J&J VENTURES GAMING, LLC, еt al., Appellants, v. WILD, INC. (Accel Entertainment Gaming, LLC, et al., Appellees).
119870, 119871, 119872, 119873, 119874 cons.
Supreme Court of Illinois
September 22, 2016
Rehearing denied November 21, 2016
2016 IL 119870
Hon. Donald M. Flack, Judge, presiding.
Illinois Official Reports
Decision Under Review: Appeal from the Appellate Court for the Fifth District; heard in that court on appeal from the Circuit Court of Madison County, the Hon. Donald M. Flack, Judge, presiding.
Judgment: Appellate court judgments affirmed.
Counsel on Appeal:
William M. Gantz and Gail S. Eisenberg, of Dentons US LLP, of Chicago, for appellant Action Gaming, LLC.
Steven P. Blonder and Marissa L. Downs, of Much Shelist, P.C., of Chicago, and G. Patrick Murphy and Patricia S. Murphy, of Murphy & Murphy LLC, of
Lisa Madigan, Attorney General, of Springfield (Carolyn E. Shapiro, Solicitor General, and Frank H. Bieszczat, Assistant Attorney General, of Chicago, of counsеl), for intervenor-appellee Illinois Gaming Board.
JUSTICE FREEMAN delivered the judgment of the court, with opinion.
Chief Justice Garman and Justices Thomas, Kilbride, Burke, and Theis concurred in the judgment and opinion.
Justice Karmeier took no part in the decision.
OPINION
¶ 1 At issue in these consolidated appeals is whether the circuit courts have subject-matter jurisdiction to determine whether the location agreements between plaintiffs and defendants are valid and enforceable contracts that control the placement of video gaming terminals in defendants’ establishments. The appellate court held that the circuit courts lack subject-matter jurisdiction because the Illinois Gaming Board has exclusive authority over contracts for the placement of video gaming terminals. The appeals are before us pursuant to certificates of importance granted under
BACKGROUND
¶ 2 ¶ 3 In July 2009, the General Assembly enacted the
powers necessary and proper to effectively execute the provisions of the Act. Id. Those powers include 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. In October 2009, the Board adopted emergency regulations to administer the Act.
¶ 4 A video gaming terminal is an electronic device that allows users to play a videо game, such as video poker or blackjack, and permits the user to receive free games or credits that can be redeemed for cash.
¶ 5 Shortly after the Act became effective and prior to the Board‘s adoption of emergency regulations, Action Amusement Company, LLC (Action Amusement), an unlicensed terminal operator, executed agreements entitled “Exclusive Location and Video Gaming Terminal Agreements” with each of the defendant establishments involved in these cоnsolidated appeals. Those agreements, which are substantially identical, purported to give Action Amusement the exclusive right to place and operate video gaming terminals within the defendant establishments. Each agreement included a “Recitals” portion, stating that Action Amusement and the establishment would obtain a license from the Board and wished to enter into an exclusive location agreement “for the purpose of placing and operating video gaming terminals in the Licensed Establishment.” Each agreement also stated that, “[i]n accordance with the Video Gaming Act,” the parties agreed to evenly split the after-tax profits from the operation of thе terminals. The term of each agreement was for a period of five years, beginning on the date the first video gaming terminal was operated in the licensed establishment.
¶ 6 In addition, each agreement provided that, during the term of the agreement, the terminal operator would have the exclusive right to place video gaming terminals in the licensed establishment and further provided that the agreement would be binding upon the successors
and/or assigns of the parties. Also, each agreement expressly acknowledged that nothing of value had been offered or received in exchange for the execution of the agreement and that it is a violation of the Act to offer anything аs an inducement for the procurement of a location.
¶ 7 On October 5, 2010, Action Amusement assigned its rights under the location agreements to Action Gaming, LLC (Action Gaming), another unlicensed terminal operator. In exchange for the assignment of rights under the location agreements, Action Gaming agreed to pay Action Amusement $10,000 per month until August 1, 2011. After that date, once Action Gaming was operating video gaming terminals in at least 70 locations, it agreed to pay Action Amusement up to $20,000 per month for the next 10 years, depending on the number of locations at which it was operating terminals. The assignment was signed by Jason Rowell, as authorized representative of both Action Amusement and Action Gaming.
