J&J Ventures Gaming, LLC v. Wild, Inc.

NOTICE
2015 IL App (5th) 140092
Decision filed 08/07/15. The
text of this decision may be NO. 5-14-0092
changed or corrected prior to
the filing of a Peti ion for
Rehearing or the disposition of IN THE
the same.
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
________________________________________________________________________
J&J VENTURES GAMING, LLC, an Illinois ) Appeal from the
Limited Liability Company, and ACTION GAMING, ) Circuit Court of
LLC, an Illinois Limited Liability Company, ) Madison County.
)
Plaintiffs-Appellees and Cross-Appellants, )
)
v. ) No. 13-MR-85
)
WILD, INC., d/b/a Wild Country, an Illinois )
Corporation, )
)
Defendant )
) Honorable
(Accel Entertainment Gaming, LLC, Intervenor- ) Donald M. Flack,
Appellant and Cross-Appellee). ) Judge, presiding.
________________________________________________________________________
JUSTICE STEWART delivered the judgment of the court, with opinion.
Justices Goldenhersh and Schwarm concurred in the judgment and opinion.
OPINION
¶1 This case involves a conflict between two companies claiming to have exclusive
contractual rights for the placement of video gaming terminals in an establishment owned
by the defendant, Wild, Inc., doing business as Wild Country, pursuant to the Video
Gaming Act (the Act) (230 ILCS 40/1 et seq. (West 2012)). "Video gaming terminals"
are electronic machines that accept cash or electronic cards or vouchers for the purpose of
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allowing users to play games such as video poker or blackjack. 230 ILCS 40/5 (West
2012). A "terminal operator" is a person or entity licensed under the Act that owns,
services, and maintains video gaming terminals for placement in licensed establishments.
230 ILCS 40/5 (West 2012).
¶2 Under the language of the Act, a terminal operator's right to place video gaming
terminals in a particular location must be established by a "written use agreement" with
the owner of the establishment. 230 ILCS 40/25(e) (West 2012). The plaintiff, J&J
Ventures Gaming, LLC (J&J Ventures Gaming), maintains that it has an exclusive right
to place video gaming terminals in Wild Country's establishment by virtue of a written
use agreement that preceded any other agreements for the placement of the machines in
Wild Country's establishment. The intervenor, Accel Entertainment Gaming, LLC
(Accel Entertainment), however, maintains that it entered into the only valid use
agreement with Wild Country for the placement of video gaming terminals. It argues that
the agreement upon which J&J Ventures Gaming relies is not a valid use agreement
under the Act because it was created and then assigned to J&J Ventures Gaming by two
entities that were never licensed to operate video gaming terminals under the Act.
¶3 J&J Ventures Gaming filed a lawsuit against Wild Country requesting the court to
enter a declaratory judgment establishing that it had the exclusive right to be the video
gaming terminal operator for Wild Country's establishment until the expiration of the
term of its use agreement. The circuit court granted Accel Entertainment's request to
intervene in the lawsuit over J&J Ventures Gaming's objection. After a hearing, the
circuit court concluded that J&J Ventures Gaming had a valid, binding, and enforceable
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use agreement with Wild Country that preceded Accel Entertainment's use agreement.
The court, therefore, enjoined Accel Entertainment from operating video gaming
terminals within Wild Country's establishment and ordered it to remove any video
gaming terminals it had installed at the establishment.
¶4 Accel Entertainment appeals the circuit court's judgment, arguing that J&J
Ventures Gaming's contract is not a valid and enforceable use agreement under the Act.
J&J Ventures Gaming cross-appeals the circuit court's order allowing Accel
Entertainment to intervene in the lawsuit. For the following reasons, we vacate the
circuit court's judgment and dismiss this cause for a lack of subject matter jurisdiction.
¶5 BACKGROUND
¶6 The legislature enacted the Act on July 13, 2009. Pub. Act 96-34 (eff. July 13,
2009). The Act legalized the use of video gaming terminals for gambling purposes for
the first time within the State of Illinois. This new video gaming industry is subject to
extensive regulations under the statute's comprehensive regulatory scheme. The Act
requires the Illinois Gaming Board (the Gaming Board) to license all entities having
video gaming terminals installed in their establishments (licensed establishments) and
license all entities seeking to place and operate video gaming terminals (licensed terminal
operators) within licensed establishments. 230 ILCS 40/25(c), (e) (West 2012). Without
a license issued by the Gaming Board, no person or entity can legally engage in the
operation of video gaming terminals for gambling purposes.
¶7 When the legislature enacted the video gaming statute in 2009, video gaming did
not begin immediately. Instead, there was a three-year start-up period before actual video
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gaming began. Video gaming terminals did not go "live" until October 9, 2012. During
this start-up period, unlicensed persons and entities entered into agreements with
establishments that hoped to become licensed establishments under the Act. These
agreements purported to grant the unlicensed party the exclusive right to place video
gaming terminals in the other party's establishment upon each party obtaining its
respective licenses under the Act.
¶8 The dispute in the present case stems from such an agreement initially entered into
between Wild Country and another entity that is not a party to this lawsuit, Action
Amusement Company (Action Amusement). Wild Country entered into the agreement
with Action Amusement on August 17, 2009. This agreement purported to be an
"Exclusive Location And Video Gaming Terminal Agreement" (exclusive location
agreement, or agreement) granting Action Amusement the exclusive right to place video
gaming terminals in Wild Country's establishment.
¶9 The parties entered into the exclusive location agreement before the Gaming
Board had established any rules for implementing the Act. Therefore, the Gaming Board
had not licensed either party when they entered into this agreement. However, the
agreement states that Action Amusement "is or shall become" a licensed terminal
operator under the Act and that Wild Country "is or shall become" a licensed
establishment under the Act. The stated purpose of the contract is for "placing and
operating video gaming terminals" in Wild Country's establishment for a period of 60
months, beginning when the first video gaming terminal begins operating in the
establishment. The agreement states that Action Amusement "shall have the exclusive
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right to place video gaming terminals" in Wild Country's establishment during the term of
the agreement and that the agreement "shall be binding upon and inure to the benefit of
the representative legal representatives, successors and assigns of the parties hereto."
