Kentucky v. Interactive Media Entertainment

Citation: Commonwealth of Kentucky v. Interactive Media Entertainment & Gaming Ass’n, Inc., 2009 SC-000043-MR (Ky. Mar. 18, 2010).

Factual Background
In a move against internet gambling in Kentucky, the Commonwealth filed an in rem action over 141 domain names.

Trial Court Proceedings
Following a hearing only attended by the Commonwealth, the trial court concluded that the websites were violating Kentucky gambling laws and instructed their registrars to transfer them to the Commonwealth.

Counsel later appeared to challenge the forced transfer claiming to represent both the domain names themselves, and gaming trade associations claiming to have registrants of the seized domains as members. The court denied all motions brought by the domains and the associations holding that only the domain name owners, operators, and registrants had a legal interest in the domain names and only they or their representatives could defend against forfeiture.

Appellate Court Proceedings
The Court of Appeals issued a writ enjoining the impending forfeiture and the Commonwealth appealed the matter to the State Supreme Court.

Kentucky Supreme Court Proceedings
The Kentucky Supreme Court acknowledged the many “compelling arguments endorsing the grant of the writ of prohibition;” that Kentucky law only mandates the seizure of tangible gambling devices, that the Kentucky statute relied upon by the Commonwealth only contemplates criminal sanctions, and that Kentucky lacks in rem jurisdiction over the domain names because they are not located in Kentucky. Despite the merit of the arguments, the court noted, as the trial court had done initially, that no one making the arguments met the basic requirements of standing.

The domain names’ assertion of standing hinges on the origination of this action as an in rem proceeding. Counsel’s argument was simply that since the Commonwealth named the domain names as the in rem defendants, those names should have the opportunity to represent themselves to defend against forfeiture. This approach to an in rem proceeding somewhat confuses the process. Property does not have an interest in itself and therefore does not have an interest in litigation. Even though property may be listed as a defendant in an in rem proceeding, only those with an interest in the property may defend against the action. Taylor v. City of La Grange, 262 Ky. 383, 90 S.W.2d 357 (1936); City of Middlesborough v. Coal & Iron Bank, 33 Ky. L. Rptr. 469, 110 S.W. 355, 356 (1908); United States v. One 1965 Cessna 320C Twin Engine Airplane, 715 F.Supp. 808, 810 (E.D. Ky. 1989). The styling of case captions has no influence over the well established rules of standing. When the same issue was raised in the Fifth Circuit, that court found the concept of property representing itself to be “not arguable on its merits” and “frivolous.” United States v. One Parcel of Real Property, 831 F.2d 566, 568-69 (5th Cir. 1987).

Associational standing is allowed when an association can establish that (1) its members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are germane to the organization’s purpose; and (3) neither the claim asserted nor the relief requested requires the participation of the individual members in the lawsuit. The gaming associations’ attempt to invoke associational standing was defeated by their failure to reveal which registrants were being represented by the associations, or even how many registrants or domain names they sought to represent. Without identifying who the associations seeks to represent there is no way for the court to determine whether or not they even satisfy the first requirement of associational standing. “The cyber-age status of their members does not let [the associations] escape traditional standing requirements.”

The associations cited to cases in which an organization was allowed to proceed without identifying the specific members affected by the issues in a lawsuit, however in those cases the courts were satisfied that the majority of the members of the organization were affected and able to have standing on their own. An additional distinction for this case is the requirement that where harm is specific, the proof of standing must be equally specific. Forum for Academic & Inst. Rights, Inc v. Rumsfeld, 291 F. Supp.2d 288 (D.N.J. 2003) and at the case at issue there is a specific number of domains to be seized, which must be met with a specific number of registrants or parties with standing to oppose the forfeiture.

The Supreme Court of Kentucky ultimately held that a consideration of the merits was improper for lack of standing but acknowledged that the proceedings could be re-filed with the Court of Appeals if a party able to establish standing was willing to come forward.