                                     IN THE
              ARIZONA COURT OF APPEALS
                                DIVISION ONE


       BENEVOLENT AND PROTECTIVE ORDER OF ELKS #2656,
                      Plaintiff/Appellant,

                                       v.

  STATE OF ARIZONA DEPARTMENT OF LIQUOR LICENSES AND
                CONTROL, Defendant/Appellee.

                            No. 1 CA-CV 14-0793
                              FILED 1-21-2016


           Appeal from the Superior Court in Maricopa County
                        No. LC2014-000104-001
               The Honorable Crane McClennen, Judge

                                 AFFIRMED


                                     COUNSEL

Charles E. Buri, PLC, Phoenix
By Charles E. Buri
Co-Counsel for Plaintiff/Appellant

and

Guttilla Murphy Anderson PC, Phoenix
By Nicholas C. Guttilla
Co-Counsel for Plaintiff/Appellant

Arizona Attorney General’s Office, Phoenix
By Michael Raine
Counsel for Defendant/Appellee
                         BENEVOLENT v. STATE
                           Opinion of the Court



                                OPINION

Judge Andrew W. Gould delivered the opinion of the Court, in which
Presiding Judge Donn Kessler and Judge Patricia K. Norris joined.


G O U L D, Judge:

¶1            The Benevolent Order of the Elks (the “Elks”) appeals the
superior court’s judgment affirming the decision by the Arizona
Department of Liquor Licenses and Control (“Department”). In its
decision, the Department fined the Elks $200 for conducting unlawful
gambling activities in violation of Arizona Revised Statutes (“A.R.S.”)
section 4-244(26). For the following reasons, we affirm.

                FACTS AND PROCEDURAL HISTORY

¶2            The Elks is an Arizona non-profit organization licensed to sell
liquor by the Department. In 2010, the Elks entered into a contract with
Patriots Land Group (“Patriots”) to run a “sweepstakes,” for the stated
purpose of charitable fundraising. Pursuant to the contract, the Elks leased
computer equipment, software, and furniture from Patriots to conduct the
sweepstakes. The sweepstakes equipment consisted of a kiosk, which
housed a file server connected to a game terminal; each game terminal had
a video monitor, a mouse, and a magnetic card reader. In addition, Patriots
agreed to provide operational support consisting of training,
computer/equipment maintenance and repairs, and software updates.

¶3           In April 2010 the Elks started offering the sweepstakes to its
members. The sweepstakes kiosks were housed in the Elks’ Lodge and
were available for use during the Elks’ hours of operation. To participate
in the sweepstakes, a member obtained a player card, provided by Patriots,
from the Elks’ bar manager or bartender. Each card had a magnetic strip
and a sweepstakes identification number on the back.

¶4           Once a member received a sweepstakes card, he participated
in the sweepstakes by running the card through the kiosk’s card reader and
placing money in the kiosk’s bill acceptor. Members paid one dollar for
each play.

¶5            The software provided by Patriots generated “prize pools”
consisting of cash prizes. The pools were funded by the money members


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                           Opinion of the Court

paid to purchase plays. Each play included the chance to win cash prizes
of up to $1,199.

¶6           If a member won, the software added the prize amount to his
card. When a member wished to redeem his winnings, he would print out
a redemption ticket from the kiosk, give the ticket to the bar manager or
bartender, and receive a cash payout. The Elks maintained a daily bank of
$500 to redeem winnings.

¶7           Members were not required to pay for all of their plays.
Members could receive one free play a day. However, over the course of
the Elks sweepstakes, only nine to ten percent of the sweepstakes plays
were free plays.

¶8            Members could also obtain free plays by mailing a request,
with a self-addressed stamped envelope, to Patriots. There was no limit on
the number of mail-in requests that could be submitted by a member.
Patriots, however, never received any mail-in requests for free plays.

¶9            For each play, members could learn if they won in two ways.
The member could click the “reveal button” on the kiosk’s video monitor,
which would instantly reveal if the member won a cash prize. In the
alternative, a member could run his sweepstakes card through a game
terminal’s card reader, and play a casino style computer game; at the end
of the game, the monitor would reveal any winnings. However, whether
the member used the reveal button or played the casino game, the method
used had no bearing on the outcome, because the prize amount, if any, was
assigned to each play as it was loaded onto the sweepstakes card.

