Interactive Media Entertainment and Gaming Association Inc. v. Attorney General of the United States, No. 08-1981 (3d Cir. Sept. 1, 2009)
Opinion (Hosted by wired.com)

On September 1, 2009, the U.S. Court of Appeals for the Third Circuit affirmed the United States District Court for the District of New Jersey decision, which upheld the Unlawful Internet Gambling Enforcement Act of 2006.

Wired.com provides an overview of the case. The Wall Street Journal features an analysis of the decision and its potential effects on online gambling. Additional analysis can be found on ZDnet and Law.com.

The appellate court held that the Act, which bans credit card companies or other institutions from processing payments for unlawful online betting, was not impermissibly vague and did not violate an individual’s privacy rights, the two primary arguments raised by Interactive.

With regard to Interactive’s vagueness argument, the court stated that the law “clearly provides a person of ordinary intelligence with adequate notice of the conduct that it prohibits.” The court also noted that “the Act itself does not make any gambling activity illegal.” Rather, the underlying state law governing gambling determines whether a particular bet is illegal. Accordingly, any vagueness problem is not with the Act, but with the state law governing the application of the Act.

Additionally, the court noted that Interactive’s privacy argument cited Lawrence v. Texas, 539 U.S. 558 (2003), and Reliable Consultants, Inc. v. Earle, 517 F.3d 738 (5th Cir. 2008), both of which prohibited forms of sexual conduct between consenting adults in the privacy of their homes. The court found that gambling “simply does not involve any individual interests of the same constitutional magnitude,” so Interactive’s reliance on Lawrence and Earle was misplaced.

The Act and this decision upholding it are undoubtedly blows to Internet gambling sites, which will not be able to receive payment via credit cards.  Nevertheless, many gambling sites already are able to collect payments through other methods.  Additionally, the Wall Street Journal reports that Joe Brennan Jr., chairman of Interactive Media, is hopeful that “language in the decision appearing to place the issue under state jurisdiction” could be “a silver lining,” as it opens the door for state regulation of online gambling.

ACLU v. Mukasey
Third Circuit, July 22, 2008, No. 07-2539
Slip Opinion

On July 22, the Third Circuit affirmed the United States District Court for the Eastern District of Pennsylvania’s decision, finding that the Child Online Protection Act (”COPA”), 47 U.S.C. § 231, violated the First and Fifth Amendment, and permanently enjoined its enforcement. COPA imposes civil and criminal penalties for anyone who, “for commercial purposes,” knowingly posts “material that is harmful to minors” on the World Wide Web. 47 U.S.C. § 231(a)(1).  While broad, COPA allows web publishers a complete defense if they ”require[] use of a credit card, debit account, adult access code, or adult personal identification number,” “accept[] a digital certificate that verifies age,” or use other similar measures. 47 U.S.C. § 231(c).  COPA has been mired in litigation since it was first enacted in October of 1998, including two trips to the Supreme Court;  this is the third time that the Third Circuit has held the Act unconstitutional.

Judge Morton I. Greenberg, writing for a unanimous panel with Judges Thomas L. Ambro and Michael A. Chagares, found that COPA failed to meet the strict scrutiny standard for restrictions on constitutionally protected speech. To survive strict scrutiny review, regulation that restricts protected speech must serve a “compelling government interest”, be “narrowly tailored” to serve the interest, and use the least restrictive means available.  The Third Circuit found that COPA served the compelling government interest to protect children, but that it failed to meet the second and third prongs of the test.  The court held that COPA was insufficiently narrowly tailored because, inter alia, minors were broadly defined as any person under the age of 17, and the standard for harmfulness did not require that the material be viewed in context.  In addition, the court found the definition of a “commercial” publisher to be overly inclusive and the affirmative defenses available to such publishers — evidence of the implementation of credit card shields or similar measures — unduly restrictive both to publishers and adults wishing to access the material. Finally, the court held the government failed to demonstrate that internet content filters, deemed a less restrictive option, were less effective than COPA.

The Electronic Privacy Information Center hosts the full text of COPA and related House Report.

The Center for Democracy and Technology, an online rights advocacy group that filed an amicus brief for an earlier Third Circuit COPA case, lauded the decision. CDT General Counsel John Morris states, “This empowers parents, respects the First Amendment and acknowledges the diverse sensibilities of American families.”

