PER CURIAM.
These appeals, which were argued back-to-back and which we now consolidate for purposes of the opinion, arise out of a poker tournament hosted by Marina District Development Company, LLC, d/b/a Borgata Hotel Casino and Spa, which the Division of Gaming Enforcement cancelled when Borgata discovered a registered player had introduced counterfeit chips into tournament play.
In the administrative matter, appellants Jacob Musterel, Steven Celeste and Farid Vaghefi, who are also plaintiffs in the Law Division case, challenge the April 14, 2014 final order of the Director of the Division of Gaming Enforcement directing the distribution of retained entry fees, unpaid prizes and the remaining unallocated tournament funds among the 2,827 persons participating in the tournament. They contend the Director's distribution scheme was arbitrary and capricious and that their due process rights were violated by the agency's failure to hold a hearing.
In the Law Division matter, plaintiffs appeal from the entry of summary judgment dismissing their class action complaint
Because we conclude the Director's distribution scheme was reasonable, not arbitrary or capricious, and amply supported by the record, and that plaintiffs cannot demonstrate any entitlement to a hearing, we affirm the Director's order of distribution of tournament proceeds. We further find the distribution of tournament proceeds in this instance provided plaintiffs an adequate administrative remedy to vindicate their damage claims against Borgata. Because plaintiffs received restitution in the administrative proceeding and any further award to compensate them for their alleged losses would be wholly speculative, and because jury determinations of culpability on other theories of liability would interfere with the agency's regulatory authority over gaming, we affirm the entry of summary judgment dismissing their Law Division action.
Play began in Borgata's "Winter Poker Open," a three-week poker tournament consisting of multiple events, on January 14, 2014. Each player had paid $560 for a seat at one of the 170 tables positioned in three rooms at the Borgata. Sixty dollars of the entry fee went to Borgata for its costs to run the tournament; the other $500 went to the prize pool. Any player eliminated ("busting out") could pay another $560 fee and re-enter the tournament.
In the afternoon on the second day of play on January 16, 2014,
By 8:45 a.m. the following morning, the tournament director had provided Borgata security officials with four tournament chips he believed to be counterfeits, and Borgata had advised the Division of Gaming Enforcement of the problem. At a 10:00 a.m. meeting attended by Borgata's president, vice president and general counsel, vice president of finance, the casino controller, senior security staff and the tournament director, a decision was made to suspend play for the remaining twenty-seven players still in the tournament and conduct an internal chip audit used in the tournament.
That same day, a Division detective obtained Harrah's hotel registry to determine the guests occupying the rooms feeding the clogged sewer line. Cross-referencing the registry with the list of tournament entrants yielded five names, including that of Christian Lusardi. As later detailed in a lengthy report by the State investigator conducting an investigation of Borgata's internal controls for the tournament, Lusardi was well known to Borgata officials as a "high action player," having gambled at the casino since at least 2008.
Borgata officials "tagged" Lusardi in 2010 for monitoring after receiving an anonymous letter mentioning his name in connection with possible cheating activity in three card games and his comments to a Borgata floor manager about cheating occurring at another casino. Although Borgata's surveillance logs on Lusardi contain numerous entries, including a bizarre incident in which he is observed on tape placing a backpack, later discovered to contain a "fake" gun and a "home-made bomb,"
The chip audit conducted on January 17 found 160 counterfeit $5000 chips among the tournament chips. Upon being advised the tournament had been compromised, the Director issued an order on January 18, 2014 pursuant to
Later that same afternoon, a Borgata employee recovered twenty-two $5000 chips from a clogged toilet in a men's room near the poker tournament rooms. A review of surveillance tape revealed Lusardi entered the men's room at the conclusion of play on January 15. He was, at that point, the tournament chip leader with $519,000 in chips. Lusardi was arrested and charged in connection with the counterfeit tournament chips.
