FAMILY AMUSEMENT OF NORTHERN ILLINOIS, INC., and RICHARD E. GRAP, Plaintiffs-Appellees,
ACCEL ENTERTAINMENT GAMING LLC, f/k/a Accel Entertainment, LLC, and Accel Gaming LLC; THE ILLINOIS GAMING BOARD; DONALD R. TRACY, HECTOR ALEJANDRE, THOMAS A. DUNN, and DEE ROBINSON, in Their Official Capacities as Members of the Illinois Gaming Board; and MARK OSTROWSKI, in His Official Capacity As Administrator of the Illinois Gaming Board, Defendants The Illinois Gaming Board; Donald R. Tracy, Hector Alejandre, Thomas A. Dunn, and Dee Robinson, in Their Official Capacities as Members of the Illinois Gaming Board; and Mark Ostrowski, in His Official Capacity as Administrator of the Illinois Gaming Board, Defendants-Appellants.
from the Circuit Court of Winnebago County. No. 16-L-174
Honorable J. Edward Prochaska, Judge, Presiding.
JUSTICE SCHOSTOK delivered the judgment of the court, with
opinion. Justices Hutchinson and Birkett concurred in the
judgment and opinion.
1 This is an appeal from the trial court's rulings of
February 1, 2017, which denied the request of the defendants
the Illinois Gaming Board and its members (collectively, the
Gaming Board or the Board) to dismiss the counts against them
in the complaint filed by the plaintiffs, Family Amusement of
Northern Illinois, Inc. (Family), and Richard E. Grap
(collectively, FA), and granted summary judgment in favor of
FA on one of its requests for declaratory judgment. We affirm
in part and reverse in part.
2 I. BACKGROUND
3 In 2009, the legislature enacted the Illinois Video Gaming
Act (Act) (230 ILCS 40/1 et seq. (West 2016)). The
Act created a comprehensive regulatory scheme legalizing, for
the first time, gambling via video-gaming terminals. See
J&J Ventures Gaming, LLC v. Wild, Inc., 2016 IL
119870, ¶ 3. The Act gave the Gaming Board broad powers
to supervise video-gaming operations. Id. ¶ 32.
Under the statute, the Gaming Board "has all powers
necessary and proper to effectively execute the provisions of
the Act, " including "the authority to adopt
regulations for the purpose of administering the Act and
'to provide for the prevention of practices detrimental
to the public interest and for the best interests of video
gaming.' " Id. ¶ 3 (quoting 230 ILCS
40/78(a)(3) (West 2014)).
4 Section 45(a) of the Act requires licensing by the Gaming
Board for any person or entity wishing to manufacture,
distribute, supply, operate, or handle video-gaming terminals
and for any establishment wishing to have a video-gaming
terminal on its premises. 230 ILCS 40/45(a) (West 2016). The
Gaming Board cannot issue a license to any person having
"a background, including a criminal record, reputation,
habits, social or business associations, or prior activities
that pose a threat to the public interests of the State or to
the security and integrity of video gaming." 230 ILCS
40/45(d)(1) (West 2016). The Act provides that the Board
"may adopt rules to establish additional qualifications
and requirements to preserve the integrity and security of
video gaming in this State." 230 ILCS 40/45(e) (West
5 In early 2016, the Gaming Board adopted section 1800.330(b)
of Title II of the Illinois Administrative Code (Video Gaming
Rule 330), which allows the Board, after an investigation, to
enter an order of "economic disassociation, "
essentially requiring a licensee to stop doing business with
a specified person. See 11 Ill. Adm. Code 1800.330(b) (eff.
Jan. 27, 2016). Persons from whom a licensee can be ordered
to disassociate are identified in section 1800.220 of the
Illinois Administrative Code (Video Gaming Rule 220) and
include anyone who acts as a sales agent or broker for the
licensee or who "otherwise engage[s] in the solicitation
of business from current or potential licensed video gaming
locations." 11 Ill. Adm. Code 1800.220(a), (e)(2) (eff.
Feb. 16, 2016). The Gaming Board can issue a disassociation
order under the same circumstances that would justify the
denial of a license under section 45(d) of the Act or section
9 of the Riverboat Gambling Act (230 ILCS 10/9 (West 2016)).
11 Ill. Adm. Code 1800.330(c) (eff. Jan. 27, 2016). Any
person affected by a disassociation order can request an
administrative hearing to contest it. 11 Ill. Adm. Code
1800.330(b) (eff. Jan. 27, 2016).
