The United States District Court for the District of New Jersey recently found that the defendant could not obtain a preliminary injunction prohibiting the plaintiff from operating a sports wagering business on the plaintiff’s property due to a restrictive covenant, but that the defendant still showed a likelihood of success on the merits. See Cherry Hill Towne Ctr. Partners, LLC v. GS Park Racing, L.P., 2019 WL 4187836 (D.N.J. Sept. 4, 2019). Under the New Jersey Sports Wagering Act of 2018, certain businesses could apply for sports wagering licenses. See N.J.S.A. 5:12A-11. Plaintiff owned a former racetrack and was eligible to apply for a license. In 2018, 11 days after the law was passed, Defendant sent a letter to Plaintiff informing Plaintiff that Plaintiff was barred from applying for a sports wagering license due to a Declaration of Restrictive Covenants (the “Declaration”). The Declaration stated: “Horse racing, simulcasting, off-track betting, wagering activities and gambling and gaming of any sort (collectively, ‘Gaming’) anywhere on the [Plaintiff’s] Property at any time by any party other than [Defendant] and its successors and assignees is hereby prohibited.” Plaintiff responded by bringing this action seeking a declaratory judgment invalidating the Declaration and providing that the Declaration does not prohibit sports wagering. Defendant then brought a motion for preliminary injunction preventing Plaintiff from “engaging in the business of sports wagering at” the property.
The Court denied the motion. The Court first found that the issue was ripe for review. Although Plaintiff had not obtained or even applied for a license yet, the parties agreed that Plaintiff “intends to do so as soon as possible” and “[a] declaration of rights in this case will alleviate legal uncertainty and could potentially have a significant impact on Plaintiff’s plan to open and operate a sports wagering facility.” The Court then addressed the motion for a preliminary injunction. The Court found that Defendant showed a likelihood of success on the merits. It found that the Declaration’s language was unambiguous and clear, and was not an unreasonable restraint on trade because it only encumbered one property. The Court also found that the fact that the Declaration was entered into in 1999, when sports wagering was illegal in New Jersey, did not make the Declaration unenforceable after the law changed. “The changed circumstances have not resulted in any burden on [Plaintiff]. Before the Sports Wagering Act, [Plaintiff] could not conduct sports wagering on its property, and after the Act, it still cannot conduct sports wagering.” Nonetheless, the Court found that Defendant had not shown that it would be irreparably harmed without the injunction. Plaintiff had not applied for its license yet, so the Court determined that it could not engage in the sports wagering business “anytime in the immediate future” and that an injunction was unnecessary at this time.