Note

A Clash of Constitutional Covenants: Reconciling State Sovereign Immunity and Just Compensation

When two bedrock constitutional guarantees come in conflict, which one prevails? This Note explores the clash between state sovereign immunity and the right to just compensation in inverse condemnation actions. When a state physically invades private property without providing remuneration, plaintiffs rightly take to federal court, asserting their entitlement to just compensation. Yet, state sovereign immunity shields the state from liability—permitting a work-around of the Fifth Amendment. Recognizing this conflict, the federal circuit courts have devised a clever, albeit faulty, solution. Relying on a law review article and dicta, the circuit courts have held that state sovereign immunity can bar inverse condemnation suits in federal courts so long as the state courts theoretically remain open to adjudicate the claims. Yet, as this Note will demonstrate, such an approach is unmoored from precedent and practicability. A proper solution is called for. This Note will discuss alternate ways out of the clash and will ultimately recommend a novel approach: private officer suits with a relaxed qualified immunity bar. As real-world people continue to face permanent damage to their property at the hands of the state, while being deprived of a constitutional guarantee to just compensation, this Note seeks to solve a timely and pressing dilemma.

Introduction: The Clash

Two concepts abound in Anglo-American jurisprudence that shape the contours of sovereign power: state sovereign immunity and the right to just compensation. The first recognizes a supreme authority; the other imposes a limitation on authority. Both are deeply entrenched in the common law.1 1.Alden v. Maine, 527 U.S. 706, 715 (1999) (“When the Constitution was ratified, it was well established . . . that the Crown could not be sued without consent in its own courts.”); Sinnickson v. Johnson, 17 N.J.L. 129, 145 (N.J. 1839) (“[I]t seems to have been considered a settled principle of universal law, that the right to compensation, is an incident to the exercise of [the eminent domain] power: that the one is so inseparably connected with the other, that they may be said to exist not as separate and distinct principles, but as parts of one and the same principle.”).Show More Yet, while other seemingly contradictory constitutional provisions leave room for “play in the joints”2 2.Locke v. Davey, 540 U.S. 712, 712 (2004).Show More between them, ensuring both principles are upheld, in many situations state sovereign immunity and the right to just compensation present a zero-sum game. Either the state must consent (or be forced to consent) to liability, or the person whose property has been taken must forego a constitutionally guaranteed remedy of just compensation.3 3.U.S. Const. amend. V; Chi., Burlington & Quincy R.R. Co. v. City of Chicago, 166 U.S. 226, 241 (1897) (incorporating the Amendment against the states).Show More

This circumstance is limited to when a taking is disputed—that is, when the state acts in such a way that deprives the plaintiff of her property or destroys her property, but that is not a formal exercise of the eminent domain power.4 4.Eric Berger, The Collision of the Takings and State Sovereign Immunity Doctrines, 63 Wash. & Lee L. Rev. 493, 501 (2006).Show More Even though the plaintiff can try to enjoin the government to stop the activity, she at least will suffer a temporary taking for which she is entitled to compensation.5 5.First Eng. Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 306–08 (1987).Show More And often, the government activity will result in permanent damage. Yet, state sovereign immunity will likely bar any action for damages in federal court, and the plaintiff will be deprived of just compensation.6 6.Berger, supranote 4, at 502.Show More She will find herself completely without a federal remedy.

An illustration will ground the point. Recently, confronting a history of heavy rainfall that impeded evacuation efforts during severe weather events, the Texas Department of Transportation installed an impenetrable concrete median in the middle of Interstate 10.7 7.Devillier v. Texas, No. 20-cv-00223, 2021 WL 1200893, at *1 (S.D. Tex. Feb. 22, 2021).Show More The barrier “effectively created a dam” by “barricading all rainfall on the northside” of the Interstate, so as to allow future travelers to use the southernmost lanes for evacuation.8 8.Id.Show More When heavy rainfall occurred again, the State’s plan was successful: a significant quantity of water accumulated against the northernmost side of the dam.9 9.Id.Show More But, then, with nowhere to drain, the water flooded and destroyed private property to the north of the Interstate.10 10.Id.Show More When the owners brought suit, acknowledging the public benefit of the dam but asserting their constitutional guarantee to just compensation, the State of Texas raised its hands, claiming sovereign immunity.11 11.Id.at *6. Although the magistrate judge found Texas waived its immunity by removing the suit to federal court, this issue is disputed and will not always arise in a proceeding where a state is more careful.Show More The matter is on appeal, but, under current understandings of state sovereign immunity, whether or not the plaintiffs will be able to recover is far from clear.12 12.The U.S Court of Appeals for the Fifth Circuit’s subsequent denial of rehearing en banc inspired a fascinating dissent by Judge Oldham highlighting many of the dangers discussed in this Note, as well as tangential dangers beyond the scope of this Note. See Devillier v. State, 63 F.4th 416, 426–41 (5th Cir. 2023) (Oldham, J., dissenting from the denial of rehearing en banc).Show More

This Note will focus on similar plights—claims of a right to just compensation after an “inverse condemnation” by the state.13 13.SeeUnited States v. Clarke, 445 U.S. 253, 255 (1980) (explaining the difference between inverse condemnation and formal eminent domain).Show More This Note limits its understanding of “inverse condemnation” to situations where private property is physically harmed or physically invaded. This Note will not focus on “regulatory takings,” where a government ordinance so diminishes the value of property that it can be called a “taking.”14 14.See, e.g., Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1015 (1992).Show More

