DAVID R. HERNDON, District Judge.
Pending before the Court is defendant Rational Entertainment Enterprises, Ltd., and Oldford Group Ltd.'s motion to dismiss second amended complaint (Docs. 75 & 76). Plaintiffs oppose the motion (Doc. 79). Based on the following, the Court
On January 25, 2013, Kelly Sonnenberg, individually and on behalf of all others similarly situated, filed a first amended complaint against Isai Scheinberg, Paul Tate, Nelson Burtnick, Oldford Group, Ltd. ("Oldford"), Pyr Software, Ltd., Stelekram, Ltd., Rational Entertainment Enterprises, Ltd. ("REEL"), and Sphene International, Ltd for violations of the Illinois Anti-Gambling statutes in the St. Clair County, Illinois Circuit Court (Doc. 4-1).
On April 9, 2013, REEL removed the case to this Court based on the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. 1332(d) (Doc. 4).
On April 14, 2014, plaintiffs filed a second amended class action complaint adding Casey Sonnenberg as a named plaintiff (Doc. 71).
(Doc. 71; pg. 11, ¶ 41). Casey Sonnenberg seeks to represent a very similar class:
(Doc. 71; pg. 13, ¶ 49).
The specific allegations as to defendants REEL and Oldford are contained in paragraphs 7 through 11 of the second-amended complaint. Plaintiffs allege that REEL "is a business entity organized in and operating under the laws of the Isle of Man. REEL is licensed by the Isle of Man Gaming Authority to operate online poker rooms and accept losses from Illinois gamblers. (Doc. 71; pg. 3, ¶ 7). Plaintiffs allege that Oldford "is a business entity organized under the laws of the British Virgin Islands. At all times relevant, Oldford was a parent company and/or directed the illegal acts of other defendants." (Doc. 71; pg. 3, ¶ 8). Further, plaintiffs allege:
(Doc. 71; pg.3, ¶¶ 9-11).
Federal Rule of Civil Procedure 8(a)(2) imposes "two easy-to-clear hurdles" that a complaint must satisfy in order to survive a motion to dismiss pursuant to Federal Rule of Procedure 12(b)(6). Tamayo v. Blagojevich, 526 F.3d 1074, 1084 (7th Cir. 2008)(quoting EEOC v. Concentra Health Svcs., Inc., 496 F.3d 773, 776 (7th Cir. 2007)). First, a complaint must describe the plaintiff's claims and the grounds supporting them in "sufficient detail to give the defendants fair notice" of the claims alleged against them. This requires more than mere "labels and conclusions" or a "formulaic recitation of the elements of a cause of action." E.E.O.C. v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007).
Second, to survive a motion to dismiss, the court determines whether the well-pleaded allegations, if true, "plausibly suggest a right to relief, raising that possibility above a speculative level." See Iqbal 556 U.S. at 679; Concentra, 496 F.3d at 776. A claim has facial plausibility when the pleaded factual content allows the Court to draw a reasonable inference that the defendant is liable for the misconduct alleged. See Iqbal, 556 U.S. at 678. "The plausibility standard . . . asks for more than a sheer possibility that a defendant acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Iqbal, 556 U.S. at 678 (internal quotation marks omitted). "`Plausibility' in this context does not imply that the district court should decide whose version to believe, or which version is more likely than not." Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010). Rather, Twombly and Iqbal require "the plaintiff to `provide some specific facts' to support the legal claims asserted in the complaint." McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011) (quoting Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009)). Though the "degree of specificity required is not easily quantified, . . . `the plaintiff must give enough details about the subject-matter of the case to present a story that holds together.'" Id. (quoting Swanson, 614 F.3d at 404). If a complaint does not satisfy these two criteria, "the plaintiff pleads itself out of court." Concentra, 496 F.3d at 776. Accordingly, a motion to dismiss may be properly granted where the plaintiff does not allege a plausible entitlement to relief either by (1) failing to provide the defendant with notice of plausible claims against it or (2) asserting only speculative or conclusory allegations in the complaint.