¶ 10 The Act does not specify any requirements that an agreement must meet in order
to be a valid "use agreement" for the placement of video gaming terminals. However,
rules promulgated by the Gaming Board after the effective date of the Act (and after the
date of the exclusive location agreement) set out minimum standards for use agreements,
including that they must be between a licensed terminal operator and a licensed
establishment. See 11 Ill. Adm. Code 1800.320 (2012).
¶ 11 On October 5, 2010, Action Amusement assigned its rights under various
exclusive location agreements, including its rights under its agreement with Wild
Country, to another entity, Action Gaming, LLC (Action Gaming). Action Amusement
never became a licensed terminal operator under the Act. Nonetheless, the terms of the
assignment provided that Action Amusement would receive compensation that is directly
tied to video gaming operations. Under the assignment, Action Amusement is to receive
compensation from Action Gaming in the amount of $10,000 per month on the first day
of each month following execution of assignment until August 1, 2011. After August 1,
2011, Action Amusement would receive additional compensation once Action Gaming
operated video gaming terminals in 70 of the locations included in the assignment. Once
Action Gaming began operating in 70 locations, Action Amusement would receive
$20,000 per month for a period of 10 years provided that Action Gaming maintained
operation of video gaming terminals in 70 or more locations.
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¶ 12 At the time that Action Gaming entered into this assignment with Action
Amusement, it was also not a licensed terminal operator under the Act, but it intended to
obtain the necessary licensing. However, as explained below, the Gaming Board later
denied Action Gaming's request for a license.
¶ 13 On January 12, 2012, while Action Gaming's application for a terminal operator's
license was pending before the Gaming Board, Wild Country and Action Gaming signed
a document purporting to be an amendment to the exclusive location agreement. In the
amendment, the parties acknowledged that Action Gaming, rather than Action
Amusement, was now a party to the exclusive location agreement. The parties also noted
that amendments to the exclusive location agreement were necessary in order for the
contract to comply with the Act "and the rules and regulations promulgated thereunder."
¶ 14 The rules promulgated by the Gaming Board after the enactment of the Act
"[p]rohibit any assignment [of use agreements] other than from a licensed terminal
operator to another licensed terminal operator." 11 Ill. Adm. Code 1800.320(d) (2012).
Accordingly, the January 12, 2012, amendment to the parties' exclusive location
agreement added additional language addressing the right to assign the agreement by the
"Terminal Operator" as follows:
"Assignment of Agreement by Terminal Operator: Prior to Terminal
Operator being licensed as a 'terminal operator' pursuant to the Act and the rules
and regulations promulgated thereunder (collectively, the 'Video Gaming Law'),
Terminal Operator may freely assign and/or transfer this Agreement and its rights
and/or obligations hereunder, subject to the Video Gaming Law. After Terminal
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Operator becomes a licensed terminal operator, Terminal Operator may not assign
and/or transfer this Agreement and its rights and/or obligations hereunder except:
(i) to another licensed terminal operator; or (ii) as may otherwise be permitted by
the Video Gaming Law."
¶ 15 The amendment to the contract also included a provision concerning approval of
the Gaming Board as follows:
"The parties acknowledge that this Amendment and the Agreement are
subject to and contingent upon the Illinois Gaming Board's (the 'IGB') review of,
and to the extent required by the IGB, consent to the use of this Amendment. To
that end, the parties agree to submit this Amendment to the IGB with any licensing
application and to cooperate with each other in obtaining the IGB's consent, if
required. The parties agree to modify or amend this Amendment to comply with
the requirements of the IGB or any change in the Illinois Video Gaming Act or the
rules and regulations promulgated thereunder."
¶ 16 On July 19, 2012, the Gaming Board issued a preliminary notice of denial of
Action Gaming's application to become a licensed terminal operator. In a
correspondence dated July 30, 2012, the Gaming Board informed Action Gaming that it
did not meet the requirements for licensing under the Act. Specifically, the Gaming
Board noted that Action Gaming "through its employees and owners Nicky Nichols and
Jason L. Rowell have associated both personally and professionally with James Koehler,
who has a gambling conviction." In addition, Nichols "has associated in business affairs
with not only Mr. Koehler, but also others of questionable character." The Gaming
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Board concluded that Nichols had also "engaged in questionable business practices
related to business transactions with convicted felon[s], Tim Whitmer and Tim Coulon,"
and "has a questionable association with felon, Robert Guirdry." With respect to Rowell,
the Gaming Board found that he "failed to disclose portions of his criminal record, and
was untruthful with police during the course of one of his arrests." The Gaming Board
concluded, therefore, that Action Gaming failed to meet the requirements set forth in
sections 45(a), (d), and (e) of the Act (230 ILCS 40/45(a), (d), (e) (West 2012)).
¶ 17 Action Gaming petitioned the Gaming Board for a hearing. See 11 Ill. Adm. Code
1800.615(c) (2012). Under the rules promulgated by the Gaming Board, "[a] request for
hearing is deemed to be granted unless denied." 11 Ill. Adm. Code 1800.615(g) (2012).
In addition, under the rules, an applicant who has been denied a license and who has
requested a hearing is still considered an applicant until final resolution of the request for
hearing. 11 Ill. Adm. Code 1800.695 (2012).
¶ 18 On August 24, 2012, while Action Gaming's request for hearing was pending
before the Gaming Board, Action Gaming entered into an asset purchase agreement with
J&J Ventures Gaming in which Action Gaming assigned its rights, title, and interest in all
of its exclusive location agreements, including the agreement with Wild Country, to J&J
Ventures Gaming. Prior to this assignment, the Gaming Board had approved J&J
Ventures Gaming as a licensed terminal operator under the Act.
