                     NOTICE: NOT FOR OFFICIAL PUBLICATION.
        UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT
           PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.




                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE


   AMERICAN LEGION POST 62; AMERICAN LEGION POST 105;
  VETERANS OF FOREIGN WARS POST 1433; AMERICAN LEGION
POST 1; VETERANS OF FOREIGN WARS POST 1796, Plaintiffs/Appellants,

                                        v.

       ARIZONA DEPARTMENT OF GAMING, Defendant/Appellee.

                             No. 1 CA-CV 15-0606
                               FILED 10-25-2016


           Appeal from the Superior Court in Maricopa County
                          No. CV2015-006992
                 The Honorable Patricia A. Starr, Judge

                                  AFFIRMED


                                   COUNSEL

Laman Law Office PLLC, Phoenix
By Charley L. Laman
Co-Counsel for Plaintiffs/Appellants

Brian A. Hatch PLLC, Scottsdale
By Brian A. Hatch
Co-Counsel for Plaintiffs/Appellants

Arizona Attorney General’s Office, Phoenix
By Roger L. Banan
Counsel for Defendant/Appellee
               AMERICAN LEGION, et al. v. AZ GAMING
                      Decision of the Court



                      MEMORANDUM DECISION

Presiding Judge Andrew W. Gould delivered the decision of the Court, in
which Judge Peter B. Swann and Judge Patricia A. Orozco joined.


G O U L D, Judge:

¶1             Appellants American Legion Posts 1, 62, and 105 and
Veterans of Foreign Wars Posts 1433 and 1796 (collectively “Appellants”)
challenge the superior court’s decision granting judgment on the pleadings
to the Arizona Department of Gaming (“Gaming”). The superior court
found Appellants’ raffle fundraisers, as described in their complaint,
constituted illegal gambling. We affirm for the reasons set forth below.

           FACTUAL AND PROCEDURAL BACKGROUND

¶2             Because the superior court granted judgment on the
pleadings, we state the well-pleaded facts from Appellants’ complaint
below and accept them as true.1 Estate of Ethridge v. Recovery Mgmt. Sys.,
Inc., 235 Ariz. 30, 31 n.1 (App. 2014).

¶3            Appellants are tax-exempt organizations under Arizona
Revised Statutes (“A.R.S.”) § 43-1201(A). As part of their fundraising
efforts, Appellants conducted raffle2 games using “gaming devices,
software, tickets and related equipment” provided by third-party vendor




1     Both parties agree the affidavit of Dennis Pogue, attached to
Appellants’ complaint, is incorporated into the pleadings and is a part of
the complaint. See Ariz. R. Civ. P. 10(c) (“A copy of a written instrument
which is an exhibit to a pleading is a part thereof for all purposes.”).

2      We assume, without deciding, that Appellants’ fundraisers were in
fact “raffles.” The term raffle is not defined in A.R.S. § 13-3301, nor is it
defined under Arizona’s case law. The term is defined in the Arizona
lottery regulations as “the selling of numbered tickets, where each ticket
has an equal chance of winning a prize in a random drawing held after the
completion of all ticket sales." Arizona Administrative Code, section R 19-
3-201 (18).


                                     2
                AMERICAN LEGION, et al. v. AZ GAMING
                       Decision of the Court

RSG. Appellants paid RSG “on a per raffle ticket basis” up to 50 percent of
the revenue generated in each raffle.

¶4             In early 2015, a Gaming agent visited Appellants’ locations,
instructed them to discontinue their raffles, and threatened to seize the RSG
equipment. Appellants discontinued the raffles then sought a declaratory
judgment that the raffles were permitted under A.R.S. § 13-3302(B).
Gaming moved for judgment on the pleadings, arguing that Appellants’
raffles as described in their complaint and their accompanying affidavit did
not fall within that statutory exemption. The trial court granted Gaming’s
motion. Appellants timely appealed.

