T AND A AMUSEMENTS, LLC; and CRAZIE OVERSTOCK PROMOTIONS, LLC, Plaintiffs,
PATRICK McCRORY, in his official capacity as Governor of the State of North Carolina; FRANK L. PERRY, in his official capacity as Secretary of the North Carolina Department of Public Safety; MARK J. SENTER, in his official capacity as Branch Head of the Alcohol Law Enforcement Division; JODY WILLIAMS, in his official capacity as the Chief of Police of the City of Asheboro, North Carolina; and MAYNARD B. REID, JR., in his official capacity as the Sheriff of Randolph County, Defendants.
in the Court of Appeals 24 August 2016.
by plaintiffs from order entered 19 November 2015 by Judge
Michael D. Duncan in Randolph County Superior Court No. 15
Morningstar Law Group, by William J. Brian, Jr. and Keith P.
Anthony, for plaintiffs-appellants.
H. Stein, Attorney General, by Hal F. Askins, Special Deputy
Attorney General, and J. Joy Strickland, Assistant Attorney
General, for defendants-appellees Patrick McCrory, Frank L.
Perry, and Mark J. Senter.
Cranfill Sumner & Hartzog LLP, by Jaye E. Bingham-Hinch
and Patrick H. Flanagan, for defendant-appellee Jody
brief filed on behalf of defendant-appellee Maynard B. Reid,
case requires us to revisit the issue of whether lawsuits
brought by companies in the business of licensing and
distributing promotional rewards programs seeking declaratory
and injunctive relief as to the legality of those programs
are barred by sovereign immunity or are otherwise
nonjusticiable. Crazie Overstock Promotions, LLC
("Crazie Overstock") and T and A Amusements, LLC
("T&A") (collectively "Plaintiffs")
argue that the trial court erred in dismissing their amended
complaint pursuant to Rules 12(b)(1), (2), and (6) of the
North Carolina Rules of Civil Procedure. Because we conclude
that Plaintiffs' claims are neither barred by sovereign
immunity nor nonjusticiable, we reverse the trial court's
order and remand for further proceedings.
and Procedural Background
Overstock, a retailer of various discount goods, licenses
"retail establishments" to promote and display its
goods, which may then be purchased through Crazie
Overstock's website. Customers may purchase items through
the website with either a credit card or an electronic gift
certificate. In order to incentivize the sale of such gift
certificates, Crazie Overstock has created a promotional
rewards program (the "CO Rewards Program").
Rewards Program allows customers to receive a certain number
of "game points" for each dollar of gift
certificates they purchase through kiosks located in the
retail establishments. Game points may then be used to play
"reward games" on machines in these establishments.
The reward games require no skill, and their results are
determined randomly. Customers who are successful at reward
games receive "reward points" as a result. Reward
points, in turn, may be used by the customer to play a
"dexterity test, " which tests players'
hand-eye coordination and reflexes by requiring them "to
stop a simulated stopwatch within specified ranges."
Customers who are successful at the dexterity test then
receive "dexterity points, " which may be redeemed
for cash rewards.
is a distributor for Crazie Overstock and, as such, is
responsible for recruiting persons to operate retail
establishments and for helping to set up and service those
establishments. In the spring of 2015, T&A recruited an
entity called Mighty Enterprises, LLC ("Mighty
Enterprises") to operate a store in Asheboro, North
Carolina. The Mighty Enterprises store, which opened in May
2015, offered the CO Rewards Program to its customers.
on their knowledge that the Alcohol Law Enforcement Division
("ALE") of the North Carolina Department of Public
Safety and local law enforcement agencies had previously
investigated other businesses offering similar promotional
rewards programs, the principals of Mighty Enterprises
contacted the Asheboro Police Department and offered to
conduct a demonstration of the CO Rewards Program in the hope
of demonstrating that the program did not violate North
Carolina's gambling and sweepstakes statutes.
June 2015, a demonstration of the CO Rewards Program was
conducted for Detective Daniel Shropshire of the Asheboro
Police Department and Agent Stephen Abernathy of ALE. After
the demonstration, the officers stated that they would review
the legality of the CO Rewards Program with their respective
supervisors as well as the district attorney.
June 2015, Detective Shropshire contacted Dawn Moffitt, a
principal of Mighty Enterprises, to inform her that "the
City Police Chief, the ALE, the Office of the District
Attorney, and the Randolph [County] Sheriff considered the CO
Rewards Program to have the same elements of an illegal
electronic sweepstakes which violates both the Video
Sweepstakes Law and the Gambling Statutes." He also
warned Moffitt that "if Mighty Enterprises did not cease
all operations, including the CO Rewards Program[, ] by June
30, 2015, she and the other principals and employees of
Mighty Enterprises would be charged criminally, and . . . the
company's equipment and other personal property would be
confiscated." As a result, Mighty Enterprises shut down
its operations until the legality of the CO Rewards Program
could be determined by a court.
August 2015, Plaintiffs filed the present action in Randolph
County Superior Court requesting, inter alia, that
the trial court (1) declare that the CO Rewards Program does
not violate North Carolina law; and (2) enjoin the defendants
from taking law enforcement action against retail
establishments for offering the CO Rewards Program. The
complaint named as defendants Patrick McCrory, Governor of
North Carolina; Frank L. Perry, Secretary of the North
Carolina Department of Public Safety; Mark J. Senter, Branch
Head of ALE; Jody Williams, Asheboro Police Chief; and
Maynard B. Reid, Jr., Sheriff of Randolph County
(collectively "Defendants"). All of the defendants
were sued solely in their official capacities.
alleged in their amended complaint that "ALE and other
state officials desire to eradicate all electronic
sweepstakes or electronic rewards programs from the State of
North Carolina, including the CO Rewards Program, without
regard to whether such sweepstakes or rewards programs
violate the Gambling Statutes or the Video Sweepstakes
Statute, or other applicable law." Plaintiffs also
asserted that ALE officers, in conjunction with local law
enforcement agencies, have participated in numerous raids of
businesses offering rewards programs, resulting in both
threatened and actual prosecutions. Plaintiffs further
alleged that "[a]s a direct result of threats by ALE and
increased activity by ALE and other local and state
officials, [T&A] and Crazie ...