¶ 9 On July 19, 2012, the Board notified Action Gaming that its license application had been denied based on its findings that Nicky Nichols and Jason Rowell, employees and owners of Action Gaming, were personally and professionally associated with James Koehler, who had been convicted of illegal gambling. The Board also cited its finding that Nichols had engaged in business practices and maintained associations with a number of convicted felons. Under the Board‘s regulations, Action Gaming wаs an “applicant” at the time this letter was issued.
¶ 10 On August 24, 2012, while Action Gaming‘s request for a hearing on the denial of its application was pending, it assigned its rights under the subject location agreements to J&J Ventures Gaming, LLC (J&J Ventures), a licensed terminal operator, in exchange for a purchase price. That assignment specifically stated that, in consideration for the purchase price, Action Gaming agreed to assign and J&J Ventures agreed to accept all rights “under each Use Agreement.” This assignment was executed by Nicky Nichols on behalf оf Action Gaming, as its member/manager. At the time of the assignment, J&J Ventures was a licensed terminal operator, but the 10 defendant establishments were not yet licensed by the Board.
¶ 11 During late August and early September 2012, each of the defendant establishments signed separate location agreements with Accel Entertainment Gaming, LLC (Accel), a licensed terminal operator. Those agreements purported to grant Accel the exclusive right to operate video gaming terminals within the defendant establishments.
¶ 12 Thereafter, plaintiffs J&J Ventures and Action Gaming subsequently brought the 10 underlying lawsuits in the circuit courts seeking declaratory judgments against the defendant
establishments. The complaints asserted that the circuit courts had jurisdiction over the disputes under the Illinois declaratory judgment statute (
¶ 13 Accel was granted leave tо intervene in all 10 declaratory judgment actions, over the objections of J&J Ventures and Action Gaming. In answer to the complaints, Accel alleged that the location agreements that had been assigned to Action Gaming and later to J&J Ventures were invalid because they did not comply with the Act and the Board‘s regulations.4
¶ 14 While the declaratory judgment actions were pending, the appellate court for the Third District issued its opinion in Triple 7 Illinois, LLC v. Gaming & Entertainment Management-Illinois, LLC, 2013 IL App (3d) 120860, which involved successive assignments of a location agreement by an unlicensed terminal operator under factual circumstances that were virtually identical to those on which the present appeals are based. Id. ¶¶ 2-5. In that case, the Third District addressed the question of whether the Board‘s regulation precluding the assignment of a use agreement except from one licensed terminal operator to another (
Third District did not address the issue of the circuit court‘s subject-matter jurisdiction over the claims.
¶ 15 Based on the holding in Triple 7, the circuit courts considering the 10 declaratory judgment actions underlying these appeals ruled that the location agreements between J&J Ventures and the defendant establishments were not use agreements and were valid, binding, and enforceable contracts. Accordingly, the circuit courts enjoined Accel from operating video gaming terminals at the defendant establishments.
¶ 17 The appellate court vacated the circuit courts’ judgments and dismissed the appeals, holding that the circuit courts lacked subject-matter jurisdiction over the disputes becаuse the Board had exclusive jurisdiction over the matter that formed the basis of the parties’ claims. 2015 IL App (5th) 140092; see also J&J Ventures Gaming, LLC v. Whitlock Chiefs, Inc., No. 5-14-0181 (2015) (unpublished summary order) (d/b/a Chiefs); J&J Ventures Gaming, LLC v. Coatney, No. 5-14-0180 (2015) (unpublished summary order) (d/b/a Denny‘s Package Liquor); J&J Ventures Gaming, LLC v. Mule Barn, Inc., No. 5-14-0171 (2015) (unpublished summary order); J&J Ventures Gaming, LLC v. Ole Lonnie‘s Liquor, Inc., No. 5-14-0093 (2015) (unpublished summary order) (d/b/a Lonnie‘s Liquor). Those judgments were based on the court‘s determination that the Gaming Board has exclusive authority over all agreements that purport to control the placement and operation of video gaming terminals within a licensed establishment. 2015 IL App (5th) 140092, ¶¶ 32, 62. As a consequence, the appellate court refused to follow the reasoning employed in Triple 7 and declined to consider the merits of the parties’ disputes. Id. ¶¶ 55, 60.
¶ 18 On the application of J&J Ventures and Action Gaming, the appellate court granted certificates of importance in all five appeals.
