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Windy City Promotions, LLC v. Illinois Gaming Board

Court of Appeals of Illinois, Third District

July 19, 2017

WINDY CITY PROMOTIONS, LLC, Plaintiff,
v.
THE ILLINOIS GAMING BOARD, Defendant-Appellee. and PIER2 HOLDINGS, LLC, Plaintiff-Appellant,

         Appeal from the Circuit Court of the 13th Judicial Circuit, La Salle County, Illinois, Circuit No. 14-LM-133 The Honorable Joseph P. Hettel, Judge, presiding.

          JUSTICE McDADE delivered the judgment of the court, with opinion. Justices Lytton and Carter concurred in the judgment and opinion.

          OPINION

          McDADE JUSTICE.

         ¶ 1 The defendant, the Illinois Gaming Board, had posted a document to its website (the Website Document) opining, inter alia, that certain devices called "Electronic Product Promotion Kiosks" (the Kiosks) violated section 35 of the Video Gaming Act (230 ILCS 40/35 (West 2014)). Shortly thereafter, the Gaming Board seized two of the Kiosks belonging to plaintiff Windy City Promotions, LLC, from a health club in Morris. In response, Windy City sued the Illinois Gaming Board for declaratory relief and replevin, alleging that the Gaming Board lacked the authority both to issue the Website Document and to seize the Kiosks. Plaintiff Pier2 Holdings, LLC, which had provided the software for the Kiosks, was allowed to intervene. The plaintiffs and the Gaming Board filed motions for judgment on the pleadings. The circuit court ruled in favor of the Gaming Board on the Website Document issue and in favor of the plaintiffs on the seizure issue. Pier2 appealed, arguing that the circuit court erred when it ruled in the Gaming Board's favor regarding the Website Document. In a cross-appeal, the Gaming Board argues that the circuit court erred when it ruled that the Gaming Board lacked the authority to seize the Kiosks. We reverse.

         ¶ 2 FACTS

         ¶ 3 On July 10, 2014, Windy City filed a replevin action against the Gaming Board, alleging that the Gaming Board wrongfully seized two of Windy City's Kiosks from a health club in Morris. In part, Windy City described the Kiosks as "stand-alone or table top devices featuring several buttons, a touch screen and a bill acceptor." A participant would insert paper money into the machine in exchange for a coupon that could be applied toward products sold by a particular company. The Kiosk would also automatically enter the purchaser into a sweepstakes. The purchaser could either instantly reveal the results of the sweepstakes entry or "elect to reveal the results of his or her entries more slowly via an entertaining display of the customer's choosing on the screen." The "entertaining display" was a choice of games, "which mimic the look of slots, poker, keno and bingo." Windy City alleged that the sweepstakes winners were "pre-determined by the internal promotional sweepstakes software. The customer cannot influence the sweepstakes results after the random choice is made." If the purchaser was a sweepstakes winner, he or she would receive a ticket that could be exchanged for a cash prize with the location hosting the Kiosk.

         ¶ 4 On September 26, 2014, Windy City amended its complaint to request an expedited hearing, declaratory relief, and replevin. In addition to a request for the return of the Kiosks, Windy City sought declaratory rulings that its Kiosks were not unlawful gambling machines and that the Gaming Board lacked the authority to post the Website Document. The amended complaint contained a new description of the Kiosks, but it was substantially similar to the description given in the original complaint.

         ¶ 5 The Website Document referenced by the complaint was dated December 5, 2013, and titled "The legality of Electronic Promotion Sweepstakes Kiosks in Illinois." In full, it stated the following:

