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In re Delaware Sports Service

Superior Court of Delaware, New Castle County

August 6, 1963

In the Matter of DELAWARE SPORTS SERVICE, a Partnership.

Rehearing Denied Oct. 7, 1963.

Page 216

E. Norman Veasey, Chief Deputy Atty. Gen., and Ruth M. Ferrell, Deputy Atty. Gen., Wilmington, on the briefs, for the State, intervenor. Januar D. Bove, Jr., former Atty. Gen., Trial Atty. before the Commission.

Henry A. Wise, Jr., and Richard Allen Paul (of Wise & Suddard), Wilmington, for Delaware Sports Service.

Hugh L. Corroon (of Berl, Potter & Anderson), Wilmington, for Diamond State Tel. Co.

STIFTEL, Judge

[57 Del. 3] Appeal from an order of the Public Service Commission which refused to direct the Diamond State Telephone Company to continue its telephone service to the Delaware Sports Service.

The following facts are not in dispute:

The Delaware Sports Service has been located in Wilmington, Delaware, for more than a decade. Its only reason for existence is to supply 'flash race track results' to its customers. Generally, its method of operation is to place an employee inside a race track who instantaneously communicates, by visual device, such as hand signals, or by radio, with an employee outside the race track who has an open telephone line to relay the information he acquires to Delaware Sports Service in Wilmington. For many years Delaware Sports Service, or its predecessor in name, Delaware Wired Music, supplied instantaneous detailed information on each race to the Wilmington headquarters but in recent years only the name of the winner of each race has been supplied. However, any customer on the open line from the race track through the Wilmington switchboard was able to determine the time the horses left the post and the time the horses finished the race.

A person became a customer of Delaware Sports Service by telephoning the Wilmington office and asking the operator of Delaware Sports Service what Delaware Sports Service had available. The customer was told that he was entitled to the name of the unofficial winner of one race for $20; of two races for $30; and [57 Del. 4] of five races for $50. The money was payable in advance by sending a Western Union money order telegram to Delaware Sports Service. The customer seldom used his own name when calling Delaware Sports Service for the results. When a person would call for results, the switchboard operator would immediately check her records so as to determine whether or not the money order had been transmitted in advance. If so, she would give the customer the immediate result, which was usually no more than one

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to three minutes after the race was run and sometimes sooner.

For many years the Attorney General's office had attempted to terminate the business of the Delaware Sports Service. After an unsuccessful attempt to terminate this business through the courts in 1949, Tollin v. State, 7 Terry 120,78 A.2d 810, the Legislature, on the recommendation of the then Attorney General, enacted certain statutes which the Attorney General hoped to use to eliminate businesses of this nature. [1]

The present phase started in 1959. On October 13, 1959, the Attorney General sent a letter to the Diamond State Telephone

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Company requesting it to discontinue its service to Sports Service; whereupon Diamond State notified[57 Del. 5] Delaware Sports Service of its intention to discontinue telephone service to it pursuant to Title 11 Delaware Code, Sec. 675.

Shortly after the receipt of the Diamond State letter, Sports Service filed an action, on October 22, 1959, in the Court of Chancery, praying that Diamond State be enjoined from discontinuing its telephone service, contending that Sec. 675 of Title 11 Delaware Code was unconstitutional.

On September 8, 1960, the Court of Chancery ruled Section 675 unconstitutional because it failed to provide [57 Del. 6] an opportunity to the telephone subscriber for a hearing, and the Court enjoined Diamond State from terminating plaintiff's present telephone service prior to a hearing presumably before the Commission on the uses to which plaintiff put such service. See Tollin v. Diamond State Telephone Co., Del.Ch.,164 A.2d 254. Thereafter, the Attorney General again requested the Telephone Company to discontinue telephone service to Sports Service. Whereupon, Diamond State notified Sports Service that it would terminate its telephone service unless Sports Service filed a petition with the Public Service Commission by a certain date. Sports Service filed a petition with the Public Service Commission seeking to prohibit the telephone company from terminating its services. As a preliminary step the Commission decided, on briefs, by [57 Del. 7] written opinion dated December 14, 1961, that it had jurisdiction to consider the petition. The Attorney General's request to intervene was granted.

