Jerry HANNOSH, a married man, Plaintiff/Appellant, v. David P. SEGAL and Jane Doe Segal, his wife; Zalman Segal and Jane Doe Segal, his wife; Joseph Segal and Jane Doe Segal, his wife, Defendants/Appellees. Jerry Hannosh, a married man, Plaintiff/Appellee, v. David P. Segal and Jane Doe Segal, his wife; Zalman Segal and Jane Doe Segal, his wife; Joseph Segal and Jane Doe Segal, his wife, Defendants/Appellants.
No. 1 CA-CV 12-0811
Court of Appeals of Arizona, Division 1
May 22, 2014
328 P.3d 1049
PORTLEY, Judge
David P. Segal, Zalman Segal, Phoenix Joseph Segal, Los Angeles, CA, for Defendants/Appellees.
OPINION
PORTLEY, Judge.
¶ 1 We are asked to decide whether a person gambling on Internet websites can bring a private right of action to recover his losses under the Organized Crime, Fraud and Terrorism Act, Arizona Revised Statutes (“A.R.S.“) section
FACTUAL AND PROCEDURAL BACKGROUND
¶ 2 Jerry Hannosh (“Hannosh“) bet on sporting events on the Internet and ultimately lost approximately $800,000. In an attempt to recover his losses, he filed a lawsuit against David Segal, Zalman Segal, Joseph Segal, and their respective spouses (collectively, “the Segals“) under Arizona‘s racketeering statute alleging their gambling websites constituted an enterprise engaged in a pattern of unlawful activity and that they were engaged in civil racketeering. The Segals filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted, arguing that Hannosh had no cognizable injury, could not show proximate cause, and that his allegations inadequately supported liability. The superior court granted the motion and awarded the Segals their attorneys’ fees and costs.
¶ 3 The court, however, reconsidered the award of attorneys’ fees, and found that it
DISCUSSION
Standard of Review
¶ 4 We review de novo a dismissal of a complaint for failure to state a claim upon which relief may be granted. Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7, 284 P.3d 863, 866 (2012). We will affirm if the plaintiff would not be entitled to relief even if all alleged facts could be proven to be true. Jeter v. Mayo Clinic Ariz., 211 Ariz. 386, 391, ¶ 18, 121 P.3d 1256, 1261 (App.2005). We assume the truth of only well-pled facts in the complaint and reasonable inferences from those facts. Cullen v. Auto-Owners Ins. Co., 218 Ariz. 417, 419, ¶ 7, 189 P.3d 344, 346 (2008). We can affirm the trial court‘s dismissal if correct for any reason. See Dube v. Likins, 216 Ariz. 406, 417 n. 3, ¶ 36, 167 P.3d 93, 104 n. 3 (App.2007).
I. Are Gambling Losses an Injury under Arizona‘s Racketeering Statute Providing a Private Cause of Action?
¶ 5 Hannosh contends that the superior court incorrectly relied on federal, rather than Arizona, law when it dismissed his complaint. He argues that the money he lost gambling constitutes a cognizable injury that was proximately caused by the Segals’ alleged Arizona RICO violations.
¶ 6 Whether gambling losses constitute an injury to a person, property or business under
¶ 7 Arizona RICO allows a private cause of action for racketeering. Section
A person who sustains reasonably foreseeable injury to his person, business or property by a pattern of racketeering activity, or by a violation of
§ 13-2312 involving a pattern of racketeering activity, may file an action in superior court for the recovery of up to treble damages and the costs of the suit, including reasonable attorney fees for trial and appellate representation.2
“Racketeering,” in pertinent part, is defined as any act or preparatory act committed for financial gain, chargeable or indictable under the law where the act occurred and punishable by more than a year‘s imprisonment.
¶ 8 A plaintiff seeking damages or other relief from individuals allegedly engaged in racketeering does not have to allege a special racketeering injury. State ex rel. Corbin, 136 Ariz. at 595, 667 P.2d at 1310. The complaint is sufficient if there is an allegation that the plaintiff has been injured by a violation of
¶ 9 Arizona‘s racketeering statutes do not specifically define an “actionable injury to his person, business or property” to include Internet gambling losses.