The Supreme Court has yet to issue a holding on which age-old provision must yield in these cases: state sovereign immunity or the right to just compensation.15 15.But seeFirst Eng.Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 316 n.9 (1987) (acknowledging the clash between sovereign immunity and just compensation and noting that “the Constitution . . . dictates the remedy for interference with property rights amounting to a taking”); infraSection III.A.Show More In fact, the Court has expressly ducked resolving the clash.16 16.The Court in Palazzolo v. RhodeIsland, 533 U.S. 606 (2001), neglected to address an argument presented in an amicus brief that sovereign immunity always trumps the just compensation guarantee. See Amicus Brief of the Board of County Commissioners of the County of La Plata, Colorado in Support of the Respondents State of Rhode Island, et al., Palazzolo v. Rhode Island, 533 U.S. 606 (2001) (No. 99-2047), 2001 WL 15620, at *20–21.Show More In the Court’s October 2020 Term, it did hold that states surrendered their sovereign immunity in the “plan of the Convention” when the federal eminent domain power is being used against a state.17 17.PennEast Pipeline Co. v. New Jersey, 141 S. Ct. 2244, 2263 (2021).Show More But the Supreme Court has not decided whether state sovereign immunity gives way in a case where a private plaintiff brings suit against a state. In addressing this conflict, the federal circuit courts have adopted a Solomonic approach. Relying on a due process analogy18 18.Reich v. Collins, 513 U.S. 106 (1994).Show More and a law review article,19 19.Richard H. Seamon, The Asymmetry of State Sovereign Immunity, 76 Wash. L. Rev. 1067 (2001).Show More these courts have held that state sovereign immunity bars a claim for inverse condemnation in federal court, so long as the state courts theoretically remain open to adjudicate federal takings claims.20 20.DLX, Inc. v. Kentucky, 381 F.3d 511, 527 (6th Cir. 2004) (citing Reich, 513 U.S. at 110); Jachetta v. United States, 653 F.3d 898, 909 (9th Cir. 2011); Seven Up Pete Venture v. Schweitzer, 523 F.3d 948, 956 (9th Cir. 2008); Hutto v. S.C. Ret. Sys., 773 F.3d 536, 552 (4th Cir. 2014); Williams v. Utah Dep’t of Corr., 928 F.3d 1209, 1213 (10th Cir. 2019); Frein v. Pa. State Police, 47 F.4th 247, 257 (3d Cir. 2022).Show More Yet, for reasons outlined below, this approach is unmoored from reason, history, and Supreme Court precedent. This Note will offer potential ways out of the thicket that are superior to the current approach of the lower federal courts. In so doing, this Note makes a few novel contributions. It is the first to point out the fallibilities with the circuit courts’ approach to just compensation suits against states. It is also the first to examine a range of new potential solutions to a clash that continues to evolve. Finally, it is the first to recommend a relaxation of qualified immunity’s “clearly established” bar in order to allow inverse condemnation plaintiffs to recover from public officials.

This Note proceeds as follows. Part I will discuss the histories of state sovereign immunity and just compensation provisions. Part II will discuss the recent approach of the circuit courts in inverse condemnation suits against states and point out why this approach is in error. Part III will offer novel potential answers. Part IV will conclude.

  1.  Alden v. Maine, 527 U.S. 706, 715 (1999) (“When the Constitution was ratified, it was well established . . . that the Crown could not be sued without consent in its own courts.”); Sinnickson v. Johnson, 17 N.J.L. 129, 145 (N.J. 1839) (“[I]t seems to have been considered a settled principle of universal law, that the right to compensation, is an incident to the exercise of [the eminent domain] power: that the one is so inseparably connected with the other, that they may be said to exist not as separate and distinct principles, but as parts of one and the same principle.”). ↑
  2.  Locke v. Davey, 540 U.S. 712, 712 (2004). ↑
  3.  U.S. Const. amend. V; Chi., Burlington & Quincy R.R. Co. v. City of Chicago, 166 U.S. 226, 241 (1897) (incorporating the Amendment against the states). ↑
  4.  Eric Berger, The Collision of the Takings and State Sovereign Immunity Doctrines, 63 Wash. & Lee L. Rev. 493, 501 (2006). ↑
  5.  First Eng. Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 306–08 (1987). ↑
  6.  Berger, supra note 4, at 502. ↑
  7.  Devillier v. Texas, No. 20-cv-00223, 2021 WL 1200893, at *1 (S.D. Tex. Feb. 22, 2021). ↑
  8.  Id. ↑
  9.  Id. ↑
  10.  Id. ↑
  11.  Id. at *6. Although the magistrate judge found Texas waived its immunity by removing the suit to federal court, this issue is disputed and will not always arise in a proceeding where a state is more careful. ↑
  12.  The U.S Court of Appeals for the Fifth Circuit’s subsequent denial of rehearing en banc inspired a fascinating dissent by Judge Oldham highlighting many of the dangers discussed in this Note, as well as tangential dangers beyond the scope of this Note. See Devillier v. State, 63 F.4th 416, 426–41 (5th Cir. 2023) (Oldham, J., dissenting from the denial of rehearing en banc). ↑
  13.  See United States v. Clarke, 445 U.S. 253, 255 (1980) (explaining the difference between inverse condemnation and formal eminent domain). ↑
  14.  See, e.g., Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1015 (1992). ↑
  15.  But see First Eng. Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 316 n.9 (1987) (acknowledging the clash between sovereign immunity and just compensation and noting that “the Constitution . . . dictates the remedy for interference with property rights amounting to a taking”); infra Section III.A. ↑
  16.  The Court in Palazzolo v. Rhode Island, 533 U.S. 606 (2001), neglected to address an argument presented in an amicus brief that sovereign immunity always trumps the just compensation guarantee. See Amicus Brief of the Board of County Commissioners of the County of La Plata, Colorado in Support of the Respondents State of Rhode Island, et al., Palazzolo v. Rhode Island, 533 U.S. 606 (2001) (No. 99-2047), 2001 WL 15620, at *20–21. ↑
  17.  PennEast Pipeline Co. v. New Jersey, 141 S. Ct. 2244, 2263 (2021). ↑
  18.  Reich v. Collins, 513 U.S. 106 (1994). ↑
  19.  Richard H. Seamon, The Asymmetry of State Sovereign Immunity, 76 Wash. L. Rev. 1067 (2001). ↑