A hearing on the merits of the petition was held by the Commission March 12, 1962, through March 15, 1962. The intervenor presented 9 witnesses and introduced 26 exhibits. At the conclusion of the hearing, the facts and the law were briefed and the Public Service Commission rendered a written opinion on September 12, 1962, concluding, in effect, that Diamond State was justified in its action because Delaware Sports Service was using its service to further illegal gambling. Subsequently, a motion requesting reargument and reconsideration was filed and the request was denied on October 10, 1962. Sports Service then took this appeal claiming (1) that the hearing before the Public Service Commission was a denial of due process of law; (2) that the findings of the Commission failed to comply with the laws pertaining to hearings before the Public Service Commission, namely, 26 Delaware Code, Secs. 183 and 187; [2] and (3) that the Diamond

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[57 Del. 8] State Telephone Company and the intervenor failed to establish their case by a preponderance of the evidence.

At the hearing, the telephone company argued that it had the right to act to discontinue telephone service to Delaware Sports Service because such service was being used by recipients to further illegal horse race gambling in this state and in other states. Specifically, Diamond claimed it had the right to act by virtue of Sec. 674 of Title 11 Delaware Code, or by reason of tariff No. 1, paragraph 20, [3] which it had previously filed with the Public Service Commission, or under the principle that it is never required to furnish telephone service where the use by the subscriber is against the public policy of this state.

A telephone company must furnish adequate public service to its paying customers without discrimination. 26 Del.Code § 135. See Tracy v. Southern Bell Telephone and Telegraph Co., D.C.Fla.,37 F.Supp. 829, [57 Del. 9] 830. It cannot refuse service to a legitimate enterprise. See Paterson Publishing Co. v. New Jersey Bell Telephone Co.,21 N.J. 460, 122 A.2d 599, 603. Generally, however, a telephone company may take the necessary steps to discontinue such service where it is reasonably satisfied that such service is being utilized by its customer to violate the statutory law against dissemination of racing information, State v. Chesapeake and Potomac Telephone Co.,121 W.Va. 420, 4 S.E.2d 257, 258; or, where the dissemination of such racing information is in violation of one of its published tariffs, McBride v. Western Union Telegraph Co., 9 Cir.,171 F.2d 1; see Hamilton v. Western Union Telegraph Co., D.C.Ohio,34 F.Supp. 928, 929; or where the use of such telephone service is against public policy, such as in the furtherance of bookmaking, an illegal enterprise in this and other states, Tracy v. Southern Bell Telephone Co., supra; see Taglianetti v. New England Telephone and Telegraph Co.,81 R.I. 351, 103 A.2d 67, 70, 71; Anno: 153 A.L.R. 463.

Sections 674 and 677, Title 11 Delaware Code, makes dissemination of information in furtherance of gambling or for gambling purposes by means of a call service a crime. [4] The published tariff permits the telephone company to discontinue service if a law enforcement agency advises that such service is being used or will be used in violation of a law. Sports Service raises many objections to Diamond's use of either the statute or the tariff as a basis for discontinuing service. It is not necessary, here, to explore petitioner's arguments in these directions because the telephone company, as stated above, may also act to discontinue service where such service has a tendency[57 Del. 10] to promote illegal gambling, contrary to public policy. Howard Sports Daily v. Weller,179 Md. 355, 18 A.2d 210; Hamilton v. Western Union Telegraph Co., D.C. Ohio,34 F.Supp. 928; Rubin v. Pennsylvania Public Utility Commission, 197 Pa.

Page 220

Super. 157, 177 A.2d 128; Lipton v. New York Tel. Co., Sup.,125 N.Y.S.2d 251.