¶ 19 Under the terms of the asset purchase agreement with J&J Ventures Gaming,
Action Gaming would profit from J&J Ventures Gaming's future video gaming
operations by receiving future monetary compensation from J&J Ventures Gaming in
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exchange for the exclusive right to place and operate video gaming terminals in the
locations included in the agreement, including Wild Country's establishment. The
amount of compensation Action Gaming is to receive under the asset purchase agreement
has been redacted from the copy of the agreement that is included in the record on appeal.
It is apparent from the unredacted portions of the asset purchase agreement, however, that
the compensation that Action Gaming will receive under the contract is dependent on the
extent to which J&J Ventures Gaming operates video gaming terminals in the licensed
establishments that had been under contract with Action Gaming, including Wild
Country.
¶ 20 On August 29, 2012, Wild Country entered into a new use agreement with the
intervenor, Accel Entertainment, that granted Accel Entertainment the exclusive right to
place video gaming terminals in Wild Country's establishment. At the time of this
agreement, the Gaming Board had granted Accel Entertainment a license to be a terminal
operator.
¶ 21 On September 20, 2012, the Gaming Board denied Action Gaming's request for a
hearing on its application to become a licensed terminal operator. The Gaming Board's
denial of the request for hearing was its final decision, and the denial of licensure became
the final order on the date the Gaming Board denied the request for hearing. See 11 Ill.
Adm. Code 1800.615(g) (2012).
¶ 22 On March 18, 2013, J&J Ventures Gaming (along with Action Gaming as a
coplaintiff) filed a complaint against Wild Country seeking a declaratory judgment from
the circuit court establishing that J&J Ventures Gaming has the exclusive right to place
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video gaming terminals in Wild Country's establishment. At that time, the Gaming Board
had not yet granted Wild Country's application to be a licensed establishment. The
Gaming Board granted Wild Country's application to become a licensed establishment on
October 24, 2013.
¶ 23 Accel Entertainment filed a petition for leave to intervene in the lawsuit, which the
circuit court granted over J&J Ventures Gaming and Action Gaming's objection. Accel
Entertainment alleged in its counterclaim that the original exclusive placement agreement
between Wild Country and Action Amusement was not an enforceable use agreement
under the Video Gaming Act because the agreement was not signed by a licensed
terminal operator, but was between Wild Country and an unlicensed entity, Action
Amusement. Accel Entertainment maintained that its use agreement with Wild Country
was the only valid use agreement because it was the only agreement signed by a licensed
terminal operator. J&J Ventures Gaming, however, argued that its assignment of the
original exclusive location agreement was valid under common law contract principles
and was not prohibited by either the terms of the Act or the rules for implementing the
statute promulgated by the Gaming Board.
¶ 24 While the present case was pending in the circuit court, on July 26, 2013, the
Third District of the appellate court issued an opinion in Triple 7 Illinois, LLC v. Gaming
& Entertainment Management-Illinois, LLC, 2013 IL App (3d) 120860, 992 N.E.2d
1251, in which the court addressed the validity of an agreement similar to J&J Ventures
Gaming's exclusive location agreement in the present case. The Triple 7 court held that a
"precursor" agreement for the placement of video gaming terminals, entered into between
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an unlicensed entity hoping to become a licensed terminal operator and a proposed
licensed establishment, was valid and could be freely assigned and transferred among
unlicensed entities prior to the parties to the agreement becoming licensed under the Act.
Triple 7, 2013 IL App (3d) 120860, ¶ 23, 992 N.E.2d 1251. The court stated, "The
agreement is not invalid; it simply cannot be enforced under the Act until the parties'
applications are approved by the Gaming Board." Id. "Once the parties are licensed," the
court continued, "the terms of the agreement can be fulfilled under the Act and the
agreement cannot be assigned" except to other licensed terminal operators. Id.
¶ 25 In Illinois, decisions of an appellate court are binding precedent on all circuit
courts regardless of locale. People v. Carpenter, 228 Ill. 2d 250, 259, 888 N.E.2d 105,
111 (2008). When conflicts arise between appellate court districts, the circuit court is
bound by the decisions of the appellate court of the district in which it sits. Aleckson v.
Village of Round Lake Park, 176 Ill. 2d 82, 92, 679 N.E.2d 1224, 1229 (1997).
¶ 26 On February 11, 2014, the circuit court entered an order granting J&J Ventures
Gaming and Action Gaming's request for declaratory judgment. The Triple 7 decision
was the only appellate court case addressing the validity of precursor agreements
purporting to control the placement of video gaming terminals. Therefore, the circuit
court held that, based on the Triple 7 court's holding, it was "compelled to find that the
Agreement between J&J [Ventures Gaming] and Wild [Country] is valid, binding and
enforceable." The court concluded that J&J Ventures Gaming "possesses the exclusive
rights to serve as terminal operator and operate video gaming terminals at Wild [Country]
until the expiration of that Agreement, which is 60 months from the date [J&J Ventures
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Gaming's] first video gaming terminal first operates at Wild [Country]." The court held
that Wild Country's use of video gaming terminals from any operator, other than J&J
Ventures Gaming, was a breach of the contract and enjoined Wild Country and Accel
Entertainment from activating video gaming terminals at Wild Country's establishment
other than video gaming terminals provided and serviced by J&J Ventures Gaming.
¶ 27 The circuit court denied Accel Entertainment's motion to reconsider, and Accel
Entertainment timely filed a notice of appeal. J&J Ventures Gaming and Action Gaming
filed a cross-appeal of the circuit court's order allowing Accel Entertainment to intervene
in the proceeding.
¶ 28 DISCUSSION
¶ 29 During oral arguments in this appeal, we sua sponte raised the issue of whether the
circuit court has jurisdiction over the controversy raised in the plaintiffs' complaint or
whether the Gaming Board has exclusive or primary jurisdiction over the controversy.