ANALYSIS
¶ 19 ¶ 20 The underlying declaratory judgment actions are predicated on a dispute over the validity and enforceability of the location agreements assigned to J&J Ventures. The issue before this court, however, is which tribunal has jurisdiction to determine whether the location agreements are valid and enforceable.5
¶ 21 J&J Ventures and Action Gaming argue that the appellate court erred in holding that the circuit courts lack subject-matter jurisdiction to determine the validity of the location agrеements. J&J Ventures and Action Gaming further assert that the judgments of the appellate court operate to deprive them of their right to freely contract protected by the contract clauses of the United States and Illinois Constitutions (
¶ 22 Accel agrees that the appellate court erred with respect to the jurisdictional issue but contends that the appellate court properly declined to follow the ruling in Triple 7 because the location agreements assigned to J&J Ventures are not valid and binding. The Gaming Board argues that the appellate court correctly held that the circuit courts lack subject-matter jurisdiction to adjudicate the validity and enforceability of the location agreements.
¶ 23 Subject-matter jurisdiction refers to a tribunal‘s power to hear and determine cases of the general class to which the proceeding in question belongs. Crossroads Ford Truck Sales, Inc. v. Sterling Truck Corp., 2011 IL 111611, ¶ 27. In general, the Illinois Constitution vests the circuit courts with original jurisdiction over all justiciable matters, except in certain circumstances where this court has exclusive and original jurisdiction.
¶ 24 We note that in support of their argument that the circuit courts have subject-matter jurisdiction, J&J Ventures and Action Gaming rely on Employers Mutual Cos. v. Skilling, which stated that “if the legislative enactment does divest the circuit courts of their original jurisdiction through a comprehensive statutory administrative scheme, it must do so explicitly.” Employers Mutual Cos. v. Skilling, 163 Ill. 2d 284, 287 (1994). As authority, the Skilling court cited People v. NL Industries, 152 Ill. 2d 82, 96-97 (1992), for the proposition that the absence of language explicitly excluding the circuit courts from exercising jurisdiction means that the legislature did not intend to divest circuit courts of jurisdiction. Skilling, 163 Ill. 2d at 287. Yet, Skilling‘s description of the analysis in NL Industries is truncated and does not represent the full measure of this court‘s jurisprudence in ascertaining legislative intent to vest exclusive jurisdiction in an administrative agency. In fact, NL Industries considered the relevant statute as a whole, and the court referenced not only the lack of exclusionary language but also other statutory provisions that specifically referred to the circuit courts’ ability to adjudicate the questions at issue. See NL Industries, 152 Ill. 2d at 97-99. Therefore, NL Industries implicitly recognized that legislative intent to divest circuit
courts of jurisdiction may be discerned by considering the statute as a whole. Several of our other
¶ 25 We look to the statutory framework of the Act to determine whether the legislature intended to vest the Gaming Board with exclusive jurisdiction to determine the validity оf agreements that affect the placement and operation of video gaming terminals. See Crossroads Ford Truck Sales, Inc., 2011 IL 111611, ¶ 28. This determination is a matter of statutory interpretation. Ferris, Thompson & Zweig, Ltd., 2015 IL 117443, ¶ 17. When interpreting a statute, the court‘s primary objective is to ascertain and give effect to the intent of the legislature. Chicago Teachers Union, Local No. 1 v. Board of Education of the City of Chicago, 2012 IL 112566, ¶ 15; Williams v. Staples, 208 Ill. 2d 480, 487 (2004). The most reliable indicator of legislative intent is the language of the statute itself, which must be given its plain and ordinary meaning. Chicago Teachers Union, Local No. 1, 2012 IL 112566, ¶ 15; Williams, 208 Ill. 2d at 487. All provisions of a statute must be viewed as a whole, with the relevant statutory provisions construed together and not in isolation. Chicago Teachers Union, Local No. 1, 2012 IL 112566, ¶ 15; Williams, 208 Ill. 2d at 487. In addition, the court may consider the reason for the law, the problems sought to be remedied, the purposes to be achieved, and the consequences of construing the statute in one way or another. Chicago Teachers Union, Local No. 1, 2012 IL 112566, ¶ 15; Williams, 208 Ill. 2d at 487. Questions relating to the circuit court‘s jurisdiction and the interpretation of a statute both present issues of law, which we review de novo. Chicago Teachers Union, Local No. 1, 2012 IL 112566, ¶ 15; Crossroads Ford Truck Sales, Inc., 2011 IL 111611, ¶¶ 26-27.