The "Loss Recovery Act should not be interpreted to yield an unjust or absurd result contrary to its purpose." Vinson v. Casino Queen, Inc., 123 F.3d 655, 657 (7th Cir. 1997) (citations omitted). "The Loss Recovery Act was intended to deter illegal gambling by using its recovery provisions as a powerful enforcement mechanism." Id. Illinois statutes like the Loss Recovery Act (LRA") are "penal in their nature," Robson v. Doyle, 61 N.E. 435, 437 (Ill. 1901), and "must be strictly construed." See Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1023 (7th Cir. 2013); see also Reuter v. MasterCard Int'l, Inc., 921 N.E.2d 1205, 1211 (Ill. App. 2010)(noting that an Illinois Circuit Court "explained that the [Loss Recovery Act] is penal in nature and must therefore be strictly construed.").
To inform the reader, the Court sets out the relevant sections of the statute contained in the second amended complaint. Section 720 ILCS 5/28-1states in part:
Section 720 ILCS 5/28-3 reads:
Section 720 ILCS 5/28-7 states:
Further, 720 ILCS 5/28-8(a) provides:
Lastly, 720 ILCS 5/28-8(b) provides:
Defendants raise several arguments in support of dismissal of the second amended complaint. The Court turns to address the arguments raised.
First, defendants argue that plaintiffs fail to identify a loser or a loss. Specifically, defendants argue that other than identifying Casey Sonnenberg as a purported loser, plaintiffs failed to identify a single cognizable loser or a loss in that the second amended complaint does not plead basic facts, including: when the purported loss was incurred, to whom (i.e. which player) the loss was sustained, and what is the amount of the loss in question. Plaintiffs counter that they have identified a loser and the losses in that Casey Sonnenberg gambled and lost $50 or more on the website, and that these allegations are sufficient for the purposes of the second amended complaint and to withstand the motion to dismiss. Plaintiffs further counter that they should be allowed discovery into defendants' player data. The Court agrees with defendants and again finds that plaintiffs have failed to plead both loser and loss sufficiently.
Section 8(b) of the LRA plainly states that a non-loser plaintiff does not have a cause of action until the gambling loser has failed to bring suit within six months of the loss. Plaintiffs cannot allege the six months have passed or that they timely brought the claim without alleging the date of a loss and the amount of the loss. Thus, plaintiffs must allege that a specific loser lost a certain amount of money on a certain date. Plaintiffs have failed to do that in their respective counts. The Court notes that plaintiffs' second amended complaint does not contain one date establishing the time frame as to when the conduct allegedly took place. Repeatedly throughout the second amended complaint, plaintiffs merely state "[a]t all times relevant herein" without stating specifically when the conduct causing the injury took place. In plaintiffs' response to the motion to dismiss, Casey Sonnenberg attaches an affidavit that states in part: "That beginning in 2006 and continuing until 2011, I maintained an account with Poker Stars by and through the website
Next, defendants argue that Pokerstars is not a "winner" within the meaning of the LRA. Defendants argue that there are no allegations that they participated in the games by placing bets or wagers, winning bets or wagers, or by risking any of their own money. Defendants contend that they are merely operators of an online poker room, and not participants in the games they host and therefore are more akin to a third party service provider. Defendants argue that the second amended complaint reinforces this conclusion through repeated allegations that the defendants owned and operated an online poker website that hosted poker games. Defendants also argue that the assertion that they derived profits from collecting commissions in the form of "rake" or "take" is not probative of whether defendants can be construed to be "winners." Plaintiffs counter that they have adequately alleged that defendants are winners in that the second amended complaint alleges that defendants won money directly from Illinois gamblers in the form of a "rake" from the games. Specifically, plaintiffs allege "[t]he Defendants, acting in concert, won money from Illinois gamblers by taking a percentage of the amount bet, won or lost as the "rake," "take out," or commission for hosting the games." (Doc. 71; pg. 9, ¶ 24). The Court agrees with defendants and finds that the plaintiffs have not alleged winners sufficiently to withstand the motion to dismiss.