We directed the parties to submit supplemental briefs on this issue. Both parties maintain
that the circuit court has jurisdiction over this controversy. However, upon review of the
supplemental briefs and after further consideration of this jurisdiction issue, we believe
that the Gaming Board has exclusive jurisdiction over the parties' controversy.
¶ 30 The central issue in this case concerns whether the exclusive location agreement,
entered into between unlicensed entities, can control the placement of video gaming
terminals once the agreement is assigned to a licensed terminal operator. Resolution of
this controversy necessarily involves a determination of whether the original contract
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along with the series of subsequent assignments constitute a valid "use agreement" under
the Act and under the regulations enacted by the Gaming Board.
¶ 31 The assignments at issue purport to convey to unlicensed assignors the right to
receive compensation that is directly tied to the future video gaming operations of the
assignee. Enforcement of the exclusive location agreement and subsequent assignments
as a use agreement, therefore, potentially allows entities that are unqualified for licensure
under the Act to, nonetheless, profit from the legalization of video gaming in Illinois in a
manner that appears to be contrary to the Act's legislative intent. As explained more fully
below, the legislature granted the Gaming Board all powers necessary and proper to fully
and effectively execute the provisions of the Act to further the Act's legislative purpose.
We believe that these powers are exclusive and not concurrent with the circuit court's
jurisdiction.
¶ 32 Under the Act, the Gaming Board's broad powers include the power to regulate
who may and may not profit from video gaming through a strict licensing procedure and
the regulation of the required terms of use agreements. Under this statutory and
regulatory scheme, we believe that the legislature intended for the Gaming Board to have
exclusive jurisdiction over all agreements purporting to control the placement of video
gaming terminals within a licensed establishment, particularly when the agreements
involve the potential distribution to unlicensed entities of monetary compensation that is
directly linked to video gaming operations under the Act. These are issues that fall
squarely within the Gaming Board's exclusive authority to supervise all video gaming
operations.
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¶ 33 The parties in this case did not raise any issue with respect to the circuit court's
jurisdiction. They want the courts to decide this controversy. However, "[a] court has an
independent duty to consider subject matter jurisdiction even when, as here, neither party
raised it as an issue." In re Rico L., 2012 IL App (1st) 113028, ¶ 109, 977 N.E.2d 1100.
The parties cannot convey subject matter jurisdiction to a court by stipulation, consent, or
waiver. In re Marriage of Epting, 2012 IL App (1st) 113727, ¶ 28, 994 N.E.2d 535.
¶ 34 Illinois courts have jurisdiction over all justiciable matters. Employers Mutual
Cos. v. Skilling, 163 Ill. 2d 284, 287, 644 N.E.2d 1163, 1165 (1994). In administrative
actions, however, the legislature may also vest exclusive original jurisdiction in an
administrative agency. People v. NL Industries, 152 Ill. 2d 82, 96-97, 604 N.E.2d 349,
355 (1992). "Where the legislature enacts a comprehensive statutory scheme, creating
rights and duties which have no counterpart in common law or equity, the legislature may
define the 'justiciable matter' in such a way as to preclude or limit the jurisdiction of the
circuit courts." Board of Education of Warren Township High School District 121 v.
Warren Township High School Federation of Teachers, Local 504, 128 Ill. 2d 155, 165,
538 N.E.2d 524, 529 (1989). "However, if the legislative enactment does divest the
circuit courts of their original jurisdiction through a comprehensive statutory
administrative scheme, it must do so explicitly." Skilling, 163 Ill. 2d at 287, 644 N.E.2d
at 1165.
¶ 35 With respect to administrative agencies, the term "jurisdiction" is not strictly
applicable to an administrative body, but Illinois courts have used the term to designate
the authority of the administrative body to act. Byington v. Department of Agriculture¸
14
327 Ill. App. 3d 726, 730, 764 N.E.2d 576, 579-80 (2002). An administrative agency is
different from a court because an agency only has the authorization given to it by the
legislature. Business & Professional People for the Public Interest v. Illinois Commerce
Comm'n, 136 Ill. 2d 192, 243, 555 N.E.2d 693, 716 (1989). "Since an administrative
agency *** is a creature of statute, its jurisdiction or authority must be found within the
provisions of the statute by which it acts." Byington, 327 Ill. App. 3d at 730, 764 N.E.2d
at 580. An agency may adopt a rule and regulate an activity to the extent that a statute
empowers the agency to do so. Popejoy v. Zagel, 115 Ill. App. 3d 9, 11, 449 N.E.2d
1373, 1374 (1983).
¶ 36 The operation of video gaming terminals for gambling purposes is not an activity
that is recognized in Illinois except by virtue of the Act. There is no common law right in
Illinois to operate, profit from, or assign profits from video gaming terminals. Under the
common law, gambling contracts are void. Tomm's Redemption, Inc. v. Park, 333 Ill.
App. 3d 1003, 1009, 777 N.E.2d 522, 527 (2002); Semb's, Inc. v. Gaming &
Entertainment Management-Illinois, LLC, 2014 IL App (3d) 130111, ¶ 21, 12 N.E.3d
223 (Schmidt, J., dissenting). The passage of the Act created a new industry in Illinois,
which is governed by new rules and procedures, and video gaming contracts that do not
conform to the regulatory requirements are void. In our analysis, we must turn to the
statutory framework of the Act to determine whether the legislature intended for the
Gaming Board to have exclusive jurisdiction over the determination of the validity of
agreements affecting the placement of and the distribution of income derived from the
operation of video gaming terminals. Crossroads Ford Truck Sales, Inc. v. Sterling
15
Truck Corp., 2011 IL 111611, ¶ 27, 959 N.E.2d 1133 ("Statutory interpretation is
necessary to determine if the legislature intended to divest the circuit court of subject
matter jurisdiction.").