6 Defendant Accel Entertainment Gaming, LLC (Accel), is a
licensed terminal operator under the Act and may own,
service, and maintain video-gaming terminals. Family is in
the business of supplying "nongaming amusements"
and devices, including coin-operated video-game machines,
jukeboxes, dart boards, pool tables, and the like. This
"soft equipment" is not subject to oversight under
the Act. Grap is Family's sole shareholder. Grap is a
licensed terminal handler under the Act. However, Family is
not licensed to own, operate, distribute, supply, or service
7 In 2010, Accel and FA entered into a referral contract
under which FA agreed to serve as a sales agent, soliciting
sites for the placement of Accel's video-gaming
terminals. Once FA obtained a commitment for a site, the
site's owner and Accel would enter into a
"terminal" or "use" agreement governing
the actual placement of the video-gaming terminal. Under the
referral contract, FA received commissions for successfully
obtaining new sites for terminals and for renewals of
terminal agreements, and it received ongoing monthly payments
based on the total number of terminals in place. In addition,
FA was to receive a large bonus for each terminal 10 years
after the date on which the terminal "went live."
The first terminals "went live" in 2013, so the
first such bonus payment was not due until 2023.
8 On May 25, 2016, Grap was arrested and charged with the
crime of possessing multiple illegal gambling devices that
were found in FA's warehouse, a violation of section
35(a) of the Act (230 ILCS 40/35(a) (West 2016)). (Section
35(a) requires all video-gaming terminals to be licensed and
prohibits the possession of certain types of gaming devices,
including those capable of removing credits that were awarded
through the operation of chance.) As a result of this arrest,
on June 2, 2016, the Gaming Board voted to issue Accel a
disassociation order (Disassociation Order or Order)
9 The Order was issued on June 6, 2016, and required Accel to
immediately "economically disassociate" from FA. In
the Order, the Gaming Board stated that it was invoking its
authority under Video Gaming Rule 330. The Order also cited
section 45 of the Act and section 9 of the Riverboat Gambling
10 The Order required Accel to confirm that it had
disassociated from FA. In addition, the Order prohibited
Accel from making "any additional payments" to FA.
The Order concluded by advising Accel and FA that they had
the right to file responses within 21 days and that, if they
did so, a hearing officer would be appointed and a hearing
would be held.
11 The language barring Accel from making "any
additional payments" to FA proved to be a flash point.
Although the Gaming Board did not know this when it entered
the Order, in addition to serving as a sales agent for Accel
under the referral contract, FA had several other agreements
with Accel, some of which FA contended were unrelated to
gaming. (These agreements are detailed below.) In complying
with the Order, Accel not only ceased employing FA as a sales
agent, it stopped making payments under all of these
12 FA reacted swiftly. On June 17, 2016, FA filed a lawsuit
in the circuit court of Winnebago County against Accel and
the Gaming Board. The two counts directed against the Gaming
Board sought (1) judgments declaring that the Gaming Board
had exceeded its statutory authority in issuing the
Disassociation Order and that, even if it had not, the Order
was void, and (2) an injunction preventing the Gaming Board
from enforcing the Order or requiring the cessation of
payments from Accel to FA. FA also filed a petition for a
temporary restraining order (TRO). On June 21, the trial
court heard oral argument on the petition for a TRO and
13 A week later, FA also took action in the administrative
proceeding, filing responses to the Disassociation Order. The
responses noted that Grap was contesting the criminal charges
against him and denied that the business relationship between
FA and Accel posed a threat to the integrity of gambling in
Illinois. FA also asked that the administrative proceeding be
stayed until the criminal charges against Grap had been
resolved. The Gaming Board agreed to stay the administrative
proceeding pending resolution of the criminal charges.
14 FA then filed an amended complaint in the circuit court.
Four of the six counts were directed to Accel and alleged
that Accel had breached various agreements with FA, including
(1) the referral contract (as amended over time); (2) a
promissory note in the amount of $1, 035, 000, representing a
debt owed by Accel to FA under the referral contract (the
note was not due until 2020, but FA claimed that Accel's
alleged breach of the referral contract was a default that
triggered immediate repayment); (3) an
automated-teller-machine (ATM) agreement under which FA
solicited ATM placement agreements on behalf of Accel in
return for quarterly commission payments based on the number
of successful transactions performed at each ATM placed by
FA; and (4) an asset-sale agreement under which Accel bought
some nongaming assets (soft equipment) from FA for $300, 000
plus interest, to be paid over three years.
15 As before, the two counts against the Gaming Board
included requests for declaratory judgment (count V) and
injunctive relief (count VI). In count V, FA asserted (1)
that the Gaming Board lacked any statutory authority to
require Accel to disassociate from FA or, (2) in the
alternative, that the Board exceeded its authority by
requiring Accel to stop making "any additional
payments" to FA. FA alleged that this language barred
not only future payments under the referral contract but ...