  20.  DLX, Inc. v. Kentucky, 381 F.3d 511, 527 (6th Cir. 2004) (citing Reich, 513 U.S. at 110); Jachetta v. United States, 653 F.3d 898, 909 (9th Cir. 2011); Seven Up Pete Venture v. Schweitzer, 523 F.3d 948, 956 (9th Cir. 2008); Hutto v. S.C. Ret. Sys., 773 F.3d 536, 552 (4th Cir. 2014); Williams v. Utah Dep’t of Corr., 928 F.3d 1209, 1213 (10th Cir. 2019); Frein v. Pa. State Police, 47 F.4th 247, 257 (3d Cir. 2022). ↑

Reconsidering The Legal Definition of Gambling: A Resuscitation of the Gambling Instinct Test

The modern chance-based test for gambling is fundamentally flawed. It is descriptively inaccurate, difficult to apply, and easily circumvented. Despite these shortcomings, the test is by-and-large the only test employed for the identification of gambling activity. But this was not always the case. In the first part of the twentieth century, some courts employed a competing test that looked to the underlying psychological phenomenon rather than the mechanical form of the activity. This Note advocates for a re-adoption of that test. The modern test, originally put forth as the definition of a lottery, was never intended to be a test for gambling. Over time, courts warped this definition to the point where many forms of gambling could reasonably be deemed a “lottery,” blurring the distinctions between gambling and lotteries to such a degree that some states’ highest courts have held that the two terms are synonymous.

The competing test—referred to by modern academics as “the Gambling Instinct Test”—has been understudied and mischaracterized by the literature. Admittedly, the decisions applying the test were unstructured in their analysis; however, closer examination of those cases reveals that the test can be distilled into two steps: (1) whether there exists a contingent contract, and (2) whether the prospect of receiving a return of disproportionate value induced the gambling party into conveying her consideration. As so refined, resuscitation of the Gambling Instinct Test would bring the legal doctrine in lockstep with medical conceptions of gambling. Given the explosion of gambling activity in recent years, such a change has never been more necessary.

Introduction

As one of the traditional vices, gambling has long been regulated by governments.1 1.See Nat’l Inst. L. Enf’t & Crim. Just., U.S. Dep’t of Just., The Development of the Law of Gambling: 1776–1976, at 4–13 (1977) [hereinafter Development of the Law of Gambling].Show More During the post-medieval period in England, gambling in and of itself was not unlawful, but the law tried to address its collateral consequences, such as the disruption of the public peace and members of the aristocracy gambling away their estates.2 2.Id. at 39–41, 240.Show More In early colonial America, the justification for and degree of regulation varied widely, from the wholesale condemnation of gambling as a form of idleness in Puritan Massachusetts, to more permissive laws in the southern colonies that only dealt with the evils of gambling as they arose.3 3.See I. Nelson Rose, Gambling and the Law: The Third Wave of Legal Gambling, 17 Vill. Sports & Ent. L.J. 361, 368–74 (2010).Show More Since those early days, gambling has twice gone through cycles of legalization and prohibition.4 4.Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1481 (2018). Thirty-six states and the District of Columbia have legalized sports betting since that decision, and a number of other states are currently in the process of legalization. Will Yakowicz, Where Is Sports Betting Legal? A Guide to All 50 States, Forbes (Jan. 9, 2023, 12:48 PM), https://www.forbes.com/sites/willyakowicz/2022/01/07/where-is-sports-betting-legal-americ‌a-2022/ [https://perma.cc/Y67H-4SNL].Show More Given the rapid legalization of sports betting at the state level that has occurred in the years following the Supreme Court’s landmark decision that a federal statute’s prohibition on state authorization of sports betting violated the anti-commandeering principle,5 5.See Rose, supra note 4, at 374–75 (tracing the third wave of legal gambling back to the early 1930s).Show More we appear to be approaching the crest of what one prominent gambling law scholar terms “the third wave of legal gambling.”6 6.Roland J. Santoni, An Introduction to Nebraska Gaming Law, 29 Creighton L. Rev. 1123, 1129 (1996) (citing examples of such cases from a number of states); D.A. Norris, Annotation, What Are Games of Chance, Games of Skill, and Mixed Games of Chance and Skill, 135 A.L.R. 104, 107 (1941) (“In construing statutes or ordinances prohibiting gaming, gambling, or gambling devices wherein nothing is said about chance or a game of chance or skill, many courts have required, inter alia, the element of chance to be involved.”).Show More

Although gambling in the modern-day United States is primarily defined by statute, courts, “concerned that clever operators would find ways to subvert the [statutory] prohibitions,” have frequently held that a game or activity constituted gambling if the three elements of the common law definition—Prize/Chance/Consideration—were present.7 7.See, e.g., N.J. Stat. Ann. § 2C:37-1(b) (West 2023).Show More Many modern state statutes now utilize this definition, often with slight variations.8 8.See 347 U.S. 284, 290 (1954).Show More However, this definition should not apply to all forms of gambling—nor was it originally intended to. The case most often cited in support for this definition, FCC v. American Broadcasting Co., was defining a “lottery, gift enterprise, or similar scheme,” not gambling writ large.9 9.See, e.g., Phalen v. Virginia, 49 U.S. (8 How.) 163, 168 (1850) (“Experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with the wide-spread pestilence of lotteries.”).Show More Historically, lotteries have been recognized as a distinct form of gambling, not as an interchangeable term.10 10.Anthony N. Cabot, Glenn J. Light & Karl F. Rutledge, Alex Rodriguez, a Monkey, and the Game of Scrabble: The Hazard of Using Illogic to Define the Legality of Games of Mixed Skill and Chance, 57 Drake L. Rev. 383, 390–91 (2009) [hereinafter Cabot et al., Mixed Skill and Chance]; Anthony N. Cabot & Louis V. Csoka, The Games People Play: Is It Time for a New Legal Approach to Prize Games?, 4 Nev. L.J. 197, 202 (Winter 2003–2004) [hereinafter Cabot & Csoka, The Games People Play].Show More Accordingly, in using this definition to evaluate all forms of gambling, courts have stretched and twisted the three elements in order to fit their intuitions of whether a gambling-like activity should be prohibited or not.