Following cancellation of the first event of the tournament, the Division undertook a two-month investigation into the counterfeit chips and Borgata's compliance with internal controls and gaming regulations in its conduct of the tournament. The State investigator conducting the investigation was able to track Lusardi's movements throughout the tournament. Surveillance tape from closed-circuit television monitors allowed her to analyze his hand movements to surmise when he likely put the counterfeit chips into play, although the tapes apparently do not show any more than some suspicious movements. The report details the procedures Borgata adopted and filed with the Division to oversee the tournament. The investigation report does not fault the casino for not detecting the cheating or for non-compliance with its internal procedures or any Division regulation.
In a supplemental report, the investigator reviewed the analysis the Division commissioned from Borgata, which listed every player in the tournament, when they played, where they played and where they could have come into contact with Lusardi or the counterfeit chips. As twenty-seven players were still in the tournament at the suspension of play, the tournament ranking included in the analysis listed the 28th through 450th place finishers and the prize money each was awarded before being eliminated.
Having been furnished with the investigative report and tournament analysis of player activity, the Director issued his final order. After noting the Division's determination "that Borgata was in compliance with the [Casino Control] Act and the regulations promulgated thereunder, specifically regulations related to the conduct of tournaments, and its poker tournament internal controls," the Director ordered Borgata to pay a total of $50,893 to entrants winning prizes not yet paid at the suspension of play; and to distribute the remaining unpaid prize funds ($1,433,145) and its portion of all entry fees ($288,660), a sum totaling $1,721,805, as follows: $560 to each of 2,143 entrants who may have been affected by contact with counterfeit chips and were eliminated from the tournament without qualifying for a prize; and $19,323 each to the remaining entrants.
In an amplification of his reasoning, the Director explained he "focused on achieving an equitable and fair distribution in light of the [Division's] role in protecting the public by assuring the integrity of casino gaming." He explained the fund distribution as follows:
Lusardi began playing in the tournament around 11:00 a.m. on January 14, Day 1A, in the Poker Room. He played there until 4:30 p.m. Lusardi left the Poker Room and began playing in the Event Center at roughly 4:45 p.m. He busted out almost two hours later. On January 15, Day 1B, he paid another $560 entry fee and played in the Event Center from 10:54 a.m. to 7:26 p.m.
At the end of Day 1B, Lusardi was the tournament's chip leader. Lusardi did not play on Day 1C. On Day 2 of the tournament, January 16, play began at noon, and ended at approximately 2:30 a.m. on January 17. Lusardi started playing around noon in the Poker Room and never left there. He busted out between midnight and 1:00 a.m. At the end of play on Day 2, there were twenty-seven players remaining.
Plaintiff Musterel entered the tournament twice, busting out each time. He played on Day 1A in the Poker Room. Because Lusardi played there as well, Musterel was refunded $560 for his Day 1A entry fee under the Director's final order. Musterel also played on Day 1C, when Lusardi did not play. He was accordingly not reimbursed for his $560 entry fee on that day.
Plaintiff Celeste also entered the tournament twice. He played on Day 1A in the Poker Room, when he busted out. Because he may have been affected by the counterfeit chips, his entry fee was refunded. After re-entering the tournament, Celeste remained as one of the final twenty-seven players when play was suspended and thus was awarded $19,323 for his place among the finalists.
Plaintiff Vaghefi entered the tournament four times. He busted out twice in his Day 1A entries. He was refunded his entry fee for play in the Poker Room where Lusardi played but not for the second entry when he played elsewhere. Because he played in the Event Center when Lusardi did during Day 1B, Vaghefi's third entry fee was also refunded. On his last entry, he placed 240th and was awarded $1,489 which, per the Director's order, he was entitled to keep.
In their complaint alleging negligence, violations of the Consumer Fraud Act,
According to plaintiffs, Borgata knew its security measures were inadequate to detect a player attempting to compromise the event. They claim that although defendants "held out the subject poker tournament to be a fair, honest and uncompromised gaming event that gave participants a fair opportunity to win that prize money," in reality it was "rigged."