¶10           Under the contract, Patriots received 55% of the revenue
generated by the kiosks, paid every two weeks, and a one-time set-up fee
of $1,250.00. Patriots required the Elks to connect its equipment to the
internet to enable Patriots to monitor the money paid for sweepstakes plays,
cash prizes, and free plays.

¶11            Patriots also provided the Elks with rules and regulations for
conducting the sweepstakes. These rules were posted by all of Patriot’s
kiosks, and stated that sweepstakes participants must be members of the
Elks; the rules also stated how many free plays were allotted to each
member. Finally, the contract required the Elks to assist Patriots with any
litigation or lobbying efforts regarding the legality of the sweepstakes in
Arizona.




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                           Opinion of the Court

¶12           In June 2012, the Department began investigating the Elks
after receiving a complaint from another Elks Lodge. During the
investigation, the Department discovered that between April 2011 and June
2012, a total of $234,408.00 was paid by members to participate in the
sweepstakes. About 55%, or $128,834.25, was paid out to the members as
prizes. The remaining 45% was split between Patriots and Elks; Patriots
received 55%, or $58,065.56, and the Elks kept the remaining 45%, or
$47,508.19.

¶13            After its investigation, the Department concluded the
sweepstakes constituted unlawful gambling in violation of A.R.S. § 4-244
(26),1 which provides that “[i]t is unlawful . . . [f]or a [liquor] licensee or
employee to knowingly permit unlawful gambling on [its] premises.” The
Department instructed the Elks to cease and desist operating the kiosks.
The Elks immediately complied.

¶14           The Elks timely requested an evidentiary hearing with an
Administrative Law Judge. After a two-day hearing, the ALJ determined
the sweepstakes constituted illegal gambling. However, rather than
suspend or revoke the Elks’ liquor license, the ALJ imposed a minimum
fine of $200. See A.R.S. § 4-210(A)(9) (stating the Department has the
authority to suspend or revoke a liquor license for any violation of Title 4);
A.R.S. § 4-210.01(A) (fines for violations of Title 4 may range from a
maximum fine of $3,000 to a minimum fine of $200).

¶15           The Elks unsuccessfully appealed the ALJ’s decision to both
the Director of the Department and the Department. After exhausting its
administrative remedies, the Elks appealed the Department’s decision to
the superior court, which affirmed the Department’s decision. The Elks
timely appealed the superior court’s judgment to this Court.

                                 DISCUSSION

¶16           “On appeal, we determine whether the record contains
evidence to support the superior court's judgment, and in so doing, we also
reach the underlying question of whether” the Department “acted in
contravention of the law, arbitrarily, capriciously, or in abuse of its
discretion.” Comm. for Justice & Fairness v. Ariz. Sec'y of State's Office, 235
Ariz. 347, 351, ¶ 17 (App. 2014). We view the evidence in the light most



1     We refer to the current versions of all statutes unless stated
otherwise.

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                            Opinion of the Court

favorable to upholding the Department’s decision, and review questions of
law de novo. Baca v. Ariz. Dep’t. of Econ. Sec., 191 Ariz. 43, 45-46 (App. 1998).

I.   Gambling

¶17         The Elks argue the sweepstakes do not constitute illegal
gambling. Rather, the Elks contend the sweepstakes is a “marketing tool
used to promote” charitable donations, and plays which are purchased are
“given to members as tokens of appreciation for their donations.” We
disagree.

¶18           Gambling is defined under A.R.S. § 13-3301(4) as “. . . risking
or giving something of value for the opportunity to obtain a benefit from a
game or contest of chance or skill or a future contingent event . . . .” Thus,
unlawful gambling consists of three elements: (1) the payment of
consideration, (2) for the chance, (3) to win a prize or obtain some benefit.
A.R.S. § 13-3301(4).