Chance is the most consistently problematic element from this definitional framework. The prevailing test for the chance element is the Dominant Factor Test: if the winner is determined predominantly by chance, as opposed to skill, then the activity is gambling.11 11.For instance, Haralabos Voulgaris has made millions as both a professional sports bettor and poker player, and he parlayed his success using statistical models in sports gambling into becoming the Director of Quantitative Research and Development for the Dallas Mavericks. See Marton, Haralabos Voulgaris’s Life: Biggest Profits, Losses, Private Life & Net Worth, So Much Poker (Aug. 20, 2020), https://somuchpoker.com/haralabos-voulgaris-life-biggest-profits-losses-private-life-net-worth/ [https://perma.cc/Z9CU-JKNQ].Show More Although appealing at first glance, the chance/skill dichotomy is a nebulous concept. Various paradigmatic forms of gambling, such as poker and sports wagering, have such a material skill component that highly skilled gamblers have been able to make a substantial living off of their pursuits.12 12.See Las Vegas Hacienda, Inc. v. Gibson, 359 P.2d 85, 87 (Nev. 1961).Show More On the other hand, certain “games of skill”—such as common carnival games or hole-in-one contests—can be structured so as to create games where the luck component predominates over the skill component, even for the most skilled participants.13 13.See, e.g., Indoor Recreation Enters. v. Douglas, 235 N.W.2d 398, 400–01 (Neb. 1975) (upholding a ruling that chess and checkers—paradigmatic examples of games of skill—are games of chance).Show More Even outside of these edge cases, the chance element has proved to be sufficiently confusing for courts in the analog context.14 14.See Yash Nair, What Does RNG Mean in Gaming?, DOT Esports (July 12, 2022, 11:16 AM), https://dotesports.com/general/news/what-does-rng-mean-in-gaming [https://perma.cc/H2DH-XLU7] (describing how video games use random number generators in which an algorithm decides a number value that determines certain in-game outcomes).Show More Given the importance of random number generation to the outcome of e‑sports contests, the chance element is bound to cause even greater confusion in the coming years.15 15.Anthony N. Cabot, Glenn J. Light & Karl F. Rutledge, Economic Value, Equal Dignity and the Future of Sweepstakes, 1 UNLV Gaming L.J. 1, 10–15 (2010) [hereinafter Cabot et al., Future of Sweepstakes] (citing FCC v. Am. Broad. Co., 347 U.S. 284, 296 (1954)).Show More

The other two elements, consideration and prize, have seen difficulties as well. Although consideration is a well‑defined concept in contract law, the Supreme Court in FCC v. American Broadcasting Co. departed from the so-called “contract theory” of consideration in favor of what is now referred to as the Economic Value Test, which many states have subsequently adopted.16 16.See Cabot et al., Future of Sweepstakes, supra note 16, at 23–36.Show More There has been continual debate and disagreement over how to evaluate non-monetary consideration and the possibility of free entry under this test.17 17.See Mark D. Griffiths, Is the Buying of Loot Boxes in Video Games a Form of Gambling or Gaming?, 22 Gaming L.R. 52, 53 (2018). The loot box mechanism works as follows: “Players use real money to buy virtual in-game items and can redeem such items by buying keys to open the boxes where they receive a chance selection of further virtual items.” Id. at 52.Show More Prize has come under less scrutiny historically, but has recently come to the forefront in the debate over whether video game loot boxes should be considered gambling schemes.18 18.U.K. Gambling Commission, Virtual Currencies, eSports and Social Casino Gaming – Position Paper ¶ 3(17)–(18) (2017), https://assets.ctfassets.net/j16ev64qyf6l/4A644HIpG1‌g2ymq11HdPOT/ca6272c45f1b2874d09eabe39515a527/Virtual-currencies-eSports-and-soci‌al-casino-gaming.pdf [https://perma.cc/2HL8-E9FX] (“Where prizes are successfully restricted for use solely within the game, such in-game features would not be licensable gambling, notwithstanding the elements of expenditure and chance.”).Show More The U.K. Gambling Commission declined to designate these loot boxes as a form of gambling because they did not view the in-game items awarded as prizes to have any real-life value outside of the game.19 19.The Federalist No. 37, at 180 (James Madison) (George W. Carey & James McClellan eds., 2001).Show More Though the current definition of gambling can be summed up in a pithy phrase, its application in practice misses the forest for the trees.

A critical threshold in any system of regulation is the identification of the regulated activity. The modern application of Prize/Chance/Consideration has often resulted in normative policy judgments being made simultaneously with the classification of the activity—a fundamental misstep. Although we may now find that the outright prohibition of vices like gambling creates more harms than it prevents, we, as James Madison once warned, “ought not to assume an infallibility in rejudging the fallible opinions of others.”20 20.See Cabot et al., Mixed Skill and Chance, supra note 11, at 393–94.Show More Separating classification from moralization would better allow a regulatory scheme to adjust to changes in information, custom, and societal attitudes.