¶ 37 "The interpretation of a statute is a question of law, which we review de novo."
People ex rel. Madigan v. Illinois Commerce Comm'n, 231 Ill. 2d 370, 380, 899 N.E.2d
227, 232 (2008). The court's "primary objective in interpreting a statute is to ascertain
and give effect to the intent of the legislature." Solon v. Midwest Medical Records Ass'n,
236 Ill. 2d 433, 440, 925 N.E.2d 1113, 1117 (2010). When interpreting the plain
meaning of a statute, we consider the statute as a whole, the subject it addresses, and the
legislature's apparent intent in enacting it. Id.
¶ 38 We now turn to the language of the Act to determine the legislature's intent with
respect to the Gaming Board's authority over transactions affecting the placement and
operation of video gaming terminals.
¶ 39 The Gaming Board is a five-member board, appointed by the Governor and
confirmed by the Senate. 230 ILCS 10/5(a)(2) (West 2012). The Act expressly vests the
Gaming Board with authority over all aspects of implementing the Act in order to prevent
"practices detrimental to the public interest." 230 ILCS 40/78(a) (West 2012). The
legislature's enactment of the Act included an amendment to the Riverboat Gambling
Act, in which the legislature allocated "responsibility for administration and enforcement
of the Video Gaming Act to the Illinois Gaming Board." Wirtz v. Quinn, 2011 IL
111903, ¶ 26, 953 N.E.2d 899; Pub. Act 96-34, § 940 (eff. July 13, 2009).
16
¶ 40 Section 78 of the Act sets out the authority of the Gaming Board with respect to
implementing and supervising video gaming in Illinois as follows:
"(a) The Board shall have jurisdiction over and shall supervise all gaming
operations governed by this Act. The Board shall have all powers necessary and
proper to fully and effectively execute the provisions of this Act, including, but
not limited to, the following:
(1) To investigate applicants and determine the eligibility of
applicants for licenses and to select among competing applicants the
applicants which best serve the interests of the citizens of Illinois.
(2) To have jurisdiction and supervision over all video gaming
operations in this State and all persons in establishments where video
gaming operations are conducted.
(3) To adopt rules for the purpose of administering the provisions of
this Act and to prescribe rules, regulations, and conditions under which all
video gaming in the State shall be conducted. Such rules and regulations
are to provide for the prevention of practices detrimental to the public
interest and for the best interests of video gaming, including rules and
regulations regarding the inspection of such establishments and the review
of any permits or licenses necessary to operate an establishment under any
laws or regulations applicable to establishments and to impose penalties for
violation of this Act and its rules." 230 ILCS 40/78(a) (West 2012).
17
¶ 41 In order to preserve the integrity of the gaming industry, the legislature outlined
strict licensing procedures to prevent unsavory persons or entities from profiting from
video gaming. Section 45 of the Act requires the Gaming Board, with the assistance of
law enforcement, to conduct a background check of each person seeking and possessing a
license under the Act. The Act defines findings by the Gaming Board, which require
denial of a license as follows:
"(d) No person may be licensed *** if that person has been found by the
Board to:
(1) have 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;
(2) create or enhance the dangers of unsuitable, unfair, or illegal
practices, methods, and activities in the conduct of video gaming; or
(3) present questionable business practices and financial
arrangements incidental to the conduct of video gaming activities." 230
ILCS 40/45(d) (West 2012).
¶ 42 Section 15 of the Act directs the Gaming Board to "adopt rules" and establish
"criteria to preserve the integrity and security of video gaming in this State." 230 ILCS
40/15 (West 2012). Section 45 of the Act empowers the Gaming Board to "adopt rules to
establish additional qualifications and requirements [for licensing] to preserve the
integrity and security of video gaming" in Illinois. 230 ILCS 40/45(e) (West 2012). The
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rules adopted by the Gaming Board prohibit it from granting a video gaming license to
any applicant until the Gaming Board is satisfied that the applicant is, among other
things:
"1) A person of good character, honesty and integrity;
2) A person whose background, including criminal record, reputation and
associations, is not injurious to the public health, safety, morals, good order and
general welfare of the people of the State of Illinois; [and]
3) A person whose background, including criminal record, reputation and
associations, does not discredit or tend to discredit the Illinois gaming industry or
the State of Illinois[.]" 11 Ill. Adm. Code 1800.420(a)(1)-(3) (2012).
¶ 43 In the context of the controversy in the present case, section 45 of the Act and the
Gaming Board's licensing regulations are insightful in assessing the Gaming Board's
authority, because the agreements at issue purport to allow unlicensed entities to receive
compensation that is directly linked to video gaming operations. The Gaming Board
specifically found that Action Gaming was unfit for licensing under the Act because
Nichols and Rowell have associated both personally and professionally with felons, a
person with a gambling conviction, and "others of questionable character." In addition,
the Gaming Board found that Nichols had "engaged in questionable business practices
related to business transactions with convicted felon[s]" and that Rowell "failed to
disclose portions of his criminal record, and was untruthful with police during the course
of one of his arrests."
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¶ 44 The circuit court, however, in following the Triple 7 decision, has usurped the
Gaming Board's authority and has allowed Action Gaming to profit from video gaming in
Illinois outside the regulatory scheme of this newly created industry. The court's decision
undermines the Gaming Board's ability to control who may profit from the newly
established video gaming industry by validating the transactions upon which J&J
Ventures Gaming makes its claim. No reasonable interpretation of the Act and its
regulatory scheme of this new industry, taken as a whole, can lead to a conclusion that
the legislature intended the courts to make such decisions.
¶ 45 The rules established by the Gaming Board under the authority of the Act also set
out minimum standards for use agreements. In section 1800.110, the Gaming Board
defines the term "use agreement" as "[a] contractual agreement between a licensed
terminal operator and a licensed video gaming location establishing terms and conditions
for placement and operation of video gaming terminals by the licensed terminal operator
within the premises of the licensed video gaming location." 11 Ill. Adm. Code 1800.110
(2012).