¶ 10 We look to federal interpretation for guidance where the federal and state RICO statutes contain similar provisions. Rosier, 181 Ariz. at 221, 889 P.2d at 14; see Lifeflite Med. Air Transp., Inc., 198 Ariz. at 152, ¶ 12, 7 P.3d at 161 (noting that Arizona‘s racketeering statute was amended in 1993 to be more analogous to federal RICO). Where there are differences, we presume the legislature was deliberate in not following the federal statute. See State v. Ivanhoe, 165 Ariz. 272, 273-74, 798 P.2d 410, 411-12 (App. 1990) (finding that Arizona‘s racketeering act did not include sole proprietorships as enterprises because Arizona chose not to use the word “individual“). For example, a plaintiff alleging a federal RICO violation must demonstrate an injury to one‘s business or property interest that is cognizable under state law and is a “concrete financial loss.”
¶ 11 Federal courts have also examined RICO to determine what injury is one to business or property. Generally, gambling losses have been held not to constitute property or business harm. See Chaset, 300 F.3d at 1087 (noting that trading card purchasers do not suffer a federal RICO injury when they do not receive a prize card because they paid for and received the chance to obtain the card); Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 188 (3d Cir.2000) (noting that a lost speculative opportunity is not a federal RICO injury); Adell v. Macon Cnty. Greyhound Park, Inc., 785 F.Supp.2d 1226, 1241 (M.D.Ala.2011) (“The injuries of which Plaintiffs complain—illegal gambling losses (unaccompanied by allegations of fraud affecting their losses) and loss of honest services—do not qualify as RICO injuries to business or property.“); Dumas v. Major League Baseball Props., Inc., 104 F.Supp.2d 1220, 1223 (S.D.Cal.2000) (noting that unless there are allegations that the gambling enterprise was rigged, the plaintiffs received the benefit of their bargain and lack a business or property injury under the federal RICO statute).4 Federal courts also recognize that even though gambling may be illegal under state law, the gambler exchanges money for a chance to win and suffers no RICO property injury. See Major League Baseball Props., Inc. v. Price, 105 F.Supp.2d 46, 51-52 (E.D.N.Y.2000) (noting that the unavailability of enforcement of an illegal gambling transaction does not mean that the benefit of chance was not present); see also Adell, 785 F.Supp.2d at 1239 (“[E]ven if the chance to win that Plaintiffs paid for was illegal under state law, such illegality in and of itself would not transform Plaintiffs’ gambling losses into civil RICO property losses.“). If, however, a gambler alleged that the gambling or the gambling odds were rigged, courts have noted that a gambler may be able to plead a federal RICO injury. See Adell, 785 F.Supp.2d at 1239; see also Price, 105 F.Supp.2d at 52.
¶ 12 Hannosh argues that because
¶ 13 The term “injury to his person” is arguably ambiguous, but it does not appear to have been intended to include losses by a voluntary gambler who does not allege that the games were rigged. The term “injury to his person” has been in the racketeering statute since its passage even though, at the outset, only the state could sue for civil remedies.
¶ 14 Although the Arizona racketeering statute is broader than its federal counterpart, we disagree that the phrase “injury to [] person,” in the Arizona statute, includes gambling losses from an alleged illegal gambling operation.5 Although Black‘s Law Dictionary does not define “injury to person,” it defines “injury” as “[t]he violation of another‘s legal right, for which the law provides a remedy; a wrong or injustice.... Some authorities distinguish harm from injury, holding that while harm denotes any personal loss or detriment, injury involves an actionable invasion of a legally protected interest.” 801 (8th ed.2004) (citing Restatement (Second) of Torts § 7, cmt. a (1965)). And, Black‘s Law Dictionary simply defines “person” as “[a] human being.” Id. at 1178. Similarly, the Merriam-Webster‘s Dictionary defines “injury” as “an act that damages or hurts [or a] violation of another‘s rights for which the law allows an action to recover damages.” Injury, Merriam-Webster, http://www.merriam-webster.com/dictionary/injury (last visited May 6, 2014). Merriam-Webster further defines injury as “hurt, damage, or loss sustained.” Id.
¶ 15 Gambling losses would not qualify as an injury to person because gambling without a chance to lose is not “a legally protected interest.” See Black‘s Law Dictionary 801 (8th ed.2004). In fact, in the insurance context, payments that are made voluntarily with full knowledge of the facts cannot later be recovered by the payor. Moody v. Lloyd‘s of London, 61 Ariz. 534, 540, 152 P.2d 951, 953 (1944) (noting that an insurer who knew all facts before making payment under the policy could not recover the amount paid). As a result, because Hannosh voluntarily took the understood risk
¶ 16 The Arizona Supreme Court has narrowly interpreted the phrase “injury to [] person” in a related context. In Reed v. Real Detective Publishing Co., the court addressed whether a libel claim survived the defendant‘s death and determined that “[a]n injury ... which affects the sensibilities is equally an injury to the person as an injury to the body would be.” 63 Ariz. 294, 299, 306, 162 P.2d 133, 136, 139 (1945). The court noted, however, that the phrase “injury to person” emphasizes the word “person” as a noun, which relays greater importance on “a natural body, or perhaps a body corporate, and the injuries contemplated are injuries to that body.” Id. at 301, 162 P.2d at 137 (quoting McCaffrey v. Jackson, 23 Pa. D. 173, 174 (Pa.D.1914) (noting that “[t]he expression ‘injury to person’ is clearly more restrictive than the term ‘personal injuries’ employed in the act under consideration, and is to be distinguished therefrom“)). As a result, libel, which besmirches character or reputation, is not an injury to person for purposes of determining the applicable statute of limitations. Id. at 301-02, 162 P.2d at 137.