¶ 26 There is no common-law right in Illinois to engage in or profit from gambling. Schneider v. Turner, 130 Ill. 28, 39 (1889) (recognizing that “[n]othing is more clearly and firmly established by the common law, than that all gambling contracts are void“); Mallett v. Butcher, 41 Ill. 382, 384 (1866) (holding that all contracts having their origin in gaming are void, not voidable); see also Tomm‘s Redemption, Inc. v. Park, 333 Ill. App. 3d 1003, 1009 (2002); Hall v. Montaleone, 38 Ill. App. 3d 591, 592 (1976); Brelsford v. Stoll, 304 Ill. App. 222, 226 (1940). The Act, which legalized the use of video gaming terminals under certain limited circumstances, is an exception to the general prohibition against gambling.
¶ 27 The Act explicitly vests the Gaming Board with authority to administer the Act by granting the Board “all powers necessary and proper to fully and effectively execute [its] provisions” and by directing that the Board “shall have jurisdiction over and shall supervise all gaming operations
¶ 28 Further, the Act authorizes the Board to adopt regulations under which all video gaming is to be conducted, and those regulations “are to provide for the prevention of practices detrimental to the public interest and for the best interests of video gaming.”
(West 2014). Pursuant to its authority under the Act, the Board has adopted regulations establishing certain qualifications and requirements of licensees in order to “preserve the integrity and security of video gaming” in Illinois.
¶ 29 In addition, the Board has adopted regulations that define the term “[u]se agreement” (
¶ 30 The Gaming Board‘s jurisdiction under the Act also includes the authority conferred by the Riverboat Gambling Act and the regulations promulgated thereunder, provided the terms of the two statutes do not conflict.
¶ 31 J&J Ventures, Action Gaming, and Accel argue that, although the General Assembly enacted legislation that created a new form of legalized gambling through the use of video gaming terminals, it did not explicitly divest the circuit courts of jurisdiction to adjudicate the
validity and enforceability of location agreements that provide for the placement and operation of such terminals. We disagree.
¶ 32 By legalizing the use of video gaming terminals for commercial gambling purposes, the legislature enacted a comprehensive statutory scheme, creating rights and duties that have no counterpart in common law or equity. Considered in its entirety, this statutory scheme demonstrates the legislature‘s explicit intent that the Gaming Board have exclusive jurisdiction over the video gaming industry and the use agreements that are a necessary prerequisite of engaging in that industry. The Act, therefore, confers authority on the Gaming Board to determine the validity and enforceability of contracts that purport to control the location and operation of video gaming terminals within licensed establishments.
¶ 33 The question remaining is whether the agreements at issue here fall within the purview of the comprehensive statutory scheme granting the Board exclusive jurisdiction over video gaming in Illinois. The underlying declaratory judgment actions are predicated on the contention that J&J Ventures has the exclusive right to place and operate video gaming terminals in the defendants’ establishments, based on the exclusive location agreements and subsequent assignments. As the appellate court observed, resolution of those claims requires a determination of whether the contracts assigned to J&J Ventures are valid use agreements, which is a matter that falls within the exclusive province of the Board. 2015 IL App (5th) 140092, ¶ 30.
¶ 34 J&J Ventures and Action Gaming argue that, despite its exclusive jurisdiction and broad authority to supervise all video gaming operations in Illinois, the Board lacks authority to determine the validity of the location agreements because those contracts are not “use agreements” under the Act and the Board‘s regulations. According to J&J Ventures and Action Gaming, the location agreements are “precursor” contracts, the validity of which falls within the jurisdiction of the circuit courts. The Gaming Board counters that the location agreements must fall within the Board‘s exclusive jurisdiction because contracts relating to video terminal gaming are legal only if they comply with the Act and the corresponding regulations and because any such contract that does not comply with the Act and regulations is an illegal gambling contract. In addressing these arguments, we consider the nature of the location agreements through the lens of the governing statutory and regulatory framework.
¶ 35 The location agreements provide that the terminal operator and the licensed establishment will obtain the necessary licenses under the Act. In addition, the agreements expressly state that they are “for the purpose of placing and operating video gaming terminals” in the licensed establishments. The agreements require the terminal operator to provide all video gaming terminals in the licensed establishment and obligate the licensed establishment
¶ 36 The initial terms of the agreements “commence upon the date the first video gaming terminal described herein first operates in the [l]icensed [e]stablishment.” Further, the agreements state that, in accordance with the Act, the after-tax profits of the video gaming operations are to be divided equally between the terminal operator and the licensed
establishment. The agreements also еxpressly acknowledge that nothing of value was offered or received in exchange for the execution of the agreements and that it is a violation of the Act to offer anything as an inducement for the procurement of a location.