The Commission, in reviewing the purported action of the telephone company to discontinue telephone service to Sports Service, decided that Diamond State was justified in concluding that petitioner was using its telephone service to further illegal gambling over a many state area, against the public policy of this and other states. Its decision is now before this Court on appeal.

On appeal to this Court from the Public Service Commission, the cause is determined from the record, which includes a written copy of the evidence and the findings, order and opinion of the Commission. This Court may affirm, modify or revise the order of the Commission, in whole or in part, or may remand the proceedings to the Commission, in whole or in part. 26 Del.Code, Sec. 192(b). [5] The language of Section 192(b) is essentially the same as the language contained in the statute governing appeals from orders of the Workmen's Compensation [57 Del. 11] Commission. 19 Del.Code, Sec. 2350(b). [6]

The rule which has been applied in workmen's compensation cases is the rule which governs the present case on appeal, In the Matter of Application of Diamond State Telephone Company, Supreme Ct.Del.,107 A.2d 786, 792-793. In workmen's compensation cases a court never disturbs a finding of the Commission, if there is evidence in the record from which its conclusions could have been fairly and reasonably drawn. Wright v. American Brake Shoe Co., 8 Terry 299,90 A.2d 681, 684. Thus, the Superior Court sits as a reviewing court only and not as an administrative agency of superior rank. In the Matter of Application of Diamond State Telephone Company, supra. The decision of the Commission must stand if there is evidentiary basis for it; cf., Hill Road Publishing & News Co. v. Public Utility Hearing Board, Supreme Ct. R.I.,190 A.2d 729, 731; and it is not the job of this Court to re-evaluate pertinent evidence adduced before the Commission.

Plaintiff claims that the hearing before the Commission was in violation of the due process clause of the Federal Constitution for the reason that the evidence adduced at the hearing by the telephone company and the intervenor was not competent evidence upon which a finding should be based. The primary issue this argument presents is whether there was proper evidence before the Commission to justify its action.

[57 Del. 12] The record is lengthy. The testimony alone covers more than 700 pages. The Attorney General admits that much of the testimony presented by the defendants was

Page 221

hearsay and would generally be inadmissible in a court trial. But he contends that hearsay evidence is permissible before the Commission by reason of Sec. 183, Title 26 Delaware Code, which provides that '[T]he Commission shall not be bound by the technical rules of evidence.' In any event, he claims that the Commission made its findings on probative evidence, and did not consider in its findings evidence that would normally be inadmissible in a court trial. Thus, he claims that Geegan v. Unemployment Compensation Commission, 6 Terry 513,76 A.2d 116, is inapplicable since in that case the decision of the Unemployment Compensation Commission could not stand because it was based solely and exclusively on hearsay, which is not true here. In Geegan, the Court explained that the purpose of the statute which permits a commission to accept evidence not conforming to the legal rules is to free commissions from technical rules in order to prevent the invalidation of administrative orders after such evidence has been received.

Throughout the proceedings below, the Attorney General requested the Commission to accept evidence that would ordinarily be inadmissible in a court trial, relying on the rule of the statute. The Commission, with some reluctance, allowed this procedure, reserving the right to strike it or ignore it at the time of its decision. The statutory rule that commissions are not bound by the same strictness as to the admission of evidence as a court, is a good one. It protects commissions from reversible error for admitting evidence which is not generally admissible in a court trial for the reason that legislators recognize that so often members of commissions are not as conversant with the technical rules of evidence as are judges. The [57 Del. 13] Commission may, in its discretion, accept any evidence that is offered. There must, however, be a residuum of legal evidence that supports its final determination. See, U. S. ex rel. Dong Wing Ott v. Shaughnessy, D.C.S.D.N.Y.,116 F.Supp. 745. Here, the Commission ignored facts in the record which it considered inadmissible and based its findings on admissible, competent evidence.

A fair reading of all the testimony on which the Commission relied establishes that it was justified in reaching its conclusion that Delaware Sports Service disseminated flash results of horse races primarily for the use of bookmakers.