The judge hearing Borgata's summary judgment motion asked plaintiffs' counsel at oral argument how the case was different from one already dismissed by another judge in the vicinage brought by others of the twenty-seven players remaining in the tournament when play was suspended. Although maintaining the other judge erred in dismissing that case, counsel was forced to concede the legal issues were the same.
The motion judge adopted the reasoning of the first judge to consider claims arising out of the compromised poker tournament, that is, that jurisdiction over the controversy is squarely in the Division because the specific conduct alleged to have occurred is within the Casino Control Act's prohibitions against the use of bogus chips. Adopting as persuasive the first judge's finding that the Division had both the expertise and the specifically delegated authority to sanction licensee violations of the Casino Control Act or its implementing regulations and to afford remedies to plaintiffs, and had, indeed, already done so, the judge granted Borgata's motion for summary judgment.
We first address plaintiffs' appeal of the Director's final order governing the distribution of the tournament proceeds. Our role in reviewing the decision of an administrative agency is limited.
Applying those standards here, we find no basis to reverse the Director's order. The issue confronting the Director was how to fairly disburse the proceeds of a poker tournament hopelessly compromised by the illegal acts of one of the participants. Restitution of money retained by a casino licensee is among the specified powers delegated to the Division by the Legislature.
Instead of dividing up the remaining $1,433,145 in unallocated prize money among the twenty-seven players remaining when play was suspended, resulting in a $53,079.44 award to each, as would have benefitted Celeste, or refunding the entry fees of all entrants, even those not possibly affected by the illegal play, as would have benefitted Musterel and Vaghefi, the Director reasonably chose to ensure that every entrant possibly affected by Lusardi's illegal conduct got their entry fee back, that prize winners kept their prizes and that the remaining twenty-seven players shared equally in the remaining funds without unfairly penalizing any.
That decision benefitted all three plaintiffs. But to refund the entry fees of players not possibly affected by any illegal play, as Musterel urges in advocating for the return of his second entry fee, would necessarily reduce the amount available for distribution to Celeste and would require clawing back Vaghefi's prize for his 240th place finish.
Plaintiffs' proposed solution to those problems is for the Division to fine Borgata in order to pay the participants more. They cite no authority, however, that would have allowed the Director to fine a casino licensee and provide the proceeds to gamblers. Moreover, the Division's investigation did not reveal that Borgata violated any regulation or internal control in running the tournament for which imposition of a fine would be authorized and appropriate.
The Director reasonably chose to divide the entrants into four classes of similarly-situated players: 1) entrants who busted out not playing near Lusardi and not exposed to counterfeit chips; 2) entrants who busted out who might have been exposed to counterfeit chips in play; 3) entrants who won a prize of between $1,082 and $6,338 for placing between 450th and 28th in the tournament, all of whom may have been exposed to counterfeit chips; and 4) the last twenty-seven entrants still in the tournament when play was suspended who would certainly have been exposed to counterfeit chips.
The Director's distribution formula fairly ensured, with the addition of the $288,660 in administrative fees it required Borgata to contribute, that every entrant who may have been victimized received, at a minimum, the return of his or her entry fee; prize winners got to keep their prizes; and the remaining twenty-seven entrants received $19,323 in prize money. As the formula treats all four classes fairly and all players within each class equally, and is based on the facts in the record, deference to the Director's expertise in fashioning an equitable remedy is appropriate.
Although plaintiffs claim they were denied a hearing, plaintiffs' counsel confirmed at oral argument they never sought one, as they intended to press their claims against Borgata in the Law Division. Moreover, they have not identified any factual dispute which would have required a trial-type adjudication.
Because the Director's distribution formula for the tournament funds is supported by substantial evidence in the record, consistent with legislative policy, and is not arbitrary, capricious, or unreasonable, we affirm the April 14, 2014 final order.
