All academic endeavors of the students of the University of Kentucky College of Law are governed by the Honor Code. The Honor Code prohibits lying, cheating, stealing, and interference with academic pursuits. Additionally, the Honor Code places on all law students an affirmative duty to report a breach of the Code. A failure to report is itself a violation of the Honor Code. In turning in this exam, I hereby pledge on my honor as a student that I have neither given nor received any unauthorized aid on this exam.
If you have ever been told that your handwriting is difficult to read, please double-space. Please refer only to the excerpt of the Federal Administrative Procedure Act (distributed herewith), if necessary.
The U.S. Congress became concerned in 1997 with increasing rather than decreasing deficits. Some Congress members proposed a Federal Lottery. In order to overcome opposition to such a federal gambling program, several members of Congress proposed designating the proceeds to politically popular causes. The Medicare Trust Fund, Public Broadcasting, and grants for public education were all urged. However, a majority of the House of Representatives could not be obtained for a lottery with proceeds to be directed to any one of these three purposes. Finally, Congress member Bully proposed that an agency to operate the lottery (the Federal Lottery Executive Agency, or FLEA) be set up very carefully with five members, with extensive Congressional oversight, and that the agency simply be given the statutory mandate to "allocate the profit to support the public interest in any of the following areas: public education, health, safety, and culture. Such allocations shall be in accordance with rules promulgated by the FLEA." Bully is convinced that the U.S. Congress could constitutionally create a lottery and direct the profits toward such purposes (i.e., therefore you should assume there is Federal Article I power to create a federal lottery and dispose of the profits for such purposes), but Bully is concerned with (a) whether it is otherwise consistent with constitutional principles to permit a federal agency to exercise such authority. Bully also wants to know the advisability and legality of providing one OR some of the following safeguards in the legislation:
Assume that the lottery legislation was passed, with all profits simply going into the Federal Treasury. The Federal Lottery Act provided for a single Federal Lottery Administrator to be appointed by the President, with the consent of the Senate. The Administrator was given the responsibilities of
Following passage of the Act, the Administrator began entering into standard agreements with grocery stores and gas stations. The agreements provided that the private seller could sell Federal lottery tickets for a two year period, as long as the seller complied with FLEA regulations. Renewal was subject to renegotiation of commission terms and the discretion of the agency.
In January, 1999, at the time of renewal of its agreement, Foodacre, a large grocery store in Adtucky (a state of the Union) sought renewal of the agreement to sell Federal lottery tickets. FLEA denied renewal in a letter from the FLEA regional administrator, stating that Foodacre had sold less than $100 in Federal lottery tickets during the initial two-year period. Foodacre's lawyer wrote back, submitting written records showing that Foodacre had sold over $400 worth of tickets, and requesting an oral hearing before a final determination was made. The FLEA regional administrator wrote back, saying that a review of records showed less than 500 in ticket sales, and that it was "against our general practice" to renew agreements with grocery stores that had sold less than $500 worth of lottery tickets in two years. The letter concluded that the decision was a final decision by the FLEA, but that Foodacre could of course reapply in two years.
Foodacre's lawyer now seeks judicial review of the agency decision on the grounds that Foodacre was (h) statutorily and (i) constitutionally entitled to an oral hearing, and (j) in the alternative that the Administrator's decision not to renew was not based on a properly adopted rule or regulation. The Secretary moves to dismiss, and in the alternative for summary judgment. What arguments should the Secretary make? How should the court rule? Explain.
In March, 1998, the Secretary, proposed regulations that would disqualify retail sellers of Federal lottery tickets who "sell, at the same locations as lottery ticket sales, firecrackers, fireworks, or other dangerous combustibles." The Administrator's comments suggested that the agency wanted to disassociate the highly regarded federal lottery with the seasonal sale of dangerous fireworks. Several comments questioned the need of such a regulation; others said "the words 'dangerous combustibles' was ambiguous. Finally, several anti-smoking groups commented that "cigarettes and cigars" be specifically included in the list of items that could not be sold in the same location as Federal lottery tickets. After the close of the comment period, without any oral hearing, the Federal administrator promulgated final regulations that rendered "retail sellers unqualified for Federal lottery purposes who sell firecrackers, fireworks, cigarettes or cigars in the same location as they sell federal lottery tickets."
GG and HH are two large U.S. cigarette manufacturers whose cigarettes are sold in retail gas stations and groceries that also sell federal lottery tickets. GG and HH challenge the regulations in court as (k) an abuse of discretion and (l) procedurally invalid, and the agency responds by countering these arguments and also urging that in any event the case is (m) not ripe and (n) GG and HH lack standing. How should the court rule on each of (k), (l), (m) and (n)? Explain. Deal with counter arguments.
Assume that Congress now amends the organic Lottery Act to provide that "Federal lottery tickets shall not be sold by retailers who also sell state lottery tickets in the same location." Some Congress persons voted for this provision to protect state lottery proceeds. Others voted for it because they generally were against gambling. Others voted for it because their colleagues said it was a good amendment. FLEA had opposed the amendment on the ground that it would hurt federal lottery sales.
FLEA now promulgated a regulation prohibiting the sale of Federal and state lottery tickets in the same room, but permitting the sale of Federal lottery tickets in an outdoor booth or vending machine at least 40 feet from any entrance to a room in which state lottery tickets are sold.
A's gas stations, an Adtucky chain of gas stations, set up automatic vending booths for federal lottery tickets at a distance of over 50 feet from the little grocery shop appurtenant to each A's gas station. After FLEA approved the renewal of A's license to sell Federal lottery tickets, the Adtucky state lottery administrator sued the Federal Lottery Administrator to obtain an injunction against the licensing of any A's station to sell Federal Lottery tickets where a customer could also purchase state lottery tickets easily without driving to a different location. Assume the state lottery commissioner had standing. (o) How should each side argue, and how should the court rule? Explain.
B operated two gas stations 10 miles apart. The Federal Lottery Administrator proposed to debar B from selling Federal lottery tickets at either location on the ground that B had sold both at each location, in violation of Federal statute and regulation. B requested and was granted a hearing before an Administrative Law Judge. B testified that since June, 1997 (when the statutory amendment went into effect) B had never sold Federal lottery tickets at First Street B's nor had B ever sold state lottery tickets at Eleventh Street B's. Two of B's employee clerks testified to the same effect. A local resident testified that his teenage sons had often complained of having bought losing state and federal lottery tickets when they went to get gas. And a member of a local anti-gambling league testified that he had seen both types of lottery tickets sold at First Street B's. The ALJ determined that B had not violated the statute or regulation, and issued a recommended opinion to that effect. The administrator, using discretionary power provided for in previously promulgated regulations, reconsidered the case. Following the submission of extensive written briefs for both sides, the Administrator found the agency's witnesses (Q and R) more believable, and ordered the three year disbarment of B from the sale of Federal lottery tickets. Assume there are no further administrative remedies for B to exhaust, and that B seeks judicial review. (p) How should the court rule? Explain.