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Paul C. Stepnes v. Peter Ritschel

December 9, 2011


Appeal from the United States District Court for the District of Minnesota.

The opinion of the court was delivered by: Murphy, Circuit Judge.

Submitted: November 15, 2011

Before WOLLMAN, MURPHY, and BENTON, Circuit Judges.

Minneapolis Police Sergeant Peter Ritschel arrested Paul Stepnes without a warrant for running a contest which allegedly violated Minnesota gambling laws.

Ritschel later obtained a search warrant and seized several items from the house where Stepnes was running the contest. Reporter Esme Murphy broadcast a news story about the contest and Stepnes's arrest on WCCO TV, a local CBS television station. Stepnes sued Ritschel and the city of Minneapolis under 42 U.S.C. § 1983, for civil rights violations during the arrest and search, and Murphy and CBS for defamation. Both sides moved for summary judgment. The district court*fn1 granted the motion of the defendants, and Stepnes appeals. We affirm.


Stepnes, a home builder and developer, built a high priced home at 2857 Irving Avenue South in Minneapolis. He described it as a "new old house," meaning that it was designed to blend in with the surrounding established neighborhood while offering modern amenities, such as an elevator and a fully wired sound system.

Stepnes had financed the house with several loans. After his attempts to sell the home failed, it went into foreclosure and was sold in a February 2008 sheriff's sale to the bank which held most of the loans. In the spring of that year, Stepnes designed a contest to raise money to redeem the mortgage before the redemption deadline of September 26, 2008. See Minn. Stat. § 581.10 (governing redemption of mortgages). He called the original contest the "Big Dream House Giveaway." The contest website,, did not mention that the house was in foreclosure. Instead, it explained that the contest was designed to "take a negative situation and make something positive come out of it by raising enough money to pay off the mortgage of a housing shelter for women and children." No additional information or location was given about this housing shelter. Another section of the website stated that the goal of the contest was to raise $1.5 million for the Chester House Foundation, which was described as an organization focused on providing affordable housing and reducing homelessness. The website did not reveal that the Chester House Foundation was a sole proprietorship run by Stepnes.

The original contest involved guessing the number of nuts, bolts, and screws (collectively referred to as fasteners) contained in a chest stored in the Irving Avenue house and pictured on the website. The website provided the dimensions of the chest but did not describe the ratio of each type of fastener. Nor did it reveal that also inside the chest were a plastic protection sheet and a cardboard box for stability. The contest was described on the website as one of "skill based on your mathematical and analytical skills." Stepnes promoted it by hiring a public relations agent. Several local newspapers ran stories about the contest.

Contestants were required to pay $20 for the opportunity to guess the number of fasteners in the chest. Entries could be purchased by mailing an application available online or going to the house in person. The contestant who guessed closest to the actual number of fasteners without exceeding it would win her choice of the house (valued at $1.8 million) or $1 million cash, provided that at least $5 million worth of tickets were sold. If less than $5 million in tickets were sold, the winner would receive 50% of the contest proceeds in excess of $1 million. The contest was to run until November 15, 2008. It also had a second component involving weekly drawings for small prizes, such as a microwave. The contest rules provided that all persons registering for the contest would be entered in the weekly drawings.

Prior to launching the original contest, Stepnes had contacted Tom Barrett, executive director of the Minnesota Gambling Control Board, to obtain advice about gambling laws. Barrett explained that illegal gambling consists of three elements: consideration, chance, and a prize. He advised Stepnes that guessing the number of fasteners in the chest would require analytical skill and thus remove the element of chance. For that reason the contest would not violate Minnesota's gambling laws.

On May 28, 2008, shortly after Stepnes launched the contest, a contractor who had a lien on the house phoned Sergeant Peter Ritschel and informed him that Stepnes might be conducting an illegal raffle at the house. The contractor directed Ritschel to the contest website. Sergeant Ritschel looked at the website and noted that it listed the name of a contestant who had won a microwave as part of the weekly drawing. Within hours of reviewing the website, Ritschel went to the house to investigate and to "get Mr. Ste[p]nes to cease his unlawful activities." The sergeant arrived at the house without a warrant during hours when it was open to the public. At the time Ritschel entered, Stepnes was in the back of the house with his public relations agent and a reporter from the Southwest Journal, a Minneapolis newspaper.

Ritschel told Stepnes that he believed an illegal gambling operation was occurring at the house. Stepnes responded that he had consulted with Barrett and State Senator Scott Dibble about his contest. When Stepnes refused to show Ritschel his identification, the officer arrested him and placed him in handcuffs. Stepnes claims that the handcuffs were so tight that they cut into his wrists. Ritschel transported Stepnes to jail and booked him under Minnesota Statute § 609.735, which prohibits wearing a mask in public. Police released Stepnes a few hours later.

The next day, Ritschel spoke with Barrett who explained that he had advised Stepnes that the contest as described was not gambling. Ritschel then asked whether the weekly drawing for a small prize was gambling. Barrett replied that Stepnes had not advised him that the contest would feature such a drawing. Because that drawing involved ...

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