We turn now to consider plaintiffs' appeal from the entry of summary judgment dismissing their Law Division complaint. We review summary judgment using the same standard that governs the trial court.
Plaintiff argues the judge misstated and misapplied the summary judgment standard and erred in construing the case law regarding the jurisdiction of the Division. Because we apply the same standard as the trial judge and review questions of law de novo without deference to interpretive conclusions we believe mistaken,
The law is well established that the Division of Gaming Enforcement has primary jurisdiction over interpretation of the Casino Control Act, its implementing regulations and a casino licensee's compliance with internal controls.
"[C]ourts are not ousted of jurisdiction over common law damage claims against casinos merely because the claims arise from gambling transactions,"
Applying the
Plaintiffs' negligence, consumer fraud and promissory estoppel claims are all grounded in Borgata's failure to insure a fair game untainted by counterfeit chips. Specifically, plaintiffs contend Borgata
Each of these alleged derelictions, however, is the subject of a detailed regulation governing the conduct of a casino licensee, that only the Division has the power to enforce.
A licensee intent on holding a gaming tournament must provide the Division, at least five days before the start of the event, the date and time of the tournament, the number of expected entrants, the equipment to be used, a description of security and surveillance measures implemented for the tournament, and three certifications from senior casino staff.
A casino must also have a surveillance department supervised by a director of surveillance,
A licensee is also required to maintain a security department,
Specifically, in regard to counterfeiting,
The internal control plan submitted to the Division must include "[p]rocedures for the security, storage and recordation of cash, chips and other cash equivalents utilized in the gaming. . . operations."
The table inventory must also be counted whenever "gaming tables remain open for gaming activity during the drop box collection."
The internal control plan submitted to the Division must include procedures for storage of chips.
During tournaments, at least two employees, one of whom must be "a supervisor from the casino games or security department or other department approved by the Division," may take and return the tournament chips to an approved storage area, and record in a tournament chip inventory ledger information including the value of the chips.
Apart from these extensive rules governing the actual conduct of gaming, the Division is required, by statute, to maintain a list of individuals to be excluded from casinos.
As that review demonstrates, all of plaintiffs' allegations deal with highly technical areas of the rules governing casino games or gambling tournaments and gaming equipment, which are the subject of comprehensive regulation by the Division and thus within the special expertise of the agency. The very real possibility of a direct and unavoidable conflict clearly exists between application of the CFA by judges and jurors and the gaming regulations governing this poker tournament. Further, the pervasiveness of the regulations here leave no place for a consumer fraud action. Alternatively, allowing a common-law negligence claim to proceed would be providing plaintiffs with a private right of action for violations of gaming regulations, which New Jersey law does not recognize.
Finding plaintiffs' claims for negligence, consumer fraud, and promissory estoppel barred, we turn to plaintiffs' claims for breach of contract and the implied right of good faith and fair dealing and unjust enrichment. As the late Judge Irenas noted in
That observation is especially pertinent as one tries to consider the damages available to plaintiffs, assuming they could prove their claim, for Borgata's breach of its contractual obligation to run a fair poker game, depriving them of their chance to compete for the prize money. Our law requires a "plaintiff prove damages with such certainty as the nature of the case may permit, laying a foundation which will enable the trier of the facts to make a fair and reasonable estimate." Totaro, Duffy, Cannova & Co., L.L.C. v. Lane, Middleton & Co.,
Because poker is a game of chance, none of these plaintiffs could predict or quantify his chances of winning in a meaningful and reliable way. Moreover, even a player such as Celeste, who was among the final twenty-seven players, may just as easily have been benefitted as harmed from the counterfeit chips in play.
Even assuming plaintiffs could prove their contract claims, the only conceivable damages available to them would be restitution, returning them to the condition they occupied before the contract was executed.
Although plaintiffs' disappointing experience in this aborted tournament is regrettable, the Division's response to the situation was fair, and plaintiffs present no legal basis for their claims seeking further enhancement of their recovery.
Affirmed as to both appeals.