¶ 37 The amendments to the location agreements state they were “necessary in order for the Agreement to comply with the [Act] and the rules and regulations promulgated thereunder.” In addition, the amendments include a clause entitled “IGB Approval,” stating that the location agreements and amendments “are subject to and contingent upon the [Gaming Board‘s] review of, and to the extent required by the [Board], consent to the use of this [a]mendment.” This clause further states that the parties will modify the amendment “to comply with the requirements of the [Gaming Board] or any change in the [Act] or the rules and regulations promulgated thereunder.”
¶ 38 We agree with the appellate court‘s conclusion that the agreements fall within the Board‘s exclusive jurisdiction because they purport to control the placement and operation of video gaming terminals within licensed establishments. See 2015 IL App (5th) 140092, ¶¶ 32, 62. In addition, we note that the agreements require each party to obtain the requisite license, and the agreements specifically provide that they take effect when the first video gaming terminal first operates in the licensed establishment—a сircumstance that cannot occur unless and until the parties are licensed and the Board has approved the agreements. In addition, the agreements and amendments are “subject to and contingent upon” the Gaming Board‘s review and consent. These express conditions providing for licensure of the parties and Board approval further support the conclusion that the Board has exclusive jurisdiction to decide their validity and enforceability.
¶ 39 J&J Ventures and Action Gaming assert that the agreements are merely “precursor” contracts and, therefore, cannot be considered to be use agreements. We reject this assertion for two reasons. First, there is nothing about these fully negotiated agreements that can be characterized as preliminary in nature. The terms and conditions are definite, setting forth the rights and obligations of the parties. All of those rights and obligations relate to the placement of video gaming terminals and to the division of profits derived from the operation of those terminals. Also, the amended agreements are complete and do not require or contemplate the execution of any subsequent agreements or amendments, except as required to comply with the requirements of the Board or with any changes in the Act or the Board‘s regulations. Second, as noted above, the amended agreements sрecifically acknowledge that they are governed by the terms of the Act and the Board‘s regulations and also are “subject
¶ 40 Moreover, the argument of J&J Ventures and Action Gaming would lead to an anomalous result where the circuit court could determine that a contract for the placement and operation of video gaming terminals is valid but the court could not enforce the terms of that contract. Also, the Board would be bound by a judicial determination as to thе validity and enforceability of such a contract. Such a circumstance directly conflicts with and undermines the exclusive and original jurisdiction of the Board to oversee all video gaming operations and to decide questions relating to the placement of video gaming terminals
within licensed establishments in Illinois. Therefore, the Board‘s jurisdiction necessarily includes jurisdiction over the agreements and assignments at issue in these appeals.
¶ 41 In urging a contrary result, J&J Ventures and Action Gaming cite representations of the Board indicating that the validity of prelicensure location agreements does not fall within the purview of the Act. In particular, they rely on forms and information relating to the applicаtion process, as well as comments made by an attorney of the Gaming Board. As recognized by the appellate court, however, these representations do not control the determination of the Board‘s jurisdiction, which is a judicial function and not a question for the agency itself. County of Knox ex rel. Masterson v. The Highlands, L.L.C., 188 Ill. 2d 546, 554 (1999); see also 2015 IL App (5th) 140092, ¶ 64 (citing Gallaher v. Hasbrouk, 2013 IL App (1st) 122969, ¶ 19).
¶ 42 In sum, the General Assembly has enacted a comprehensive statutory scheme that vests jurisdiction over video gaming operations with the Illinois Gaming Board. The agreements at issue in these cases purport to control placement and operation of video gaming terminals, and the Illinois Gaming Board has exclusive, original jurisdiction to determine their validity and enforceability. Accordingly, we are precluded from addressing the merits of the parties’ claims, as were the appellate court and the circuit courts. Our disposition renders unnecessary any discussion of the constitutional arguments raised by J&J Ventures and Action Gaming.
CONCLUSION
¶ 43 ¶ 44 For the foregoing reasons, the judgments of the appellate court, vacating the circuit courts’ judgments for lack of subject-matter jurisdiction and dismissing the appeals, are affirmed.
¶ 45 Appellate court judgments affirmed.