¶19            The Elks do not contest the fact the sweepstakes plays involve
the chance to win a cash prize. Rather, they argue that because free plays
are available to members, the sweepstakes lack the requisite element of
consideration. In making this argument, the Elks seek to compare the
sweepstakes to cases involving radio and TV promotional giveaways,
grocery store giveaways, and sweepstakes entries included with the
purchase of goods or services. See Fed. Commc’n Comm’n v. Am. Broad. Co.,
347 U.S. 284, 296 (1954) (radio and television programs giving away prizes
were not conducting an illegal lottery because contestants were not
required to purchase anything or pay any consideration to enter the
contest); Brice v. State, 242 S.W.2d 433, 435 (Tex. 1951) (prize drawing was
not an illegal lottery because there was no consideration; contestants paid
nothing to enter the contest, were not required to purchase any goods or
services, and were not required to be in attendance at the store at the time
of the drawing); see also Miss. Gaming Comm’n v. Treasured Arts, Inc., 699 So.
2d 936, 940-41 (Miss. 1997) (business selling telephone calling cards, with
purchases including a free sweepstakes entry, was not engaged in illegal
gambling; contestants paid retail value for the calling cards, and no
additional consideration was paid for sweepstakes entries).

¶20           The cases cited by the Elks are distinguishable. Here, 90% of
the sweepstakes plays involved members paying money for a chance to win
cash prizes. Additionally, the members received no goods or services in
return for their purchases.




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                            Opinion of the Court

¶21              The Elks’ attempt to characterize the plays as “free,” or as
charitable “donations” is also unavailing. Several courts have rejected
similar arguments. For example, in Cleveland v. Thorne, 987 N.E. 2d 731
(Ohio App. 2013), a business attempted to implement a sweepstakes
through the sale of internet time. For every dollar spent to purchase
internet time, a customer received 100 sweepstakes points. Cleveland, 987
N.E.2d at 735, ¶ 2. Most customers, however, did not use the internet time,
and were paying primarily for the sweepstakes entries. Id. at 743, ¶¶ 42-44.
Under these circumstances, the court held the business attempted “to couch
[its] illegal activities as [a] legitimate business enterprise” and although the
customers were technically buying internet time, the jury was justified in
finding the customers’ primary purpose was to participate in the
sweepstakes. Id. at 744-45, ¶¶ 44, 48.

¶22           Similarly, in Commonwealth v. Wintel, Inc., 829 A.2d 753 (Pa.
Comm. Ct. 2003), a business offered a “Freespin Promotional Sweepstakes
System,” consisting of video slot machines, for the alleged purpose of
raising money for charitable purposes. Id. at 755. The business provided
participants with two daily free plays and the opportunity to purchase
additional plays. Id. Despite the existence of daily free plays and a
charitable motive, the court determined that because participants paid
money to play the machines, the machines were being used for illegal
gambling. Id. at 758. See Barber v. Jefferson Cty. Racing Ass'n Inc., 960 So. 2d
599, 610-11, 615 (Ala. 2006) (the court rejected the argument that free plays
negated the requisite element of consideration for gambling, stating that the
devices in question were "slot machines as to those who pay to play them"
and that "[g]ratuitous entries . . . do not legitimize the [activity] any more
than some opportunity for free plays could render innocuous a
conventional slot machine.”).

¶23           The evidence in this case supports the Department’s
determination that the Elks’ sweepstakes is gambling under A.R.S. § 13-
3301(4). The amount of plays a member received directly correlated with
the amount of money he “donated” to the Elks; for every dollar paid into
the kiosk, the member received one play and a chance to win a cash prize.
Moreover, free plays made up less than ten percent of the total plays; the
other 90 per cent involved paying money for the chance to win cash.

II.   Raffle Exception

¶24          The Elks argue the sweepstakes is a lawful raffle under A.R.S.
§ 13-3302(B). Pursuant to A.R.S. § 13-3302(B), a non-profit organization
may lawfully conduct a raffle if it satisfies all of the following restrictions:


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                         BENEVOLENT v. STATE
                           Opinion of the Court

       1. … no member, director, officer, employee or agent of the
       nonprofit organization may receive any direct or indirect
       pecuniary benefit other than being able to participate in the
       raffle on a basis equal to all other participants.

       2. The nonprofit organization has been in existence
       continuously in this state for a five year period immediately
       before conducting the raffle.

