Semb's, Inc. v. Gaming & Entertainment Management-Illinois, LLC
2014 IL App (3d) 130111
Ill. App. Ct.2014Background
- Semb’s, Inc. d/b/a Da Lee’s Fine Dining sued GEM, Metro, and Best over a Metro Agreement to place video gaming terminals (VGTs) at Da Lee’s; Metro assigned the contract to Best, who then assigned it to GEM.
- Da Lee’s and the other entities were unlicensed VGT operators and Da Lee’s establishment was initially unlicensed.
- Board threatened to deny Best’s licensure in July 2012; Best assigned the Metro Agreement to GEM two days after the Board’s denial notice.
- Da Lee’s later entered into a separate exclusive VGT-placement contract with Triple 7 Illinois, LLC (licensed) in July 2012.
- Triple 7 filed a declaratory judgment action challenging the Metro Agreement; the circuit court ruled the Metro Agreement was not a “use agreement.”
- The appellate court later decided in Triple 7 that the Metro Agreement was not a use agreement and that the consent/assignment rules did not apply to that agreement; Da Lee’s filed this suit seeking invalidation and remedies, which the circuit court dismissed; the appellate court affirmed the dismissal on res judicata grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Metro Agreement is an illegal gambling contract or a use agreement. | Da Lee’s argues the Metro Agreement is an illegal gambling contract and not a valid use agreement. | GEM argues Triple 7 controls and that the agreement is not a use agreement under the Act. | Affirmed that res judicata bars re-litigation based on Triple 7’s determination. |
| Whether assignment of a use agreement between unlicensed operators violated 11 Ill. Admin. Code 1800.320. | Da Lee’s contends the assignments violated use-agreement prohibitions. | GEM/defendants rely on Triple 7’s reasoning that such assignments were permissible. | Affirmed that the assignments were ineffective because neither party was licensed; res judicata applies. |
| Whether the Board’s denial of Best’s licensure renders the Metro Agreement enforceable. | Da Lee’s asserts Board denial undermines validity of the contract. | GEM argues that the denial does not rescue an illegal prelicensing contract. | Affirmed that Board denial does not save an illegal contract; but dispositive holding rests on res judicata. |
| Whether Da Lee’s fraud claims survive given the Triple 7 decision and res judicata. | Da Lee’s argues fraud in representations related to licensure and validation. | GEM contends res judicata and Triple 7 foreclose reconsideration of those issues. | Not independently addressed here; court relied on res judicata to affirm dismissal. |
Key Cases Cited
- Triple 7 Illinois, LLC v. Gaming & Entertainment Management-Illinois, LLC, 2013 IL App (3d) 120860 (3d Dist. 2013) (held Metro Agreement not a use contract; assignments unrelated to use agreements do not apply)
- Rein v. David A. Noyes & Co., 172 Ill. 2d 325 (1996) (settled standards for res judicata applicability)
- La Salle National Bank v. County Board of School Trustees, 61 Ill. 2d 524 (1965) (res judicata requirements and identity of cause of action)
- Hudson v. City of Chicago, 228 Ill. 2d 462 (2008) (explains res judicata and privity concepts)
- Style Builders, Inc. v. Fuernstahl, 32 Ill. App. 3d 272 (1975) (definition of ‘on the merits’ for final judgments)
- Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130 (Illinois Supreme Court 2013) (administrative rules carry weight in statutory interpretation)
- Hall v. Montaleone, 38 Ill. App. 3d 591 (1976) (gambling contracts are void and unenforceable)
- Mallett v. Butcher, 41 Ill. 382 (1866) (contracts arising from gaming are void)
- Schneider v. Turner, 130 Ill. 28 (1889) (principle that gambling contracts are void)
- G. Hartney Fuel Oil Co. v. Hamer, (cited above) (-) ((administrative rules interpret statutes))