¶ 46 Section 1800.320 requires that use agreements:
"a) Only be between a licensed terminal operator and a licensed
establishment ***;
b) Contain an affirmative statement that no inducement was offered or
accepted regarding the placement or operation of video gaming terminals in a
licensed establishment ***;
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c) Contain an indemnity and hold harmless provision on behalf of the State,
the Board, and its agents relative to any cause of action arising from a use
agreement;
d) Prohibit any assignment other than from a licensed terminal operator to
another licensed terminal operator;
e) Contain a provision that releases the video gaming location from any
continuing contractual obligation to the terminal operator in the event that the
terminal operator has its licensed revoked or surrenders its license." 11 Ill. Adm.
Code 1800.320 (2012).
Semb's, Inc., 2014 IL App (3d) 130111, ¶ 25, 12 N.E.3d 223 (Schmidt, J., dissenting).
¶ 47 These rules are meant to control who may or may not profit from the legalization
of video gaming (licensed establishments and licensed terminal operators) and are meant
to regulate contracts (use agreements) affecting entities operating in and profiting from
the video gaming industry in Illinois. This regulatory framework concerning minimum
requirements of use agreements stems from the Gaming Board's authority to regulate the
"conditions under which all video gaming in the State shall be conducted." 230 ILCS
40/78(a) (West 2012). Whether the agreement and assignments at issue in the present
case violate section 1800.320's requirements or are otherwise prohibited is a question we
believe the legislature intended for the Gaming Board to decide exclusively, because it is
an issue that could directly impact the integrity and security of video gaming in this State
and that otherwise concerns the conditions under which video gaming in this State shall
be conducted.
21
¶ 48 Nothing within this regulatory framework evidences a legislative intent that the
circuit courts have concurrent jurisdiction over matters directly relating to what may or
may not constitute a valid use agreement for placing machines in a licensed
establishment. Instead, the regulatory scheme is an explicit declaration by the legislature
that the Gaming Board has authority over the placement and operation of video gaming
terminals. This regulatory scheme may be frustrated if the courts allow a person lacking
"good character, honesty and integrity" to circumvent the regulatory framework by
entering into agreements for the exclusive placement of video gaming terminals and
assign the contracts to a licensed entity in return for compensation directly linked to
video gaming operations. Whether this contractual scheme violates the Act and the
Gaming Board's regulations concerning use agreements and licensing requirements is an
exclusive question for the Gaming Board.
¶ 49 The Gaming Board's authority as defined by the Act is also supplemented by its
authority that the legislature outlined in the Illinois Riverboat Gambling Act. Section 80
of the Act states that the "provisions of the Illinois Riverboat Gambling Act, and all rules
promulgated thereunder, shall apply to the Video Gaming Act, except where there is a
conflict between the 2 Acts." 230 ILCS 40/80 (West 2012). The Riverboat Gambling
Act, in turn, notes that the legislature's intention in legalizing gambling is to promote
Illinois tourism and increase revenues available to the State. 230 ILCS 10/2(a) (West
2012). This intent can be accomplished, the statute continues, "only if public confidence
and trust in the credibility and integrity of the gambling operations and the regulatory
process is maintained." 230 ILCS 10/2(b) (West 2012). The regulatory provisions of the
22
Riverboat Gambling Act (applicable to the Video Gaming Act) "are designed to strictly
regulate the facilities, persons, associations and practices related to gambling operations
pursuant to the police powers of the State, including comprehensive law enforcement
supervision." (Emphasis added.) Id.
¶ 50 Section 5 of the Riverboat Gambling Act grants the Gaming Board "all other
powers necessary and proper to fully and effectively execute this Act for the purpose of
administering, regulating, and enforcing the system of riverboat gambling established by
this Act." 230 ILCS 10/5(a)(1) (West 2012). Section 5 also provides that the Gaming
Board's "jurisdiction shall extend under this Act to every person, association, corporation,
partnership and trust involved in riverboat gambling operations in the State of Illinois."
Id. Because these provisions do not conflict with the Act, we believe that the legislature
intended that this grant of "all other powers" and "jurisdiction" to the Gaming Board
applies equally to the video gaming operations in Illinois under the Act. Therefore, the
Gaming Board's "jurisdiction shall extend *** to every person, association, corporation,
partnership and trust involved in [video gaming] operations in the State of Illinois." 230
ILCS 10/5(a)(1) (West 2012).
¶ 51 Section 5 of the Illinois Riverboat Gambling Act also outlines the duties and
responsibilities of the Gaming Board, which include the "administration and enforcement
of the Video Gaming Act." 230 ILCS 10/5(b)(13) (West 2012). The Gaming Board
"shall have jurisdiction over and shall supervise all gambling operations governed by" the
Riverboat Gambling Act. 230 ILCS 10/5(c) (West 2012). The Gaming Board has the
authority "[t]o conduct hearings, issue subpoenas for the attendance of witnesses and
23
subpoenas duces tecum for the production of books, records and other pertinent
documents in accordance with the Illinois Administrative Procedure Act, and to
administer oaths and affirmations to the witnesses, when, in the judgment of the Board, it
is necessary to administer or enforce [the Riverboat Gambling Act] or the Board rules."
230 ILCS 10/5(c)(9) (West 2012). The Gaming Board may "take any other action as may
be reasonable or appropriate to enforce" the Riverboat Gambling Act and rules and
regulations under the statute. 230 ILCS 10/5(c)(21) (West 2012).