Professor Susan Crawford of the University of Michigan Law comments on the decision, and addresses the possibility that the case will once again return to the Supreme Court.

This case marks the next chapter in a decade-long debate over COPA. In the first challenge to COPA by the ACLU and various Internet publishers in 1999, the United States District Court for the Eastern District of Pennsylvania upheld a motion for preliminary injunction, finding that COPA would overly burden free speech through financial and other deterrents, and that filtering and blocking technology was likely a less restrictive and more effective way to protect minors. The Third Circuit upheld the injunction on narrower grounds, holding that COPA’s use of “community standards” as a way to define what is harmful to minors was impermissibly vague. The Supreme Court vacated and remanded for further proceedings, holding that the  “community standards” language did not in itself render the statute unconstitutionally broad.

On remand, the Third Circuit again upheld the injunction, citing additional reasons for COPA’s unconstitutionality under the strict scrutiny test. The government was again granted certiorari and the Supreme Court affirmed the Third Circuit’s decision, but remanded the case to district court for a full trial on the merits. The District Court then permanently enjoined the Attorney General from implementing the Act, and held that the government failed to meet its burden of showing that the Act was the most effective and least restrictive way for the government to acheive its objective.

Related JOLT Articles

Book Review: Beyond Our Control? Confronting the Limits of Our Legal System in the Age of Cyberspace

The Marketplace vs. The Ideas: The First Amendment Challenges to Internet Commerce

CBS Corp. v. Federal Communications Commission
Third Circuit, July 21 2008, No. 06-3575
Slip Opinion

On July 21, the Third Circuit vacated an FCC order fining CBS $550,000 for the nine-sixteenths of one second broadcasting of Janet Jackson’s bare right breast during the halftime show of Super Bowl XXXVIII in February 2004. The court held that the FCC had departed from its prior policy in fining CBS for the “fleeting image” and that this change was “arbitrary and capricious” under the Administrative Procedure Act § 706. The court also held that Janet Jackson and Justin Timberlake were independent contractors with respect to CBS while performing at the half-time show and that CBS could not be held vicariously liable for their actions without proof of scienter.

The case was remanded for further proceedings consistent with its ruling; however, the court noted that any further action would be declaratory in nature, as the FCC cannot retroactively penalize CBS.

Ken Ferree, president of The Progress & Freedom Foundation (“PFF”) hailed the ruling as a reinforcement of First Amendment rights. Adam Thierer, a senior fellow at the PFF, expects the FCC to appeal the decision, as it did a Second Circuit opinion holding that the FCC’s policy sanctioning “fleeting expletives” was arbitrary and capricious.

Jonathan Rintels, Executive Director of the Center for Creative Voices in Media, also applauded the decision, focusing in particular on the “chilling” effect the FCC’s decisions might have on freedom of expression.

The Parents Television Council (“PTC”) was somewhat less pleased with the decision, which, in its view, “hijacked the will of the American people” and the “intent of Congress.”

Writing for the court, Chief Judge Scirica found that the FCC had a long-established policy that it would not take action against broadcasts of isolated or fleeting indecent material. The court rejected the FCC’s argument that its policy only applied to fleeting utterances and not fleeting images. It found instead that the distinction between words and images applied to CBS was a departure from the FCC’s prior policy. Analyzing the case under Motor Vehicle Manufacturers. Ass’n v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 41 (1983), the court found that the agency could not change its policy without both notice and a reasoned explanation for the change. The FCC declined to acknowledge the policy change, let alone provide an explanation for it, and thus could not surmount the “arbitrary and capricious” standard.

In finding that Jackson and Timberlake were independent contractors, the court noted their significant control over the content and form of their performances as well as the one-time nature of the contract and the show. Additionally, the court reasoned that First Amendment considerations required scienter, some knowledge of wrongdoing, to be read into the statutory prohibition of broadcast indecency. Without some proof that CBS broadcasted with knowledge that the indecency would occur, the FCC could not find CBS liable.

Judge Rendell concurred with the majority in holding the FCC’s actions arbitrary and capricious but dissented with respect to the majority’s disposition on scienter and the decision to remand the case. Judge Rendell argued that, first, the majority’s discussion of scienter is dicta, and second, that CBS’s conduct was “willful” under the most reasonable interpretation of the term. Judge Rendell also argued that there was no need to remand the case as further proceedings would be unnecessary without the fine and the FCC could explain its change in policy in another case or issue a declaratory ruling.