In lieu of the modern framework, this Note advocates for a modern revitalization of the Gambling Instinct Test, which simply looks to whether the activity in question triggers one’s gambling instinct.21 21.See Jim Leitzel, Regulating Vice, in The Handbook of Deviance 45, 46 (Erich Goode ed., 2015).Show More The Gambling Instinct Test is a superior doctrine because it homes in on the central harm‑causing mechanism of gambling. Like other vices, gambling is “prone to excess” and “particularly likely to compromise rational decision-making,” even amongst non-addicted adults.22 22.213 N.W. 335, 339 (Wis. 1927).Show More As described in City of Milwaukee v. Johnson:

The machine makes an appeal to the gambling instinct, because the player has constantly before him the chance that the next play will assure him of the right on the next succeeding play to secure from 2 to 20 trade checks. Were it not for this appeal to the gambling instinct, these machines, which attempt to adhere to the letter of the law while violating its spirit, would never have been placed upon the market.23 23.See Cabot et al., Future of Sweepstakes, supra note 16, at 4–5.Show More

The Gambling Instinct Test is typically associated with the deontological view of gambling: that gambling is a sin and inconsistent with a moral society.24 24.See, e.g., Mills-Jennings of Ohio, Inc. v. Dep’t of Liquor Control, 435 N.E.2d 407, 409–10 (Ohio 1982) (detailing Ohio’s shift away from an anti-gambling public policy).Show More This test, peaking in usage in the 1930s, has mostly fallen out of favor since the 1950s, alongside the broad changes to society’s moral judgment of gambling that occurred in that time period.25 25.See Cabot et al., Mixed Skill and Chance, supra note 11, at 394.Show More The Gambling Instinct Test has also been criticized for being a highly subjective test that “can vary widely in its application to particular games.”footnote_id_27_26 In light of these considerations, it may seem counterintuitive that this test would be a good fit for the modern era, where paternalistic legislation of morality is increasingly disfavored and more objective judicial methodologies are preferred. However, a broad, flexible definition better enables a smart, robust system of regulation than the illogical application of the current doctrine.

The Gambling Instinct Test is justly maligned for its subjectivity. This Note attempts to ameliorate this defect by providing more color to what it means to “appeal to the gambling instinct,” first by delving deep into the cases which applied this test, and then by drawing from empirical research to find evidentiary indicators of when that instinct is being stimulated. But before doing so, some background on the current doctrinal definition is needed.

  1.  The earliest English anti-gambling statute was enacted by King Richard II in 1388. R. Randall Bridwell & Frank L. Quinn, From Mad Joy to Misfortune: The Merger of Law and Politics in the World of Gambling, 72 Miss. L.J. 565, 622–23 (2002) (citing 1388, 12 Rich. 2 c. 6 (Eng.)). Records from third-century India indicate that there was a governmental department responsible for the regulation of gambling during the reign of Chandragupta Maurya. Ronald J. Rychlak, Lotteries, Revenues and Social Costs: A Historical Examination of State-Sponsored Gambling, 34 B.C. L. Rev. 11, 16 (1992) (citing Will Durant, Our Oriental Heritage 444 (1954)); Vincent A. Smith, The Oxford History of India 78 & n.2 (1919) (citing Arthasāstra bk. 3, ch. 20). ↑
  2.  See Nat’l Inst. L. Enf’t & Crim. Just., U.S. Dep’t of Just., The Development of the Law of Gambling: 1776–1976, at 4–13 (1977) [hereinafter Development of the Law of Gambling]. ↑
  3.  Id. at 39–41, 240. ↑
  4.  See I. Nelson Rose, Gambling and the Law: The Third Wave of Legal Gambling, 17 Vill. Sports & Ent. L.J. 361, 368–74 (2010). ↑
  5.  Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1481 (2018). Thirty-six states and the District of Columbia have legalized sports betting since that decision, and a number of other states are currently in the process of legalization. Will Yakowicz, Where Is Sports Betting Legal? A Guide to All 50 States, Forbes (Jan. 9, 2023, 12:48 PM), https://www.forbes.com/sites/willyakowicz/2022/01/07/where-is-sports-betting-legal-americ‌a-2022/ [https://perma.cc/Y67H-4SNL]. ↑
  6.  See Rose, supra note 4, at 374–75 (tracing the third wave of legal gambling back to the early 1930s). ↑
  7.  Roland J. Santoni, An Introduction to Nebraska Gaming Law, 29 Creighton L. Rev. 1123, 1129 (1996) (citing examples of such cases from a number of states); D.A. Norris, Annotation, What Are Games of Chance, Games of Skill, and Mixed Games of Chance and Skill, 135 A.L.R. 104, 107 (1941) (“In construing statutes or ordinances prohibiting gaming, gambling, or gambling devices wherein nothing is said about chance or a game of chance or skill, many courts have required, inter alia, the element of chance to be involved.”). ↑
  8.  See, e.g., N.J. Stat. Ann. § 2C:37-1(b) (West 2023). ↑
  9.  See 347 U.S. 284, 290 (1954). ↑
  10.  See, e.g., Phalen v. Virginia, 49 U.S. (8 How.) 163, 168 (1850) (“Experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with the wide-spread pestilence of lotteries.”). ↑
  11.  Anthony N. Cabot, Glenn J. Light & Karl F. Rutledge, Alex Rodriguez, a Monkey, and the Game of Scrabble: The Hazard of Using Illogic to Define the Legality of Games of Mixed Skill and Chance, 57 Drake L. Rev. 383, 390–91 (2009) [hereinafter Cabot et al., Mixed Skill and Chance]; Anthony N. Cabot & Louis V. Csoka, The Games People Play: Is It Time for a New Legal Approach to Prize Games?, 4 Nev. L.J. 197, 202 (Winter 2003–2004) [hereinafter Cabot & Csoka, The Games People Play]. ↑
  12.  For instance, Haralabos Voulgaris has made millions as both a professional sports bettor and poker player, and he parlayed his success using statistical models in sports gambling into becoming the Director of Quantitative Research and Development for the Dallas Mavericks. See Marton, Haralabos Voulgaris’s Life: Biggest Profits, Losses, Private Life & Net Worth, So Much Poker (Aug. 20, 2020), https://somuchpoker.com/haralabos-voulgaris-life-biggest-profits-losses-private-life-net-worth/ [https://perma.cc/Z9CU-JKNQ]. ↑
  13.  See Las Vegas Hacienda, Inc. v. Gibson, 359 P.2d 85, 87 (Nev. 1961). ↑
  14.  See, e.g., Indoor Recreation Enters. v. Douglas, 235 N.W.2d 398, 400–01 (Neb. 1975) (upholding a ruling that chess and checkers—paradigmatic examples of games of skill—are games of chance). ↑
  15.  See Yash Nair, What Does RNG Mean in Gaming?, DOT Esports (July 12, 2022, 11:16 AM), https://dotesports.com/general/news/what-does-rng-mean-in-gaming [https://perma.cc/H2DH-XLU7] (describing how video games use random number generators in which an algorithm decides a number value that determines certain in-game outcomes). ↑
  16.  Anthony N. Cabot, Glenn J. Light & Karl F. Rutledge, Economic Value, Equal Dignity and the Future of Sweepstakes, 1 UNLV Gaming L.J. 1, 10–15 (2010) [hereinafter Cabot et al., Future of Sweepstakes] (citing FCC v. Am. Broad. Co., 347 U.S. 284, 296 (1954)). ↑
  17.  See Cabot et al., Future of Sweepstakes, supra note 16, at 23–36. ↑
  18.  See Mark D. Griffiths, Is the Buying of Loot Boxes in Video Games a Form of Gambling or Gaming?, 22 Gaming L.R. 52, 53 (2018). The loot box mechanism works as follows: “Players use real money to buy virtual in-game items and can redeem such items by buying keys to open the boxes where they receive a chance selection of further virtual items.” Id. at 52. ↑
  19.  U.K. Gambling Commission, Virtual Currencies, eSports and Social Casino Gaming – Position Paper ¶ 3(17)–(18) (2017), https://assets.ctfassets.net/j16ev64qyf6l/4A644HIpG1‌g2ymq11HdPOT/ca6272c45f1b2874d09eabe39515a527/Virtual-currencies-eSports-and-soci‌al-casino-gaming.pdf [https://perma.cc/2HL8-E9FX] (“Where prizes are successfully restricted for use solely within the game, such in-game features would not be licensable gambling, notwithstanding the elements of expenditure and chance.”). ↑
  20.  The Federalist No. 37, at 180 (James Madison) (George W. Carey & James McClellan eds., 2001). ↑
  21.  See Cabot et al., Mixed Skill and Chance, supra note 11, at 393–94. ↑
  22.  See Jim Leitzel, Regulating Vice, in The Handbook of Deviance 45, 46 (Erich Goode ed., 2015). ↑
  23.  213 N.W. 335, 339 (Wis. 1927). ↑
  24.  See Cabot et al., Future of Sweepstakes, supra note 16, at 4–5. ↑
  25.  See, e.g., Mills-Jennings of Ohio, Inc. v. Dep’t of Liquor Control, 435 N.E.2d 407, 409–10 (Ohio 1982) (detailing Ohio’s shift away from an anti-gambling public policy). ↑

