Larry Flynt Scores Small Victory in California Casino Ownership Legal Battle

  • California law forbids gaming license holders from owning stakes in out-of-state casinos
  • Flynt and two others sued the state in 2016, claiming the law is unconstitutional
  • Judge John Mendez previously rejected the case, but the Ninth Circuit disagreed
  • The judge did not grant the state’s motion to dismiss on all counts
  • Flynt won a landmark First Amendment case against Jerry Falwell in 1988
Hustler Casino sign
A California judge has rejected the state’s motion to dismiss a lawsuit brought by Larry Flynt in which he challenges the constitutionality of state casino ownership laws. [Image:]

Law prohibits interstate casino ownership

Hustler magazine founder Larry Flynt’s casino lawsuit against the state of California is still alive after a US District Court judge partially denied the state’s motion to dismiss. In a Thursday ruling, Judge John Mendez dismissed two of the counts in Flynt’s lawsuit with prejudice but denied the state’s motion to dismiss the third, “Indirect Regulation of Interstate Commerce.”

state law does not allow card rooms to spread casino games like blackjack and roulette

A 35-year-old California law makes it illegal for card room licensees – Flynt owns the Hustler Casino and Larry Flynt’s Lucky Lady Casino – to hold more than a 1% interest in an out-of-state business that hosts gambling that is prohibited by California law. State law does not allow card rooms to spread casino games like blackjack and roulette, therefore making it illegal for Flynt to invest in a casino in another state.

Flynt and his co-plaintiffs, Haig Kelegian Sr and Haig Kelegian Jr, sued California in 2016 after the state fined the younger Kelegian because he had an ownership stake in an out-of-state casino. He had to sell his part of that business just to renew his California gaming license.

Flynt argues that the law is unconstitutional and suppresses his ability to invest out-of-state. Plus, he could have to sell investments if a non-casino business he’s a part of decides to get into gambling. Judge Mendez agreed that this point had merit, deciding to allow Flynt’s claim that the state is indirectly regulating interstate commerce in conflict with federal law to continue, while dismissing his two other claims.

Intent of law no longer relevant

The original 1986 law was designed to curtail mob involvement in California’s gambling industry. Flynt and company, however, argue that the law is outdated, that organized crime is no longer the factor in the industry that it used to be. It’s not 1950s Las Vegas anymore.

Flynt originally sued in late 2016, claiming that the law prevented him from taking advantage of out-of-state business opportunities the two previous years. Judge Mendez rejected the lawsuit in part because Flynt and the Kelegian’s had missed the two-year statute of limitations. The Ninth Circuit Court disagreed with the judge and sent the case back to the Eastern District of California.

the alleged wrongdoing and resultant injury must truly be ongoing or reoccurring”

Kelegian Jr also cited the $200,000 fine he received in 2014 for transferring ownership of a non-California gambling property to his wife. He said that the fine had kept him from investing in other potential businesses. Judge Mendez didn’t buy the argument, saying that “the alleged wrongdoing and resultant injury must truly be ongoing or reoccurring; a mere continuing impact from past violations does not suffice.”

Free speech vanguard

Larry Flynt has spent plenty of time in court in his controversial career. He was the plaintiff in 1988’s Hustler Magazine, Inc. v. Falwell, a landmark First Amendment case featured in the film The People vs. Larry Flynt (Woody Harrelson, Courtney Love).

Flynt had published a parody alcohol ad in the November 1983 of Hustler, featuring televangelist and conservative political commentator Larry Falwell admitting that his first sexual encounter was a drunken tryst with his mother in an outhouse. The ad featured a disclaimer at the bottom, explaining that it was a parody.

Falwell sued Flynt, the magazine, and Flynt’s distribution company for invasion of privacy, intentional infliction of emotional distress, and libel. He won the infliction of emotional distress claim, but Flynt was eventually able to appeal all the way to the US Supreme Court, which ruled 8-0 in Flynt’s favor. The court said that because Falwell was a public figure and that the parody ad did not present false statements as truthful, the “actual-malice” standard did not apply.

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