New York Daily Fantasy Sports Suit: State’s Appeal as of Right to the Court of Appeals Lets the Games Continue, For Now

After the Appellate Division, Third Department declared virtually the entire 2016 Interactive Fantasy Sports Law that had authorized daily fantasy sports games in the New York unconstitutional, it wasn’t long before the State appealed the decision to the Court of Appeals. Doing so imposes an automatic stay of enforcement of the Third Department’s order, which will allow daily fantasy sports games to continue to be offered in New York until the Court of Appeals decides the issue once and for all. In the meantime, let’s take a quick look at how the CPLR and case law interpreting it provides for an appeal as of right and the automatic stay.

Although permission is usually required to take a case to the Court of Appeals, the daily fantasy sports suit happens to have one of the limited jurisdictional bases that allows a party to bypass a motion for leave to appeal and take an appeal as of right. Under CPLR 5601(b)(1), a party may take an appeal as of right to the Court of Appeals from a final Appellate Division order that directly involves a substantial constitutional question. Although the requirements are easy to state (the constitutional question must be (1) directly involved and (2) substantial), their application is much more difficult.

For a constitutional question to be directly involved, it first must have been preserved both at the trial court and at the Appellate Division. A constitutional issue raised only at the Appellate Division, and reached as a matter of the Appellate Division’s interests of justice jurisdiction, is not enough. The constitutional question must also have been necessarily decided by the Appellate Division.  So, if the Appellate Division decided the case on a number of independent grounds, including nonconstitutional ones, the constitutional question is not directly involved for purposes of an appeal as of right. Here, in the DFS suit, that’s not an issue. The only issue that the Appellate Division decided was whether the Interactive Fantasy Sports law violated the constitutional ban on gambling under Article I, § 9. The constitutional question was, therefore, directly involved.

What does it mean that the constitutional question is substantial?  That’s a case-by-case decision by the Court. The question doesn’t need to be a winner, but it also can’t already have been decided against the appellant’s position in prior precedent. Otherwise, the Court generally looks at a number of things to determine substantiality, including “the nature of the constitutional interest at stake, the novelty of the constitutional claim, whether the argument raised may have merit, and whether a basis has been established for distinguishing a state constitutional claim (if asserted) from a federal constitutional claim” (The New York Court of Appeals Civil Jurisdiction and Practice Outline, at 4). The question whether DFS is prohibited gambling is an issue of first impression, the courts below certainly found merit in Plaintiffs’ arguments, and New York’s constitutional ban on gambling is unique from the federal constitution. I dare to say that this is undoubtedly a directly involved, substantial constitutional question over which the Court of Appeals has jurisdiction, without even needing a jurisdictional inquiry letter to the parties.

Because it is the State taking the appeal as of right, it also gets the benefit of an automatic stay of enforcement of the Appellate Division’s order under CPLR 5519(a)(1). “CPLR 5519(a)(1) grants an automatic stay to the State, and its political subdivisions, their agencies and officers, pending an appeal from a judgment or order. CPLR 5519(e) provides that a stay will be continued pending resolution of a second-level appeal or until a motion for permission to take such an appeal is denied, provided the governmental appellant serves and files its notice of appeal or motion for leave to appeal within five days after service of an adverse order with notice of entry” (Summerville v City of New York, 97 NY2d 427, 430 [2002]). That’s why the State filed its notice of appeal so quickly, when it otherwise had 30 days to do so. By filing early, the State kept the benefit of the automatic stay that it had obtained when it originally appealed Justice Connolly’s order to the Appellate Division.

Although DFS’s future in New York is unclear, the games can continue now as a result of the automatic stay until the Court of Appeals decides whether DFS violates the New York Constitution’s ban on gambling.

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