"It is the winner, not the keeper of the house, who is liable to respond to the loser, or if he does not sue within six months, to whoever may sue." Ranney v. Flinn, 60 Ill.App. 104 (Ill. App. 1894)(Plaintiff played cards in a room over the defendant's saloon. The defendant received compensation for the use of the room in "chips" representing money, whenever a hand of a certain type was dealt, and only on rare occasions did the defendant play at the game with plaintiff, and there was no proof that at such time the plaintiff's losses amounted to $10 to defendant.). See also Zellers v. White, 70 N.E. 669, 671 (Ill. 1904)(defendant was an owner of a gambling establishment and a winner because he kept his agent's winnings); Kruse v. Kennet et al., 181 Ill. 199 (Ill. 1899)(defendant brokerage firm which entered into contracts to bet on grain prices was a winner). A winner under the LRA is someone that has a direct stake in the outcome of the gambling. See Pearce v. Foote, 113 Ill. 228 (Ill. 1885). (The Illinois Supreme Court held that the brokers were winners not because they collected commissions on gambling activity, but because the brokers participated in the risk of the trade or "wager." The brokers or their client could be "winners" or "losers" depending "on the happening of a certain [future] event." Id. at 239. The gain or loss the client would earn from the trade was uncertain when the agreement with the broker was consummated, and "if there was a loss, [the client] was to pay it to [the brokers], and if there was a gain, [the brokers] were to pay it to [the client]." Id. at 237-38 (alterations added; internal quotation marks omitted). The brokers took a risk that the loss incurred on the trade might be so great that the client would not be able to cover it, or that the client's gain might be so great that the brokers would not be able to cover it. See id. at 236 (explaining that the client had paid the brokers only part of what he owed them)). Here, the Court finds that plaintiffs have added self-serving conclusory allegations that defendants won money by taking "rake" in order to withstand dismissal. The Court finds that these new allegations are boilerplate and insufficient to establish a winner. Further, there are no allegations that defendants won Casey Sonnenberg's money. Plaintiffs' second amended complaint fails to plead that defendants participated in the games by placing bets or wagers, won bets or wagers, or risked any of their own money. In fact, plaintiffs offer contrary allegations stating that "other individuals won money from Illinois gamblers during poker games hosted by the Defendants." (Doc. 71; pg. 11, ¶ 37). Again, based on the allegations in the second amended complaint, the Court finds that defendants were more akin to a third party service provider that provided a forum for others to play games and did not have a stake in how the games were decided/won.
Next, defendants argue that plaintiffs cannot bring private causes of action pursuant to Sections 5/28-1 and 5/28-3. Further, defendants argue that section 5/28-7 does not give plaintiff's a private cause of action; rather it simply declares gambling contracts null and void and of no legal effect. Plaintiffs respond that implied private causes of actions are necessary to financially compensate the victims harmed by defendants' illegal activity. The Court agrees with defendants' reasoning.
A court should give intention of the legislature when determining whether a statute creates a private cause of action; "all other rules of statutory construction are subordinate to this cardinal principle." Metzger v. DaRosa, 805 N.E.2d 1165, 1167 (Ill. 2004). The best way to determine the legislature's intent is to look at the statute. The absence of an explicit grant of a private right does not mean that none exists, for Illinois courts, may, and often do, find private rights of action implied in Illinois statutes. Fisher v. Lexington Health Care, Inc., 722 N.E.2d. 1115, 1117 (Ill. 1999). A private right is properly implied if: (1) the plaintiff is a member of the class for whose benefit the statute was enacted; (2) the plaintiff's injury is one the statute was designed to prevent; (3) a private right of action is consistent with the underlying purpose of the statute; and (4) implying a private right of action is necessary to provide an adequate remedy for violations of the statute. Id. at 1117-18; Cowper v. Nyberg, 10 N.E.2d 435, 354 (Ill. App. 2014). When analyzing these factors, a court should consider the statute as a whole, and not in insolated provisions. Fisher, 722 N.E.2d at 1119. The Illinois Supreme Court directed courts to focus on the fourth factor and repeatedly held that a court should not find a private right of action implied in a statute unless it would be ineffective without one. See e.g., Abbasi ex rel. Abbasi v. Paraskevoulakos, 718 N.E.2d 181, 185-86 (Ill. 1999); Fisher, 722 N.E.2d at 1120.