"The Illinois Gaming Board (IGB) has become aware that Electronic Product Promotion Sweepstakes Kiosks (Devices) have entered the Illinois market. These Devices allow a patron to insert cash and purchase credits in addition to receiving a coupon that can be redeemed via a website. The patron is then able to wager credits by playing electronic sweepstakes games that look like casino style slots. As credits are won or lost, they are represented on the screen by a running credits total. To cash out, the patron presses a button that removes and resets the credits shown on the screen and prints the total credits on a ticket/coupon. That ticket/coupon can be redeemed for cash at the location.
These Devices violate Section 35 of the Video Gaming Act (VGA), which provides that it is a felony to own, operate, possess or permit to be kept 'any device that awards credits and contains a circuit, meter, or switch capable of removing and recording the removal of credits when the award of credits is dependent upon chance.' 230 ILCS 40/35(a). Effective January 1, 2014, Public Act 098-0111 amends section 35(a) of the VGA by adding the following language:
Nothing in this Section shall be deemed to prohibit the use of a game device only if the game device is used in an activity that is not gambling under section (b) of Section 28-1 of the Criminal Code of 2012.
The Criminal Code codified the common law definition of gambling, which has three elements: (1) consideration or purchase, (2) chance, and (3) opportunity for a prize. If any one of these elements is missing, there is no illegal gambling. Thus, in order for these Devices to not constitute illegal gambling, both the Criminal Code and the Illinois Prizes and Gifts Act dictate that no purchase be required. 815 ILCS 525/20, 720 ILCS 5/28-2(b)(13) [sic].
Promoters of these Devices (much like electronic raffle machines, internet cafes or Lucky Shamrock Vending Machines), attempt to exploit what they deem a 'legal loophole' in Illinois gambling laws by arguing that the purchase paid into the kiosks is for a coupon and not for the wagering of credits. This argument has been universally rejected in jurisdictions across the country. [Footnote 1: Courts from New York, Indiana, Ohio, Alabama, North Dakota, Florida, Hawaii, North Carolina all have rejected this argument.] Additionally, a promotion under the Illinois Prizes and Gifts Act that allows the opportunity for an alternate means of entry ('no purchase necessary') does not cancel out the element of consideration or purchase. The obvious purpose of these Devices is to offer a chance to win a prize for consideration. Finally, the Illinois Prizes and Gifts Act also requires that written promotional offers must contain all nine (9) elements outlined in a clear and conspicuous statement at the onset of the offer. These Devices might not meet all nine elements and accordingly would not comply with the Illinois Prizes and Gift [sic] Act.
It is the opinion of the IGB that Electronic Product Promotion Sweepstakes Kiosks fit the definition of a gambling device. These devices will not be licensed by the IGB. An owner of a Licensed Video Gaming Location found to be in possession of such a Device could be charged with a felony under the Video Gaming Act. At a minimum, possession of such a Device will jeopardize suitability for initial or continued licensure."

         ¶ 6 In response to Windy City's amended complaint, the Gaming Board filed an answer, affirmative defense, and counterclaim, which, in part, sought a ruling that the Kiosks were illegal and an injunction prohibiting Windy City from distributing the Kiosks. In part, the Gaming Board's pleading alleged that the Kiosks in question had been seized by "IGB special agents" and that "IGB special agents are either employed by the Illinois State Police pursuant to [section 5(c)(20.7) of the Riverboat Gambling Act (230 ILCS 10/5(c)(20.7) (West 2014))] or are otherwise considered a 'local authority' as construed under [section 28-5 of the Criminal Code of 2012 (720 ILCS 5/28-5 (West 2014))]."

         ¶ 7 On November 7, 2014, Pier2 was allowed to intervene.

         ¶ 8 On November 19, 2014, Windy City and Pier2 filed a motion for judgment on the pleadings. On February 27, 2015, the Gaming Board filed a responsive pleading in which it specifically alleged, for the first time, that the Kiosks had been seized by three Illinois State Police officers assigned to the Gaming Board. The officers' affidavits were attached to the filing.

         ¶ 9 On February 10, 2015, the circuit court held a hearing on the outstanding matters, and it issued its written decision on March 13, 2015. First, the court ruled that the Gaming Board lacked the authority to seize the Kiosks, finding (1) the Gaming Board was not authorized by section 28-5 of the Criminal Code of 2012 (720 ILCS 5/28-5 (West 2014)) to conduct the seizure, as that section authorized only the Department of State Police and municipal or local authorities to take such action; (2) the seizure powers granted to the Gaming Board in the Riverboat Gambling Act and the Video Gaming Act were limited to activities connected with riverboat gambling and licensed video gambling terminals; and (3) the seizure powers granted to the Gaming Board by section 35 of the Video Gaming Act referred back to section 28-5 of the Criminal Code of 2012, which gives seizure power exclusively to the Department of State Police or local law enforcement.

         ¶ 10 Second, the court ruled, without further clarification, that the plaintiffs had failed to convince the court that it had the authority to enjoin the Gaming Board from posting documents to its website. Further, the court stated that it "makes no findings as to Plaintiffs' contention that the [Gaming Board] exceeded its statutory authority in its ...


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