Court setback ends Larry Flynt's plans to expand casino empire

U.S. District Judge John Mendez found that Flynt and father-and-son cardroom owners’ due process claims fall outside a two-year statute of limitations, the Courthouse News Service reported.

Flynt, who owns Hustler Casino and Larry Flynt’s Luck Lady Casino in Southern California, claimed an outdated state law prevented him from investing in lucrative casino opportunities in 2014 and 2015.

The Gambling Registration Act was enacted to keep the mob out of California gambling operations by limiting cardroom operators’ financial resources. The legislation prevents residents with California gaming licenses from investing in out-of-state casinos, and bars out-of-state residents who own gambling businesses from obtaining California cardroom licenses.

Flynt and Haig Kelegian Sr. and Jr. argued that the law has outlived its rationale, noting that the mob has been frozen out of Nevada casinos for decades. Nevada has updated its gambling laws, allowing publicly traded companies to operate billion-dollar Las Vegas casinos.

Their argument centered on California’s fining Kelegian Jr. $210,000 for transferring ownership of an out-of-state casino to his wife. They said the fine, while a one-time decision, has had a lasting impact and prevents plaintiffs from investing in other casinos.

Flynt said he could lose minority holdings in some of his out-of-state adult businesses if they were to add gambling because of California Business and Professions Code Section 19858, enacted in 1986. The plaintiffs had not sought punitive damages, and wanted the court to find the law unconstitutional.

Mendez rejected the amended complaint, finding they failed to allege continuing harm.

“The court also finds that any further amendment would be futile and, therefore, grants defendants’ motion to dismiss with prejudice,” Mendez wrote.

California allows certain types of gambling, including poker and other non-banked card games in which gamblers play against each other, not the house. Tribal casinos are allowed to operate banked-card games and slot machines, and California also allows residents to bet on horse racing.

Gamblers have sought changes to the gambling laws for years. In 2002, a state-funded survey recommended allowing publicly traded companies to operate cardrooms.

Attorney Paul Cambria of New York said his clients will appeal.