Intervenor presented testimony of several qualified experts. Each expert agreed that the service rendered by Delaware Sports Service was only of significant importance to a bookmaker or a past poster. [7] Mr. Albert Tollin, the dominating partner of Delaware Sports Service, testified that the present service furnished by Sports Service was of no significant value to bookmakers since it did not contain prices paid, the names of the horses that finished second and third, nor the time of the beginning or finish of a race. Intervenor's experts disagreed with this testimony. First of all, they explained that the information did furnish the time of each race because the telephone operator would announce to its customers that the horses 'were running', which indicated the beginning of a race, and any customer could determine the finish of the race when the name of the winner was announced. Even though the name of the winner was unofficial, testimony indicated that a 'pitcher' employed by Sports Service had [57 Del. 14] never been wrong. Daniel D. Moynihan, Special Agent with the New York State Commission of Investigation, noted the importance to a bookmaker of receipt of immediate race results. He explained that it helps a bookmaker to estimate his financial position in regard to the day's betting. Thus, if he should find himself losing heavily on the first race, he may arrange after the first race to lay-off

Page 222

with other bookmakers some of the bets he receives on the second race. On the other hand, since the percentages are always in favor of the bookmaker, if he runs fairly well in the first race, he may decide not to lay-off any bets on the second race. Also, by getting immediate information on the winner of a race, he can avoid being past posted, and thus avoid taking a bet from another bookmaker or private bettor on the winner after the race had actually been run.

Furthermore, Moynihan stated that a bookmaker receiving this flash information serves as a convenience for the bettor and consequently stimulates his own business, since a bettor's wagering or betting may be stimulated by his immediate knowledge of the results. If he wins, he frequently finds that he is ahead and therefore he can afford to gamble a little more on the next race. Consequently, Mr. Moynihan explained, flash results have a distinct advantage over radio and newspapers, which do not give immediate results and consequently would not enable the bookmaker to avoid past posting, or assist him with lay-offs or stimulation of bets. Also, it enables the unscrupulous bookmaker to accept bets on a loser when he knows the winner. Moynihan further explained that even though the odds were not furnished with the flash results by Sports Service, a bookmaker can nevertheless figure them out roughly if he properly understands his business.

[57 Del. 15] Mr. Frank X. Smith, Chief of the New York City District Attorney's Racket Bureau, made similar remarks when he testified.

Mr. Edward C. McMahon, a qualified agent employed by the Thoroughbred Racing Protective Bureau, primarily engaged in the supervision of the internal security at race tracks, gave testimony like that which he had previously given in a similar case; see Paterson Publishing Co. v. New Jersey Bell Telephone Co., supra, 122 A.2d at p. 601. He said he saw no reason for anyone to want flash information of the type being disseminated by Sports Service except bookmakers and past posters. He stated that some people will place their bets only with bookmakers who will let them know immediately which horse won so that they may determine how much to bet on the next race. Tollin's suggestion that there may be instances where a person wholly unconnected with gambling operations will want immediate information as to the outcome of a race and will be willing to pay a substantial charge for this information was regarded by the Commission as virtually inconceivable. In any event, it considered such instances isolated. See also, Paterson Publishing Co. v. New Jersey Bell Telephone Co., supra, 122 A.2d at p. 602. Mr. McMahon stated that no horse trainer or breeder would be interested in this flash information and that it was unlikely, as Sports Service suggests, that an owner of a horse would use this method to obtain information, especially where the customer seeks more than one result and from different tracks. Normally, a person placing a legal bet at a race track would have no need to ascertain the results of the race by resort to this service. See Telephone News System, Inc. v. Illinois Bell Telephone Co., D.C.Ill.,210 F.Supp. 471, 476. In fact, it would be highly unusual for a bettor to even know the unadvertised facility exists or its telephone numbers.

[57 Del. 16] The evidence before the Commission was not ...


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