¶ 52 Section 17 of the Riverboat Gambling Act states that the "Illinois Administrative
Procedure Act shall apply to all administrative rules and procedures of the Board under
*** the Video Gaming Act." 230 ILCS 10/17 (West 2012). Finally, section 17.1 of the
Riverboat Gambling Act states that jurisdiction and venue for the judicial review of a
final order of the Gaming Board relating to "owners, suppliers or special event licenses is
vested in the Appellate Court of the judicial district in which Sangamon County is
located." 230 ILCS 10/17.1(a) (West 2012). "Judicial review of all other final orders of
the Board shall be conducted in accordance with the Administrative Review Law." 230
ILCS 10/17.1(b) (West 2012).
¶ 53 Read as a whole, this statutory scheme, which encompasses the provisions of the
Riverboat Gambling Act, evidences the legislature's explicit intent that the Gaming Board
have exclusive power over the gaming industry in order to preserve the integrity of
legalized gambling in this State. The legislature intended that video gaming would be
conducted in Illinois only under the supervision of and authority granted by the Gaming
Board because a lack of public confidence in video gaming would undermine the
24
legislative purpose of legalized gambling, which includes promoting Illinois tourism and
increasing revenues available to the State.
¶ 54 Agreements and assignments that potentially allow unlicensed entities to receive
compensation directly linked to the placement and operation of video gaming terminals
can directly impact the public's interest in the video gaming industry. "[T]he authority to
determine public interest is vested in the legislature and cannot permissibly be delegated
to the judiciary." Fields Jeep-Eagle, Inc. v. Chrysler Corp., 163 Ill. 2d 462, 478-79, 645
N.E.2d 946, 954 (1994). We believe that the Act, therefore, confers authority to the
Gaming Board, not the circuit court, to resolve the controversy in the present case. The
controversy falls within the Gaming Board's "jurisdiction and supervision over all video
gaming operations in this State and all persons in establishments where video gaming
operations are conducted." 230 ILCS 40/78(a)(2) (West 2012). Because resolution of the
present case will have a significant impact on who profits from the legalization of video
gaming in Illinois, this court believes that the Gaming Board must address the
controversy.
¶ 55 J&J Ventures Gaming and Action Gaming argue that we should follow the court's
decision in Triple 7, 2013 IL App (3d) 120860, 992 N.E.2d 1251. We decline to follow
Triple 7 because we believe Triple 7 was wrongly decided; we believe that the court
lacked jurisdiction to decide the merits of that case.
¶ 56 In Triple 7, the owner of an establishment called Da Lee's Fine Dining signed an
agreement with Metro Amusements, which provided Metro the exclusive right to place
video gaming terminals in Da Lee's establishment. Triple 7, 2013 IL App (3d) 120860,
25
¶ 2, 992 N.E.2d 1251. At that time, Metro was not a licensed terminal operator under the
Act. Id. Subsequently, Metro entered into an asset purchase agreement with Best
Gaming in which Best Gaming acquired most of Metro's assets, including the contract
with Da Lee's. Id. ¶ 3. At that time, Best had applied to be a licensed terminal operator,
but the Gaming Board had not granted it a license. It later denied the request, and Best
requested a hearing. Id. ¶ 4. In the meantime, it assigned the contract with Da Lee's to
GEM, which was a licensed terminal operator; the Gaming Board subsequently denied
Best's request for a hearing. Id.
¶ 57 Sometime after Best's assignment to GEM, Triple 7 entered into a contract with
Da Lee's that provided that it would have the exclusive right to place and service video
gaming terminals at Da Lee's establishment. Id. ¶ 5. A dispute arose between Triple 7
and GEM concerning which entity had a valid contract with Da Lee's, and Triple 7 filed a
complaint for a declaratory judgment. Id. ¶ 7. The circuit court dismissed Triple 7's
complaint, holding that "the agreement between Da Lee's and Metro was not a use
agreement and therefore did not violate the Act or the video gaming regulations." Id. ¶ 8.
Triple 7 appealed. On appeal, the Triple 7 court did not analyze its jurisdiction over the
controversy. It affirmed the circuit court on the merits of the lower court's decision.
¶ 58 In deciding the controversy, the Triple 7 court stated that the Gaming Board's
regulations require use agreements to be between a licensed terminal operator and a
licensed video gaming location. Accordingly, the court concluded that the contract at
issue could not be a use agreement because neither Da Lee's nor Metro was licensed
when it entered into the original agreement. Id. ¶ 17. The Triple 7 court stated,
26
"[t]herefore, the rules and regulations prohibiting the assignment of a use agreement do
not apply to the agreement assigned to GEM." Id. In addition, the Triple 7 court rejected
an argument that sections 1800.110 and 1800.320 of the Gaming Board's rules prohibit
prelicensure agreements. Accordingly the court's ruling validated a practice of assigning
precursor agreements, purporting to control the placement of video gaming terminals,
between unlicensed individuals and entities "until the terminal operator becomes licensed
under the Act." Id. ¶ 23. At that point, according to the Triple 7 court, the agreement
may not be assigned "except to another licensed terminal operator." Id.
¶ 59 In the present case, the circuit court was required to follow the Triple 7 court's
reasoning, which resulted in a holding that the original exclusive location agreement was
not a use agreement under the Act for a period of time and was capable of being freely
traded and exchanged between unlicensed entities for profit. The exclusive location
agreement then transitioned into a use agreement once it was finally passed into the hands
of a licensed entity and, at that time, controlled the placement of video gaming terminals
in Wild Country's licensed establishment and served as a basis for further compensation
directly tied to video gaming operations to be transferred to unlicensed entities.
¶ 60 We believe that the highly regulated nature of the statutory scheme making video
gaming legal in Illinois evidences a legislative intent that the Gaming Board have
exclusive authority over the issues decided by the circuit court in the present case and by
the appellate court in Triple 7. The legislature intended for the Gaming Board to
determine the requirements and limitations for use agreements so that it may preserve the
integrity of the video gaming industry. Nothing in the statutory scheme evidences a
27
legislative intent that the courts should have concurrent jurisdiction to regulate use
agreements or precursor agreements that would later purport to control the placement and
operation of video gaming terminals. We believe the Triple 7 court usurped the Gaming
Board's authority and decided issues that were within the Gaming Board's exclusive
authority to decide. Accordingly, we decline to follow Triple 7.
