Ninth Circuit Revives Suit Over Casino Stake by Hustler’s Flynt

(CN) – A Ninth Circuit panel on Monday recharged porn mogul Larry Flynt’s efforts to expand his gambling business out of California, overturning a finding that the Hustler founder’s lawsuit was barred by a statute of limitations.

Larry Flynt at a Free Speech Coalition event in Los Angeles, Calif., on Nov. 14, 2009. Photo by Glenn Francis,

In a 2-1 decision, the San Francisco-based panel found Flynt has standing to challenge an anti-organized crime state law that bars residents holding California gaming licenses from investing over 1% in out-of-state casinos.

Flynt, who owns Hustler Casino and Larry Flynt’s Luck Lady Casino in Southern California, claims he has missed out on lucrative opportunities over the last decade to invest in other gaming operations because of the outdated law. He says the 1986 state law, which was meant to thwart the mob from investing in California gaming operations, is outdated and unconstitutional.

Flynt and co-plaintiffs Haig Kelegian Sr. and Jr. sued the state over the law in 2016 but a federal judge dismissed the matter with prejudice 11 months later. U.S. District Judge John Mendez found Flynt and the father-and-son cardroom owners’ due process claims fell outside a two-year statute of limitations. The plaintiffs quickly appealed to the Ninth Circuit.

The case stems from a $210,000 fine the state’s gambling commission issued Kelegian Jr. in June 2014 for his ownership in an out-of-state casino. In order to renew the licenses at his two California cardrooms, Kelegian Jr. was forced to divest from his out-of-state holdings and he and Flynt filed their lawsuit in November 2016.

The state’s lawyers convinced Judge Mendez the cardroom owners’ lawsuit was filed several months late, but the Ninth Circuit panel disagreed. It says the ongoing enforcement of the law “inflicts a continuing or repeated harm” to the appellants and that the clock on the statute of limitations should be restarted.

“That all three licensees continue to be precluded from exploring other investment opportunities is not a consequence of the commission’s decision, as the dissent would have us conclude, but rather a result of the continued existence of the statutes themselves and the realistic threat of future enforcement,” wrote U.S. Circuit Judge Diarmuid F. O’Scannlain for the majority, with U.S. Circuit Judge Mary M. Schroeder joining.

In an email, Flynt’s lawyer applauded the panel’s decision to reverse and remand the matter to Mendez’s Sacramento courtroom.

“I am pleased with the decision. It clearly is in line with the facts and the law and other circuits across the nation, and we look forward to going back to the district court and challenging the gambling statute,” said Paul Cambria Jr. of Lipsitz Green Scime Cambria.

The state defendants declined to comment on the ruling.

Writing for the dissent, U.S. Circuit Judge Johnnie Rawlinson disagreed with the majority’s reliance on the continuing violation doctrine and said Flynt and the Kelegians clearly missed a filing deadline.

“Because the continuing violation theory is not viable under our precedent, I agree with the district court that plaintiffs’ action is barred by the applicable statute of limitations. I respectfully dissent from the majority’s contrary conclusion,” Rawlinson wrote.

O’Scannlain was appointed by Ronald Reagan, Schroeder by Jimmy Carter and Rawlinson by Bill Clinton.

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