       3. No person except a bona fide local member of the
       sponsoring organization may participate directly or indirectly
       in the management, sales or operation of the raffle.

¶25          There is no dispute the Elks’ sweepstakes satisfies the
requirements of A.R.S. §§ 13-3302(B)(1), (2). Moreover, we need not address
whether the Elks’ sweepstakes is a raffle, because the dispositive issue on
appeal is whether Patriots participated in the management or operation of
the sweepstakes pursuant to A.R.S. § 13-3302(B)(3).

¶26           In determining what constitutes direct or indirect
participation in the management of a raffle under A.R.S. § 13-3302(B) (3),
the Arizona Attorney General has opined that the receipt of lease payments
“based upon a percentage of sales or receipts from conduct of the games”
constitutes “direct or indirect participation in sales or operation of the
raffle.” 1990 Ariz. Op. Att'y Gen. 57 (1990). See Ruiz v. Hull, 191 Ariz. 441,
449, ¶ 28 (1998) (stating that although attorney general opinions are
advisory, they may be used as persuasive authority).

¶27            The record supports the Department’s conclusion Patriots
indirectly participated in the management of the sweepstakes. Patriots
monitored the revenue generated by members purchasing plays, the cash
prize money paid to members, and the free plays used by members.
Patriots provided the rules for the sweepstakes, and processed requests for
free plays mailed to its office. Patriots also provided the Elks with extensive
operational support for the sweepstakes, consisting of training, equipment
maintenance, software updates, and computer and equipment repairs. In
return for its management and operational support, Patriots received 55%
of the net proceeds generated by the sweepstakes.

¶28          Therefore, we affirm the Department’s decision the Elks’
sweepstakes is not a lawful raffle under A.R.S. § 13-3302(B).




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III.   Knowingly Requirement: A.R.S. § 4-244(26)

¶29           Finally, the Elks contend the Department erred in affirming
the ALJ’s construction of A.R.S. § 4-244(26). In determining the Elks
violated A.R.S. § 4-244(26), the ALJ concluded the term “knowingly” in the
statute only requires proof the Elks knew the sweepstakes were being
conducted on its premises; it does not require proof the Elks knew the
sweepstakes were unlawful. The Elks assert this construction of the statute
is erroneous, and that the statute requires proof the Elks: (1) knowingly
permitted the sweepstakes to operate on its premises, and (2) knew the
sweepstakes were unlawful.

¶30            When interpreting a statute, “we look to the plain language
of the statute as the best indicator” of the legislature’s intent. State v. Pledger,
236 Ariz. 469, 471, ¶ 8 (App.2015); see also Hoag v. French, 238 Ariz. 118, 121,
¶ 11 (App. 2015). “[U]nless the drafters provide special definitions or a
special meaning is apparent from the text,” we give the words and phrases
of the statute their commonly accepted meaning. Pledger, 236 Ariz. at 471, ¶
8, 341 P.3d 511; Hoag, 238 Ariz. at 121, ¶ 11. “If the statute is clear and
unambiguous, we apply the plain meaning of the statute” without resorting
to other methods of statutory construction. Stein v. Sonus USA, Inc., 214
Ariz. 200, 201, ¶ 3 (App. 2007) (citation omitted).

¶31            Based on the plain meaning of “knowingly” as used in A.R.S.
§ 4-244(26), the Department was not required to prove the Elks knew the
sweepstakes were unlawful. The word knowingly, when used in Arizona’s
statutes, “[d]oes not require any knowledge of the unlawfulness of the act
or omission.” A.R.S. § 1-215(17) (b); see A.R.S. § 13-105(10) (b) (stating that
the term “knowingly,” when describing conduct constituting a criminal
offense, “does not require any knowledge of the unlawfulness of the act or
omission”). This construction is consistent with the well-settled principle
that ignorance of the law is not a defense. A.R.S. § 13-204(B); State v. Morse,
127 Ariz. 25, 31 (1980).

¶32            Accordingly, we conclude the ALJ correctly construed A.R.S.
§ 4-244(26).




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                          Opinion of the Court

                             CONCLUSION

¶33           For the foregoing reasons, we affirm. Because the Elks is not
the prevailing party on appeal, we deny its request for fees.




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