 4. To be clear, the State sent a copy of the Complaint via certified mail to all the entities that it believed might have an interest in the seized property. See certified mail receipts, attached hereto as Exhibit B. As shown in Exhibit B and as evidenced by its motion, HEDA received a copy of the Complaint.3 HEDAs arguments pursuant to each of these provisions are premature, rest on a mistaken legal premise, and, in any event, are moot. A. Rule 4 allows 120 days for service of process, but only 42 days have passed since the State filed its complaint. Rule 4(b) states that a plaintiff has 120 days after the filing of its complaint to serve defendants. Even after the passage of that time period, the action cannot be dismissed as to any unserved defendants without at least fourteen days notice to the plaintiff. The State filed its Complaint in the present case on July 26, 2012, a mere twenty-nine days before HEDA filed its Motion to Dismiss. As of the date of this filing, only forty-two days have elapsed since the date of initial filing. As a result, under Rule 4, the State would still have nearly 80 days to perfect such service before the initial 120 day period expired. HEDAs Motion is therefore highly premature at best.

The State did not send a copy of the Complaint to Baron because it was unaware of Barons interest in the seized property.
3

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B. HEDAs arguments rest on a mistaken legal premise because Rule 4 only requires service of process on a defendant and HEDA is not a defendant. Rule 4 requires that a plaintiff serve a copy of the summons and complaint upon all defendants to an action. In a civil forfeiture action, however, the seized property is the only defendant. A civil forfeiture action is not an action in personam against the owner or claimant of the property; rather, it is an action in rem against the property itself. Agee v. State ex rel. Galanos, 627 So. 2d 960, 962 (Ala. Civ. App. 1993), citing United States v. One Parcel of Property, 964 F.2d 814 (8th Cir. 1992). Consistent with the in rem nature of this action, the State has not sought any relief from HEDA or any other entity. Further, HEDA does not contend that it is a defendant. Instead, HEDA describes itself as a real party in interest with respect to the Property and argues that its participation in the case is essential to finality of any judgment entered in this case. Motion to Dismiss at 4. HEDA is wrong on both counts. HEDA may claim an ownership interest in the seized property that entitles it to intervene in the action, but it is not a real party in interest such that its participation is required for the State to obtain a judgment that the seized property is illegal. The States seizure of the illegal gambling devices and proceeds here is no different than its seizure of illegal drug proceeds. Just like the drug dealers participation in a forfeiture action is not required for the State to obtain a binding decision that the seized drug proceeds are forfeit, the State can obtain a judgment against illegal gambling devices and proceeds even if entities with ownership interests do not participate in a forfeiture action. The cases cited in HEDAs motion do not change this result, as none of them involved civil forfeiture actions. As previously noted, the State sent copies of the Complaint to every entity that it believed might have an interest in the seized property. Those entities, plus any others of which the State is not aware, now have the chance to intervene in this action to protect their interest in the seized
15

property. Their presence is not required, however, for this action to proceed. Nor is the State required to serve them under Rule 4 as if they were defendants. C. In any event, HEDAs arguments will soon be moot because the State has now initiated the process to serve it under Rule 4. While the State maintains that service under Rule 4 is not required upon any entity in a civil forfeiture action, in order to move this case forward, the State has initiated the process to serve HEDA, Baron, and the entities listed on the certificate of service on the States complaint in accordance with Rule 4. This effort is timely under the rules. Accordingly, HEDAs arguments related to service of process will be moot in the near future.

Conclusion WHEREFORE, PREMISES CONSIDERED, the State prays that this Honorable Court deny the Motion to Dismiss in its entirety.

Respectfully submitted, LUTHER STRANGE (STR003) ATTORNEY GENERAL By: /s/ Jess R. Nix Jess R. Nix (NIX014) Deputy Attorney General Counsel for the State of Alabama

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OF COUNSEL: Henry T. Sonny Reagan (REA021) Jess R. Nix (NIX014) Office of the Attorney General 501 Washington Avenue Post Office Box 300152 Montgomery, AL 36130-0152 (334) 242-7300 Office (334) 242-4890 FAX sreagan@ago.state.al.us jnix@ago.state.al.us

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CERTIFICATE OF SERVICE
I hereby certify that I have this date served the above and foregoing on: Ernest H. Hornsby, Esq. Ashton Ott, Esq. FARMER, PRICE, HORNSBY & WEATHERFORD, L.L.P P.O. Drawer 2228 Dothan, AL 36302 William C. White, Esq. PARKMAN & WHITE, LLC 1925 Third Avenue North Suite 700 Birmingham, AL 35200 John Jameson Givens The Cochran Firm-Dothan P.C. Post Office Box 927 Dothan, Alabama 36302 Jeff S. Daniel Law Office of Jeff S. Daniel, P.C. P.O. Box 131323 Birmingham, Alabama 35213 D. W. Grimsley, Jr. D. W. Grimsley, Jr. P.C. 21 South Section Street Fairhope, Alabama 36532 Anthony A. Joseph Donald F. Winningham III Maynard, Cooper, and Gale, P.C. 1901 Sixth Avenue North 2400 Regions Herbert Plaza Birmingham, Alabama 35203

by electronic notice via the AlaFile system or by placing a copy of same in the United States Mail, to their regular mailing addresses, on this 6th day of September 2012.

/s/ Jess R. Nix OF COUNSEL

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ELECTRONICALLY FILED 9/6/2012 3:49 PM CV-2012-900266.00 CIRCUIT COURT OF HOUSTON COUNTY, ALABAMA CARLA H. WOODALL, CLERK

ELECTRONICALLY FILED 9/6/2012 3:49 PM CV-2012-900266.00 CIRCUIT COURT OF HOUSTON COUNTY, ALABAMA CARLA H. WOODALL, CLERK