  26.  See Cabot et al., Mixed Skill and Chance, supra note 11, at 394. ↑

Parties or Not?: The Status of Absent Class Members in Rule 23 Class Actions

When should absent class members—individuals who are bound by and share in a class recovery but who are not active participants in the litigation—be treated as “parties” in Rule 23 class actions? This simple question has confused courts and litigants almost since the initial conception of the class action device. In 1983, then-Professor Diane Wood introduced the joinder and representational models to classify approaches to this question in her now-seminal article. The joinder model treats absent class members as parties to the litigation at all times, while the representational model presumes only the named plaintiffs are parties to the case itself. At various moments, the Supreme Court has expressed exclusive support for the representational approach, exclusive support for the joinder approach, and a preference for a balanced approach which treats absent class members as parties for some procedural issues if not for others. Through the lens of the joinder and representational models, this Note clarifies the decisions courts are making when assessing the procedural rights of absent class members, and ultimately suggests that the status of absent class members should depend on the procedural right being asserted.

Introduction

When a lawsuit proceeds as a class action, how should we think about the “absent” members of the class—people who might share in the relief that the court awards, and who are also at risk of being bound by an adverse judgment, but who are not named and are not actively participating in the suit? In a classic 1983 article, then-Professor (now Judge) Diane Wood argued that courts had unknowingly been using two different approaches, which she called the “joinder” model and the “representational” model.1 1.Diane Wood Hutchinson, Class Actions: Joinder or Representational Device?, 1983 Sup. Ct. Rev. 459, 459. Judge Wood now serves as a senior judge on the U.S. Court of Appeals for the Seventh Circuit.Show More Broadly, the joinder model treats all members of the class as full parties to the litigation, whether or not they are named and actively participating.2 2.Id.Show More On that view, the court would need to consider the absent members of the class when answering threshold questions about jurisdiction or venue, and the absent members of the class would also have all the rights and obligations of parties as the case proceeds.3 3.Id.Show More By contrast, the representational model treats only the named members of the class as parties to the litigation for procedural purposes; the named members are considered to be representing absent class members throughout the litigation, but the absent class members whom they represent are not actually parties to the case.4 4.Id.at 460.Show More

For a simplified example of the distinction, imagine a plaintiff class action in which the named plaintiffs are all citizens of State A, but some of the absent class members are citizens of State B. If the defendant is a citizen of State B, then whether the suit qualifies for diversity jurisdiction under 28 U.S.C. § 1332(a) depends on whether the absent class members are regarded as additional plaintiffs. The joinder model would deny diversity jurisdiction in this case because some of the plaintiffs are citizens of the same state as the defendant, while the representational model would grant diversity jurisdiction (assuming that the amount in controversy requirement is satisfied) because the representational model is only concerned with the named parties.