¶ 17 Based on Reed and the dictionary definitions of “injury” and “person,” we conclude that the term “injury to his person” in the Arizona statute includes bodily harm and an injury to a legally protected personal interest.6 We do not find that “injury to his person” includes monetary losses as a result of voluntary gambling. Voluntary Internet gambling is a gamble—pick the right team or the spread on the game, you win and make money; pick the wrong team or the spread on a game, you lose and owe money. Voluntary gambling losses, in the absence of any allegation that the gambling is rigged, do not constitute an injury to person.
¶ 18 In his complaint, Hannosh alleged the Segals financed, owned, controlled, conducted, or participated in two Internet gaming websites where he was given the opportunity to place bets on the outcome of events, like sporting games. The complaint further alleges that if the wager was unsuccessful, the enterprise kept the bet, but if the bettor was successful, he received the payout minus ten percent.
¶ 19 Hannosh did not allege that the Segals manipulated the odds or rigged the gambling; therefore, he has not alleged an injury to business or property. Although Hannosh alleged that David Segal falsely said that the gambling operation was legal because it was based in Costa Rica, even if we assume the allegation was true, Hannosh got what he bargained for: an opportunity to win. He did not allege that he was deceived about a successful bettor receiving the payout minus ten percent. He was not swindled or cheated, and he did not suffer an actionable injury to person, business, or property by making bets and losing.
¶ 20 Hannosh also alleged that as a result of his losses he faced “several implicit threats of using violence or other criminal means to cause harm to [himself] or his reputation or property” and that he “reasonably believed that such implicit threats were credible.” He did not allege, however, that he suffered emotional distress or any other injury from these implicit threats. In fact, Hannosh‘s opening brief clarifies that he brought the action under Arizona RICO to “disgorge the profits unlawfully gained by the enterprise through recovery of his ‘gambling losses’ as well as treble damages,” not to recover for any threatened harm.
¶ 21 Given that Hannosh did not allege an injury to person, business, or property under our interpretation of
¶ 22 The Segals challenge the ruling that denied their request for attorneys’ fees. We review an award or denial of attorneys’ fees for abuse of discretion. Motzer v. Escalante, 228 Ariz. 295, 296, ¶ 4, 265 P.3d 1094, 1095 (App.2011). But we review questions of statutory interpretation related to a ruling on attorneys’ fees de novo. Democratic Party of Pima Cnty. v. Ford, 228 Ariz. 545, 547, ¶ 6, 269 P.3d 721, 723 (App.2012).
¶ 23 Section
¶ 24 Here, the superior court originally awarded the Segals their attorneys’ fees pursuant to
¶ 25 The Segals now argue that Hannosh failed to present evidence of the parties’ disparate finances or that the fee award was disproportionate to the nature of the damage or other relief obtained. They also contend that Hannosh‘s argument that the case was one of first impression was not a special circumstance warranting consideration. The Segals raised neither of those arguments to the superior court; thus, they are waived because we generally will not consider arguments that were not presented to the trial court for the first time on appeal. See Rand v. Porsche Fin. Servs., 216 Ariz. 424, 434 n. 8, ¶ 39, 167 P.3d 111, 121 n. 8 (App.2007) (noting that arguments not raised in the trial court are waived on appeal).
¶ 26 The Segals attempt to argue that they preserved their arguments on appeal by stating in their motion to the trial court that Hannosh failed “to establish any entitlement to a reduced award.” They made the statement in relation to Hannosh voluntarily gambling, but not in response to his claim of no special circumstances. Consequently, the superior court did not abuse its discretion by denying the Segals’ attorneys’ fee request.8
CONCLUSION
¶ 27 For the aforementioned reasons, we affirm the judgment.
Presiding Judge MAURICE PORTLEY delivered the Opinion of the Court, in which Judge JOHN C. GEMMILL and Judge KENT E. CATTANI joined.