Here, both sections 5/28-1 and 5/28-3 establish criminal penalties for gambling and provide that a conviction under each section is a Class 4 felony punishable as a misdemeanor. See 720 ILCS 5/28-1 ("Gambling is a Class A Misdemeanor. A second or subsequent conviction under subsections (a)(3) through (a)(12), is a class 4 felony."); 720 ILCS 5/28-3("Any person who knowingly permits any premise or property owned or occupied by him or under his control to be used as a gambling place commits a Class A misdemeanor. Each subsequent offense is a Class 4 felony.") Further, section 5/28-7 declares gambling contracts null and void and of no legal effect and is intended to prevent the enforcement of obligations contained in certain types of gambling contracts. None of these sections provide for civil remedies like section 5/28-8 provides. It is undisputed that every claim in the second-amended complaint seeks to recover the same purported gambling losses. Examining the statute in its entirety, the Court finds that the private cause of action contained in section 5/28-8 is the only private cause of action that the legislature intended and that the statute is adequate and effective in providing remedies to plaintiffs and the public as a whole. As Metzger demonstrates, the inquiry must not focus only on plaintiffs' specific claims, but on the effectiveness of the statute generally. See Metzger, 805 N.E.2d at 1171. Clearly, plaintiffs have an adequate remedy for violations of the gambling statute. A court should look to whether a plaintiff has an alternate remedy to pursue his claims when deciding whether an act creates a private right of action. See, e.g. Corgan v. Muehling, 574 N.E.2d 602, 610 (Ill. 1991). Had the legislature intended for further civil remedies it would have included those additional civil remedies in the statute as it did in section 5/28-8. See Metzger, 805 N.E.2d at 117 ("Where, as here, the legislature has expressly provided a private cause of action in a specific section of the statute, we believe the legislature did not intend to imply private rights of action to enforce other sections of the same statute.") Moreover, as previously stated, the statute is penal in nature. When a statute is prohibitory, regulatory, or penal in nature, a strict construction is appropriate. See Sawyer Realty Group v. Jarvis Corp., 432 N.E.2d 849, 854 (Ill. 1982); McKey & Poague, Inc. v. Stackler, 379 N.E.2d 1198, 1203-04 (Ill. App. 1978). Thus, plaintiffs may not bring causes of action under sections 5/28-1, 5/28-3, and 5/28-7.
Lastly, the Court finds that plaintiffs' loser claims are barred by the relevant statute of limitations contained in the LRA. Plaintiffs did not address this argument in their opposition. As noted above, plaintiffs' second amended complaint is silent as to the specifics regarding the winners and the losers. Further, Casey Sonnenberg admits in the second amended complaint that he did not sue within the 6-month time frame. ((Doc. 71: pg. 15, ¶ 61; pg. 20, ¶ 95; pg. 25, ¶ 129 "Casey Sonnenberg did not bring an action on his own behalf within six months of any loss to Pokerstars."). The LRA only contains one statute of limitations: a six month time frame for the "loser" to bring a claim for recovery of the loss and after that time frame may a non-loser plaintiff bring a claim for the loss. This language has been interpreted as imposing a 6-month statute of limitations on the "loser's" right to recover monies paid under 5/28-8(a). See Kizer v. Walden, 198 Ill. 274 (Ill. 1902)(court held that gambling statute with nearly identical language imposed a 6-month statute of limitations on the loser's right to private cause of action to recover the money paid pursuant to the wager); see also Bartlett v. Slusher, 215 Ill. 348 (Ill. 1905); Holland v. Swain, 94 Ill. 154 (Ill. 1879); Moench v. Graff, 212 Ill.App. 42 (Ill. App. 3 Dist. 1918).
The Court takes judicial notice that the United States government shut down the gambling site on April 15, 2011. See United States v. Pokerstars, et al., 11-CV-2564. As such, April 15, 2011, was the last conceivable date on which any "losers" could have sustained any gambling losses. The original complaint in this case was filed on August 24, 2012 (almost 15 months after the gambling site was shut down) (Doc. 4-4). Thus, for plaintiffs' loser claims to be timely, plaintiffs should have brought their claims well before August 24, 2012, at least by October 10, 2011 for the "loser" claims, and they did not. Thus, their loser claims are also time barred under 720 ILCS 5/28-8(b).
As the Court found that plaintiffs failed to plead winners and losers sufficiently, that the other sections in the statute do not confer private causes of action, and that their loser claims are barred by the statute of limitations, the Court need not address defendants' remaining arguments.
Accordingly, the Court
