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City fights sweepstakes lawsuit

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BY WILLIAM F. WEST
Staff Writer

Tuesday, October 8, 2019

NASHVILLE — A Rocky Mount business has been contesting a municipal government crackdown attempt on the establishment allegedly including sweepstakes machines on the premises.

3 Lakes Amusement, which is based in Littleton, operates Tap’s in the 900 block of North Wesleyan Boulevard just north of the interchange with U.S. 64. Tap’s, which is an apparel store, was on a list of places Rocky Mount city officials in May believed were operating beyond the specifics of occupancy certificates.

3 Lakes Amusement, which is represented by attorney Jonathan Trapp of Durham, on May 21 filed a lawsuit in Nash County Superior Court against the city and police Chief George Robinson in his official capacity. 3 Lakes Amusement called for and received a temporary order from Judge J.C. Cole preventing the city from taking action against Tap’s.

Significantly, 3 Lakes Amusement has called for a ruling on whether the computer software at Tap’s violates the state law banning sweepstakes and if so, whether the law violates both the state and federal constitutions.

And 3 Lakes Amusement has called for a permanent order from the court prohibiting the city from taking further action against Tap’s.

In 2010, the General Assembly, after intense debate, passed the law banning sweepstakes. The state Court of Appeals in 2012 ruled the ban was too broad, but the state appealed and the state Supreme Court the same year reversed the appellate court.

In the lawsuit filed in Nash County Superior Court, 3 Lakes Amusement argues Tap’s was never told by Rocky Mount’s municipal government which software, if any, violated state law nor was given the chance to demonstrate the business model Tap’s used to promote the sale of apparel.

The lawsuit goes into detail about what can be found inside Tap’s.

Specifically, the lawsuit states:

Patrons can purchase their apparel at a kiosk or point of sale and can either leave after making the purchase or ask to play a particular skill-based game.

The amount the patron paid for the apparel is in line with the amount of points the patron can receive if he or she chooses to play the game, which is free.

Then the patron can either surf the internet or play multiple games of skill, with the chance to earn more gaming credits or have gaming credits deducted.

Patrons can earn more gaming credits than originally purchased based on their skill, dexterity or performance.

And patrons at any time can redeem their gaming credits for more merchandise in the store or the cash value at the point-of-sale counter when they are done using the gaming system.

On May 13, the Telegram reported the city’s intent to target internet gaming in Rocky Mount, with police believing certain businesses were running sweepstakes operations.

The Telegram reported the city’s development services department had identified more than 20 potential properties in Rocky Mount believed to be in breach of their occupancy certificates.

The lawsuit filed by 3 Lakes Amusement argues the 2010 state law banning sweepstakes generated substantial litigation from the date of passage.

The lawsuit argues courts in North Carolina have struggled with the interpretation, construction and application of the law. The lawsuit also argues the legal context of the ban of sweepstakes is too vague and violates both the state and federal constitutions.

Rocky Mount’s municipal government, in court papers filed on June 4, asked for the legal dispute with 3 Lakes Amusement to be shifted to Wake County Superior Court. The city argues that is because state law makes clear an action challenging the constitutionality of state law has to be raised in Wake County Superior Court.

The city, in papers filed in Nash County Superior Court on Sept. 16, called for the the legal dispute to be dismissed, saying both sides in open court on June 10 before Cole had agreed to a resolution.

The papers state the resolution is proposed as follows:

Tap’s would submit a new application for an occupancy certificate, as outlined in a proposal by the city.

If the application contains all of the necessary information Tap’s agreed to submit, then the city would issue the occupancy certificate within 15 days of the submission of the application.

And both sides would agree to maintain there would be an informal halt to enforcement action by the city due to the presence of the gaming machines.

The city, in the papers filed on Sept. 16, said 3 Lakes Amusement would, after being issued a new occupancy certificate, file a notice of dismissal of the lawsuit without prejudice. A dismissal without prejudice means 3 Lakes Amusement would be free to bring another lawsuit in the future.

The city said 3 Lakes Amusement on June 11 submitted a new application for an occupancy certificate but did not include information 3 Lakes Amusement agreed to provide in connection with the agreement presented to Judge Cole.

The city said, to date, 3 Lakes Amusement has failed to submit the application for the occupancy certificate.

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