The models can produce equally stark differences on questions that might arise as the suit proceeds. For example, in a major consumer protection lawsuit against the at-home exercise company Peloton, the joinder model would permit the district court to allow all forms of discovery against its, at the time, estimated 3.1 million subscribers to the platform,5 5.Lauren Thomas, Peloton Thinks It Can Grow to 100 Million Subscribers. Here’s How, CNBC (Sept. 15, 2020, 2:29 PM), https://www.cnbc.com/2020/09/15/peloton-thinks-it-can-grow-to-100-million-subscribers-heres-how.html [https://perma.cc/D2VF-3FZ4].Show More while the representational model would only permit interrogatories or requests for admission to be levied against the named class members.6 6.Cf. Fishon v. Peloton Interactive, Inc., 336 F.R.D. 67, 74 (S.D.N.Y. 2020) (permitting limited deposition of absent putative class members). Some discovery devices, such as requests for admissions and interrogatories, can only be directed at parties to the lawsuit. See, e.g., Fed. R. Civ. P. 33 (interrogatories); Fed. R. Civ. P. 36 (requests for admissions). Parties can aim other discovery mechanisms, such as depositions or subpoenas at parties and non-parties alike. See, e.g., Fed. R. Civ. P. 30 (oral depositions); Fed. R. Civ. P. 45 (subpoenas).Show More Or, the joinder model would require all absent class members to consent to adjudication by a magistrate rather than a district court judge, while the representational model would only require the named plaintiffs to consent.7 7.See, e.g., Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170, 180–81 (3d Cir. 2012) (holding that unnamed class members are not parties for purposes of consenting to adjudication by a magistrate judge).Show More These different treatments for absent class members can have major practical impacts on class action litigation in whether suits can be brought in federal court and, when they are, what absent class members are required to do.

Judge Wood herself advocated for using the representational model. In her view, applying that model across the board would best promote two goals of class actions: to provide efficiency for litigants and to act as a “private attorney-general” enforcement mechanism.8 8.Wood Hutchinson, supranote 1, at 480.Show More Since the publication of her article, however, the Supreme Court has struck different notes.9 9.Even before Judge Wood’s article, Justice Stevens’s concurring opinion in Deposit Guaranty National Bank v. Roper noted that “[t]he status of unnamed members of an uncertified class has always been difficult to define accurately.” 445 U.S. 326, 343 n.3 (1980) (Stevens, J., concurring). In Roper, Justice Stevens suggested that absent parties be conceived of as parties for some procedural purposes even if they are not for others. Id. Justice Powell’s dissent strongly disagreed with this statement, arguing that Justice Stevens cited no authority to support his position and provided no explanation “as to how a court is to determine when these unidentified ‘parties’ are present.” Id.at 358 n.21 (Powell, J., dissenting). This Note attempts to propose a solution to Justice Powell’s concern.Show More For example, in Martin v. Wilks, the Supreme Court presumed the representational model applied, labeling the class action as a “certain limited circumstance[]” where “a person, although not a party, has his interests adequately represented by someone with the same interests who is a party.”10 10.490 U.S. 755, 762 n.2 (1989); see also Taylor v. Sturgell, 553 U.S. 880, 894 (2008) (agreeing with this characterization of class actions).Show More By contrast, Justice Scalia’s plurality opinion in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co. described the class action as a straightforward “joinder” device that “merely enables a federal court to adjudicate claims of multiple parties at once, instead of in separate suits.”11 11.559 U.S. 393, 408 (2010) (plurality opinion).Show More And, in 2002, Justice O’Connor’s majority opinion in Devlin v. Scardelletti asserted that “[n]onnamed class members . . . may be parties for some purposes and not for others.”12 12.536 U.S. 1, 9–10 (2002). One might find it curious that Justice Scalia wrote the dissent in Devlin arguing for a representational approach as he would later write the majority opinion in Shady Grove, which called a class action a species of “traditional joinder.” Shady Grove, 559 U.S. at 408. In dissent, he wrote that the majority’s decision to permit both the joinder and the representational model “abandons the bright-line rule that only those persons named as such are parties to a judgment, in favor of a vague inquiry ‘based on context.’” Devlin, 536 U.S. at 20 (Scalia, J., dissenting).Show More

How courts should characterize absent class members bears on many continuing controversies. For example, after the Court’s decision in Bristol-Myers Squibb Co. v. Superior Court of California,13 13.137 S. Ct. 1773 (2017).Show More most lower courts have followed Devlin’s approach to confirm that, even if absent class members are parties for some purposes, they are not parties necessary to determine whether the court has personal jurisdiction over the defendant.14 14.See, e.g., Mussat v. IQVIA, Inc., 953 F.3d 441, 447–48 (7th Cir. 2020); Al Haj v. Pfizer Inc., 338 F. Supp. 3d 815, 820 (N.D. Ill. 2018). Not all courts have interpreted Bristol-Myers Squibb in this way. For more, see infra Subsection II.A.2.Show More As recently as June 2021, however, the Court seemed to follow Justice Scalia’s characterization of the class as a “joinder” device when it concluded that all absent class members need to demonstrate standing in order to recover damages.15 15.TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2207–08 (2021). Notably, the Court reserved judgment on “whether every class member must demonstrate standing before a court certifies a class.” Id. at 2208 n.4. For further discussion on this question, and whether this actually implicates the representational model, see infraSubsection II.A.3.Show More It follows that under what circumstances absent class members should be considered parties remains a live issue almost forty years after Judge Wood’s initial article. The Court itself has not offered consistent guidance on the status of absent class members, and its recent decisions on personal jurisdiction and standing have acutely raised these questions for lower courts.16 16.SeeinfraSubsection II.A.2 (personal jurisdiction); infra Subsection II.A.3 (standing).Show More The time is right to both clarify the choice lower courts will be making in these determinations and to suggest a new path forward considering the changes from the past forty years.

