Casino Patrons Win Gamble on Fraud Action
New Jersey casinos once believed that they operated under a different set of rules than other businesses in the Garden State. This perception was their reality until a few casino patrons took them to court. In a landmark decision, the New Jersey Appellate Division ruled that the Consumer Fraud Act applies to casinos.
The events that gave rise to this case are simple, and probably familiar to many casino patrons. Harrah’s casino sent an offer of “Birthday Cash” to the plaintiffs. This offer required only that they present the mailed coupon and valid identification at the redemption center within a certain time frame on any of a few particular dates. Plaintiffs were induced to visit Harrah’s casino and planned their trip to Atlantic City around those dates. When they presented their coupons, Harrah’s refused to honor them. Plaintiffs were told by casino workers that the redemption center was closed. Confused, plaintiffs checked the coupons against their calendars and watches, and although the casino workers agreed that they were presenting the coupons within the requisite time period, they advised the plaintiffs that there would not be anyone there to assist them until the following morning. The patrons had no choice but to leave, empty handed.
The difference between these patrons and others who are duped by casinos on a daily basis is that these patrons knew that what had happened was not just unfair—it was fraudulent. The patrons filed suit against the casino under the Consumer Fraud Act, among other statutes. The casino filed a motion to dismiss the complaint, arguing that the Consumer Fraud Act did not apply to casinos because they are regulated by a state agency, the Casino Control Commission.
The Casino Control Commission has promulgated regulations that govern the conduct of casinos, specifically, the Casino Control Act. These regulations proscribe false and misleading advertising. The defendant casino argued that because the Casino Control Act regulated its advertising, to apply the Consumer Fraud Act would be superfluous. The casino further argued that the Casino Control Commission had exclusive jurisdiction over the conduct of casinos. This was patently false. There are vast differences between the Casino Control Act and the Consumer Fraud Act. Even if the rules pertaining to advertising are the same, that is, that a casino’s advertising cannot be false or misleading, the penalties for failing to comply are different. The processes for dealing with noncompliance are also different.
To seek redress under the Casino Control Act, a casino patron must begin by filing a “patron complaint” with the Casino Control Commission, and then hope for the best. The Casino Control Commission will decide whether or not to refer the complaint to the Department of Gaming Enforcement. Even if the Department of Gaming Enforcement does pursue the claim, the best a wronged patron can hope for is restitution. While it is nice that the patron might be made whole, there is no deterrence for the casino to halt the practice that gave rise to the claim, or to cease deceiving future casino patrons.
Under the Consumer Fraud Act, however, if a consumer files a complaint, there is discovery, even the possibility of a jury trial. If a consumer wins, he or she can be awarded treble damages, as well as costs and attorney’s fees. The case described here was filed as a class action; therefore, a loss by the casino would clearly be far more than the slap on the wrist they would receive under the Casino Control Act.
The trial court was unmoved by those arguments. Rather, the trial court was concerned about potential conflict between the Consumer Fraud Act and the Casino Control Act. The trial court held that the Casino Control Commission should have exclusive jurisdiction over the claims arising from activity governed by the Casino Control Act, and the trial court dismissed the case. Plaintiffs appealed, arguing that the trial court incorrectly applied the test for preemption, as previously established by the New Jersey Supreme Court:
In order to overcome the presumption that the CFA applies to a covered activity, a court must be satisfied . . . that a direct and unavoidable conflict exists between application of the CFA and application of the other regulatory scheme or schemes. It must be convinced that the other source or sources of regulation deal specifically, concretely, and pervasively with the particular activity, implying a legislative intent not to subject parties to multiple regulations that, as applied, will work at cross-purposes. We stress that the conflict must be patent and sharp, and must not simply constitute a mere possibility of incompatibility.
Lemelledo v. Beneficial Mgmt. Corp. of Am., 150 N.J. 255, 270 (1997).
New Jersey courts had analyzed the potential conflict between the Consumer Fraud Act and the Casino Control Act in several prior cases. The Casino Control Act was found to preempt the Consumer Fraud Act when the activity giving rise to the complaint fell within the exclusive jurisdiction of the Casino Control Commission, that is, gaming or other activities about which the Casino Control Commission has particular expertise. See, e.g., Marcangelo v. Boardwalk Regency Corp., 847 F. Supp. 1222 (D.C.N.J. 1994), aff’d on other grounds, 47 F.3d 88 (3d Cir. 1995) (Casino Control Act applied where Plaintiff’s complaint arose from signage on a slot machine); Decker v. Bally’s Grand Hotel Casino, 280 N.J. Super. 217 (App. Div. 1994) (Casino Control Act applied where Plaintiff’s complaint arose from signage on a slot machine); Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173 (3d Cir. 2000), cert. denied, 532 U.S. 1038, 121 S. Ct. 2000, 149 L. Ed. 2d 1003 (2001) (Casino Control Act applied where Plaintiff’s complaint arose from shuffling-at-will in black jack game).
Conversely, the New Jersey courts found that Consumer Fraud Claims survive when the activity complained of does not fall within the specific expertise of the Casino Control Commission. See, e.g. Campione v. Adamar of N.J., 155 N.J. 245 (1998) (Court preserved Plaintiff’s common law claim for discrimination).
In an unpublished opinion, the Appellate Division in the Harrah’s case held that there was “nothing highly sophisticated or technical about Defendant’s . . . promotional schemes” (p. 16). They agreed that the coupons did not contain anything that could only be analyzed or understood by the Casino Control Commission. In fact, the Appellate Division stated, the coupons “in issue raise only ordinary questions whether they contain false, deceptive or misleading statements—the type no one argues is within the Casino Control Commission’s primary, much less exclusive jurisdiction to answer” (p. 16). The court acknowledged that the Casino Control Act regulates casino advertisement, but found that “that does not mean the Casino Control Commission has usurped the entire field” (p. 16). The court concluded finding the trial judge’s dismissal to be in error and as such reinstated Plaintiffs’ complaint. “Indeed, any other result would leave plaintiffs remediless since the Casino Control Act clearly does not empower the Casino Control commission to award damages in private matters” (p. 17).
The final outcome of the Harrah’s case remains to be seen, as the Appellate Division’s decision merely puts the case back at square one. However, the greater significance of this decision is that consumers and casinos now know that the mere existence of the Casino Control Commission, and the regulations it has promulgated, do not elevate the casino industry about the laws that govern all other New Jersey businesses that transact with consumers.
Beth Manes is a solo practitioner in Morristown, New Jersey, with a practice concentrating in estate planning, elder and disability law, and consumer rights.