3 No. 51
Joseph Dalton et al.,
George Pataki, as Governor of the State of New York, et al.,
Respondents-Appellants, et al.,

(Action No. 1)

Lee Karr,
George Pataki, as Governor of the State of New York, et al.,
Respondents-Appellants, et al.,

(Action No. 2)

2005 NY Int. 62

May 3, 2005

This opinion is uncorrected and subject to revision before publication in the New York Reports.

Jay Goldberg, for appellant-respondent Karr.
Cornelius D. Murray, for appellants-respondents Dalton, et al.
Caitlin J. Halligan, for State respondents-appellants.
Frederick J. Martin, for respondent-appellant Yonkers Racing Corporation.
Randy M. Mastro, for intervenor-respondent Park Place Entertainment Corporation.
Kevin M. Kearney, for respondent-appellant Finger Lakes Racing Association, Inc.
Daniel T. Warren; Standardbred Owners Association, Inc., et al.; New York Thoroughbred Horsemen's Association, Inc., amici curiæ.


In 2003, we addressed whether the Governor had the authority to enter into compacts with Indian tribes pursuant to the federal Indian Gaming Regulatory Act of 1988 (IGRA) (25 USC § 2701-2721; 18 USC §§ 1166-1168) allowing casino gaming on Indian lands within the State ( see Saratoga County Chamber of Commerce, Inc. v Pataki, , 100 NY2d 801 [2003]). We determined that the Governor's actions in unilaterally negotiating and entering into such tribal-state compacts violated separation of powers principles because such actions involved policy decisions within the power of the Legislature. Since the compacts were invalidated on this ground, we did not reach the questions whether casino gaming permitted by such tribal-state compacts violated the commercial gambling prohibitions of article I, § 9 of the New York State Constitution and whether IGRA preempts in this area. Those issues are now squarely presented for our review. Also presented is the constitutional validity of video lottery gaming and New York's participation in the multi-state Mega Millions lottery. Chapter 383 of the Laws of 2001 was introduced in the Senate and the Assembly on the evening of October 24, 2001, and the early morning of October 25, 2001. The 81-page bill contained a wide range of provisions aimed, in part, at countering the anticipated negative economic effects of the terrorist attacks of September 11th and at generating revenue. The Governor submitted a message of necessity, certifying the need for an immediate vote on the bill, which had not been on the legislators' desks in final form for the required three calendar days ( see NY Const, art III, § 14). The Legislature enacted the bill immediately and the Governor signed it into law shortly thereafter. The provisions at issue on this appeal are Parts B, C and D of Chapter 383. Adding a new Executive Law § 12, Part B authorized the Governor to enter into "a tribal-state compact with the Seneca Nation of Indians pursuant to the [federal] Indian Gaming Regulatory Act of 1988 . . . consistent with a memorandum of understanding between the [parties]" (L 2001, ch 383, Part B, § 2). The memorandum of understanding permitted the parties to negotiate a compact to allow Class III gaming in up to three casinos.[1] The compact would be deemed adopted by the Legislature when the Governor certified that the agreement provided for, among other things, reasonable access to the gaming facilities by labor unions, a satisfactory system for civil recovery and adequate liability insurance. Part B also authorized the Governor to enter into tribal-state compacts with unnamed tribes to allow up to three additional Class III gaming facilities in Ulster and Sullivan Counties. Those compacts would likewise be deemed adopted by the Legislature when the Governor certified they met the requisite labor union, civil recovery and liability insurance requirements. Part C authorized the use of video lottery terminals (VLTs) -- under Tax Law § 1617-a -- at several racetracks, including Aqueduct, Monticello, Yonkers, Finger Lakes and Vernon Downs ( see L 2001, ch 383, Part C, § 1). The bill also amended Tax Law § 1612 to include a revenue distribution scheme for the VLT proceeds ( see L 2001, ch 383, Part C, § 2). Between 12 and 25 percent of the total revenue was designated a vendor's fee. The legislation provided that a portion of the vendor's fee must be reinvested in the racing industry by applying it to enhancing purses and to the appropriate breeding fund. Finally, Part D amended Tax Law §§ 1604 and 1617 to authorize the State's participation in a multi-jurisdictional lottery ( see L 2001, ch 383, Part D, §§ 1, 3). Plaintiffs are a group of citizen taxpayers, state legislators and not-for-profit organizations "opposed to the spread of gambling." They commenced this action in January 2002. Plaintiffs moved for summary judgment declaring Parts B, C and D of Chapter 383 unconstitutional. Defendants and intervenor- defendant (Park Place) each cross-moved for summary judgment dismissing the complaint. Supreme Court granted the cross motions, denied plaintiffs' motion for summary judgment and declared the challenged portions of Chapter 383 of the Laws of 2001 constitutional. The Appellate Division modified, in a comprehensive opinion, by reversing the portion of Supreme Court's order that declared Part C constitutional, declared Part C unconstitutional and, as so modified, affirmed ( see 11 AD3d 62 [2004]). The court determined that the Governor's message of necessity was sufficient to meet the requirements of article III, § 14 of the State Constitution. It further found that since the State allows the type of gaming at issue, with certain limitations, the gaming was "properly the subject of a tribal-state compact and part B" was constitutional (11 AD3d at 83). Similarly, the Appellate Division found that Part D, authorizing the multi-state lottery, was constitutional -- finding that the State "retains sufficient supervision over the multi-state lottery . . . to satisfy the constitutional requirement that a lottery be 'operated by the state'" (11 AD3d at 105 [citations omitted]). The court also determined that the net proceeds from the multi-state lottery were properly dedicated to education in the state ( see 11 AD3d at 106). As to Part C -- authorizing the operation of Video Lottery Terminals (VLTs) -- the Appellate Division concluded that the VLTs were components of lotteries rather than slot machines and, as such, were constitutionally permitted ( see 11 AD3d at 94). However, the court determined that the portion of the legislation directing that certain percentages of the vendor fees be reinvested for enhancing purses and to an appropriate breeding fund did not meet the constitutional requirement that lottery proceeds be dedicated exclusively to the support of education within the state ( see 11 AD3d at 99). The Appellate Division found the revenue distribution defect was not severable because severance would result in "either an inflated vendor fee or no fee at all" (11 AD3d at 102). Thus, the Appellate Division declared Part C unconstitutional in full. Plaintiffs now appeal, and defendants cross-appeal, as of right pursuant to CPLR 5601 (b)(1). We modify the Appellate Division and declare that Parts B, C and D of Chapter 383 of the Laws of 2001 are in all respects constitutional. New York State Constitution