This Note identifies the contours of the question for various procedural doctrines, and, ultimately, suggests that Devlin’s approach of considering absent class members as parties for some purposes but not for others is preferable to a strict joinder or representational approach. Judge Wood’s article, which advocated for a more rule-like approach to the representational model, focused primarily on the jurisdiction and justiciability doctrines that govern absent class members’ access to federal courts.17 17.See Wood Hutchinson, supra note 1, at 478 (“The characteristics that would lead a court to treat a class action as a glorified joinder device or as a true representational action are different. Those characteristics are ‘procedural’ in this sense: They establish one’s right to sue in a federal court on the substantive claim, rather than in a state court.”).Show More When broadening the scope of procedural doctrines that affect absent class members during litigation, such as discovery or counterclaims, this Note contends that a more balanced approach would better vindicate the efficiency and private attorney general functions of the class action device. Writing now with the benefit of Devlin’s statement that absent class members may be treated differently for different purposes, a less rule-like approach is not only preferable but possible.

Part I of this Note explains in detail the differences between the representational and joinder models and Judge Wood’s reasons for expressing a preference for the representational model. Part II surveys post-1983 doctrine in certain procedural issues implicating the joinder and representational models in class actions. While, for the most part, courts have continued to use the representational model to conceive of absent class members, there are some areas in which Congress and the courts have shifted towards a more joinder-based approach. Part III evaluates why Devlin’s approach of treating absent class members differently based on context is preferable to following the representational model in all areas. Ultimately, it suggests that the joinder model is valuable for some litigation conduct but that the representational model continues to be a valuable way to conceive of access to federal courts for class action procedures.

  1.  Diane Wood Hutchinson, Class Actions: Joinder or Representational Device?, 1983
    S

    up

    . C

    t

    . R

    ev

    .

    459, 459. Judge Wood now serves as a senior judge on the U.S. Court of Appeals for the Seventh Circuit. ↑

  2.  Id. ↑
  3.  Id. ↑
  4.  Id. at 460. ↑
  5.  Lauren Thomas, Peloton Thinks It Can Grow to 100 Million Subscribers. Here’s How, CNBC (Sept. 15, 2020, 2:29 PM), https://www.cnbc.com/2020/09/15/peloton-thinks-it-can-grow-to-100-million-subscribers-heres-how.html [https://perma.cc/D2VF-3FZ4]. ↑
  6.  Cf. Fishon v. Peloton Interactive, Inc., 336 F.R.D. 67, 74 (S.D.N.Y. 2020) (permitting limited deposition of absent putative class members). Some discovery devices, such as requests for admissions and interrogatories, can only be directed at parties to the lawsuit. See, e.g.,
    F

    ed

    . R. C

    iv

    . P.

    33 (interrogatories);

    F

    ed

    . R. C

    iv

    . P.

    36 (requests for admissions). Parties can aim other discovery mechanisms, such as depositions or subpoenas at parties and non-parties alike. See, e.g.,

    F

    ed

    . R. C

    iv

    . P.

    30 (oral depositions);

    F

    ed

    . R. C

    iv

    . P.

    45 (subpoenas). ↑

  7.  See, e.g., Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170, 180–81 (3d Cir. 2012) (holding that unnamed class members are not parties for purposes of consenting to adjudication by a magistrate judge). ↑
  8.  Wood Hutchinson, supra note 1, at 480. ↑
  9.  Even before Judge Wood’s article, Justice Stevens’s concurring opinion in Deposit Guaranty National Bank v. Roper noted that “[t]he status of unnamed members of an uncertified class has always been difficult to define accurately.” 445 U.S. 326, 343 n.3 (1980) (Stevens, J., concurring). In Roper, Justice Stevens suggested that absent parties be conceived of as parties for some procedural purposes even if they are not for others. Id. Justice Powell’s dissent strongly disagreed with this statement, arguing that Justice Stevens cited no authority to support his position and provided no explanation “as to how a court is to determine when these unidentified ‘parties’ are present.” Id. at 358 n.21 (Powell, J., dissenting). This Note attempts to propose a solution to Justice Powell’s concern. ↑
  10.  490 U.S. 755, 762 n.2 (1989); see also Taylor v. Sturgell, 553 U.S. 880, 894 (2008) (agreeing with this characterization of class actions). ↑
  11.  559 U.S. 393, 408 (2010) (plurality opinion). ↑
  12.  536 U.S. 1, 9–10 (2002). One might find it curious that Justice Scalia wrote the dissent in Devlin arguing for a representational approach as he would later write the majority opinion in Shady Grove, which called a class action a species of “traditional joinder.” Shady Grove, 559 U.S. at 408. In dissent, he wrote that the majority’s decision to permit both the joinder and the representational model “abandons the bright-line rule that only those persons named as such are parties to a judgment, in favor of a vague inquiry ‘based on context.’” Devlin, 536 U.S. at 20 (Scalia, J., dissenting). ↑
  13.  137 S. Ct. 1773 (2017). ↑
  14.  See, e.g., Mussat v. IQVIA, Inc., 953 F.3d 441, 447–48 (7th Cir. 2020); Al Haj v. Pfizer Inc., 338 F. Supp. 3d 815, 820 (N.D. Ill. 2018). Not all courts have interpreted Bristol-Myers Squibb in this way. For more, see infra Subsection II.A.2. ↑
  15.  TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2207–08 (2021). Notably, the Court reserved judgment on “whether every class member must demonstrate standing before a court certifies a class.” Id. at 2208 n.4. For further discussion on this question, and whether this actually implicates the representational model, see infra Subsection II.A.3. ↑
  16.  See infra Subsection II.A.2 (personal jurisdiction); infra Subsection II.A.3 (standing). ↑

  17.  See Wood Hutchinson, supra note 1, at 478 (“The characteristics that would lead a court to treat a class action as a glorified joinder device or as a true representational action are different. Those characteristics are ‘procedural’ in this sense: They establish one’s right to sue in a federal court on the substantive claim, rather than in a state court.”). ↑

©Virginia Law Review Association. All rights reserved.