                                DISCUSSION

¶5            A Rule 12(c) motion for judgment on the pleadings tests the
sufficiency of the complaint; judgment should be entered for the defendant
if the complaint fails to state a claim for relief. Giles v. Hill Lewis Marce, 195
Ariz. 358, 359, ¶ 2 (App. 1999). On appeal, we assume the complaint’s well-
pleaded factual allegations are true but review legal rulings de novo. Mobile
Cmty. Council for Progress, Inc. v. Brock, 211 Ariz. 196, 198, ¶ 5 (App. 2005).

¶6            The parties agree that Appellants’ raffles constitute gambling
under A.R.S. § 13-3301(4). The parties also agree that Appellants may
lawfully conduct gambling if it falls within A.R.S. § 13-3302(B), which
provides, in relevant part:

       An organization that has qualified for an exemption from
       taxation of income under section 43-1201 . . . may conduct a
       raffle that is subject to the following restrictions:

              1.     The nonprofit organization shall maintain this
              status and 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



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                AMERICAN LEGION, et al. v. AZ GAMING
                       Decision of the Court

              or indirectly in the management, sales or operation of
              the raffle.

A.R.S. § 13-3302(B)(1)-(3). Appellants contend they sufficiently alleged that
their raffles met all of these requirements. We disagree.

I.     Appellants’ Conclusory Allegations of Compliance Are Not
       Entitled to Deference.

¶7             Appellants first cite their allegations that “[n]o member,
director, officer agent or employee . . . receives a pecuniary benefit other
than participation in [the] raffles” and that “[o]nly [Appellants], its [sic]
members and officers are solely involved in the management, operation or
sales of the raffle.” These allegations simply parrot the language of § 13-
3302(B) quoted above; such “conclusory statements are insufficient to state
a claim upon which relief can be granted,” because “a complaint that states
only legal conclusions, without any supporting factual allegations, does not
satisfy Arizona’s notice pleading standard under Rule 8.” Cullen v. Auto-
Owners Ins. Co., 218 Ariz. 417, 419, ¶ 7 (2008).

II.    Appellants’ Arrangement with RSG Violated § 13-3302(B)(3).

¶8             Appellants next contend the trial court erred in interpreting §
13-3302(B)(1), (3) and (4). We review statutory interpretation questions de
novo. Halt v. Gama ex rel. Cty. of Maricopa, 238 Ariz. 352, 354, ¶ 9 (App. 2015).
Because we conclude Appellants’ raffles did not comply with A.R.S. § 13-
3302(B)(3), and the trial court relied upon subsection (B)(3) in its ruling, we
need not address the parties’ arguments regarding subsections (B)(1) and
(B)(4).

¶9             We interpreted subsection (B)(3) earlier this year in Benevolent
& Protective Order of Elks No. 2656 v. State Dept. of Liquor Licenses & Control,
239 Ariz. 121 (App. 2016). In Benevolent, we held 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’” within the meaning of subsection (B)(3). Id. at 125, ¶ 26 (quoting
1990 Ariz. Op. Att’y Gen. 57 (1990)). As a result, Appellant’s raffles, which
involved payments to RSG “based on the number of raffle tickets sold” of
up to “50% of the revenue generated by the raffle” do not qualify for a
gambling exemption under subsection (B)(3). See Benevolent, 239 Ariz. at
125, ¶¶ 26-27 (finding raffle was unlawful in part because vendor “received
55% of the net proceeds”).




                                       4
               AMERICAN LEGION, et al. v. AZ GAMING
                      Decision of the Court

¶10           Appellants contend “[t]he statutes . . . do not make it illegal
for an outside company who sells or provides prizes, equipment, printed
materials, and the like from so doing, or from making a profit in so doing.”
We agree that subsection (B)(3) does not bar all such arrangements.
However, it does bar arrangements like the raffles in this case where
payment is “based upon a percentage of sales or receipts from conduct of
the games.” Id. at 125, ¶ 26.

                              CONCLUSION

¶11          We affirm the trial court’s ruling granting judgment on the
pleadings to Gaming. We also award Gaming its taxable costs incurred on
appeal upon compliance with Arizona Rule of Civil Appellate Procedure
21.




                         AMY M. WOOD • Clerk of the Court
                          FILED: AA




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