¶ 61 Furthermore, we believe that the legislature intended for the Gaming Board to
have exclusive authority over agreements affecting the placement and operation of video
gaming terminals because there is an obvious need for uniform application of the gaming
laws throughout the State. Allowing the parties in disputes over the placement of video
gaming terminals to seek circuit court intervention has the potential of disrupting the
Act's statutory scheme. There are multiple lawsuits in this court's district involving the
enforcement of agreements similar to the agreements at issue in the present case and in
Triple 7. 1 It is likely that similar lawsuits are pending throughout the State. This case
was consolidated for oral argument with nine different lawsuits from three different
counties. In each case, Accel Entertainment asks us to reject the Triple 7 decision and
hold that the assignment of the agreement from Action Gaming to J&J Ventures Gaming
1
The record on appeal includes a motion that Accel Entertainment filed with the
supreme court, pursuant to Illinois Supreme Court Rule 384 (eff. Nov. 1, 1990), in which
it sought to consolidate 28 cases (including the present case) that are or were pending in
10 different counties and that involved similar disputes over the placement of video
gaming terminals in various establishments. The supreme court denied the motion.
28
was invalid. This would result in conflicting appellate court rulings. Therefore, we
believe that the legislature's grant of exclusive authority to the Gaming Board furthers its
intent that the rules of this newly created and strictly regulated industry be applied
uniformly.
¶ 62 Both parties have argued that the Gaming Board has no authority over the validity
of the agreements at issue in the present case. We disagree. J&J Ventures Gaming
claims to have the exclusive right to place and operate video gaming terminals as a result
of the original exclusive location agreement and subsequent assignments. J&J Ventures
Gaming is correct only if the agreements constitute a valid use agreement under the Act.
There is no question that the Gaming Board has authority to promulgate rules related to
and exercise jurisdiction over use agreements. It has already done so by enacting rules
pertaining to the minimum standards for use agreements in section 1800.320. We believe
its authority over use agreements is exclusive and that this authority, by necessity,
includes jurisdiction over the exclusive location agreement and assignments at issue in
the present case. The validity of any agreement that controls the placement of video
gaming terminals rests exclusively within the Gaming Board's authority. Its decision is
reviewable under the standards of the Administrative Review Law.
¶ 63 In their brief, J&J Ventures Gaming and Action Gaming argue that the Gaming
Board "has acknowledged that it lacks jurisdiction and power to decide the enforceability
of pre-licensure agreements." It cites to statements made by an attorney of the Gaming
Board in a correspondence dated September 11, 2013. In the letter, the attorney states
that the Gaming Board has consistently said that a contract entered into by two
29
unlicensed parties could not be considered a use agreement pursuant to the rules adopted
by the Gaming Board and that the Gaming Board is not concerned with whether or not
such an agreement is valid or enforceable under contract law. The attorney further stated
that "[w]hether or not that contract can become a valid Use Agreement pursuant to the
Adopted Rules of the Illinois Gaming Board is an issue that is decided once the parties to
the contract are licensed by the Illinois Gaming Board."
¶ 64 This correspondence does not control our analysis. "Determining the scope of any
agency's power and authority is a judicial function, rather than a question for the agency
to answer itself." Gallaher v. Hasbrouk, 2013 IL App (1st) 122969, ¶ 19, 3 N.E.3d 913.
The validity of the agreements at issue falls within the Gaming Board's authority because
J&J Ventures Gaming maintains that it has the exclusive right to place and operate video
gaming terminals within Wild Country's establishment as a result of the agreements.
Whether the agreements collectively constitute a valid use agreement under the Act is a
matter for the Gaming Board to decide. The agreements' purported conveyance of video-
gaming-linked monetary compensation to unlicensed entities also brings the validity of
the agreements under the exclusive authority of the Gaming Board.
¶ 65 In their cross-appeal, J&J Ventures Gaming and Action Gaming argue that the
circuit court erred in allowing Accel Entertainment to intervene permissively. Section 2-
408(a) of the Code of Civil Procedure (735 ILCS 5/2-408(a)(2) (West 2012)) allows a
person or entity to intervene in an action "when the representation of the applicant's
interest by existing parties is or may be inadequate and the applicant will or may be
bound by an order or judgment in the action." The issue of whether the circuit court
30
erred in granting Accel Entertainment's petition to intervene is moot in light of our
determination that the Gaming Board has exclusive jurisdiction over the merits of the
controversy.
¶ 66 Finally, J&J Ventures Gaming and Action Gaming have filed a motion to dismiss
Accel Entertainment's appeal, arguing that it lacks standing and is not a proper
intervenor. For the reasons stated above, this motion is denied as moot.
¶ 67 CONCLUSION
¶ 68 For the foregoing reasons, we vacate the circuit court's judgment and dismiss this
appeal.
¶ 69 Judgment vacated; motion denied; appeal dismissed.
31
2015 IL App (5th) 140092
NO. 5-14-0092
IN THE
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
________________________________________________________________________
J&J VENTURES GAMING, LLC, an Illinois ) Appeal from the
Limited Liability Company, and ACTION GAMING, ) Circuit Court of
LLC, an Illinois Limited Liability Company, ) Madison County.
)
Plaintiffs-Appellees and Cross-Appellants, )
)
v. ) No. 13-MR-85
)
WILD, INC., d/b/a Wild Country, an Illinois )
Corporation, )
)
Defendant )
) Honorable
(Accel Entertainment Gaming, LLC, Intervenor- ) ) Donald M. Flack,
Appellant and Cross-Appellee). ) Judge, presiding.
________________________________________________________________________
Opinion Filed: August 7, 2015
_____________________________________________________________________________________
Justices: Honorable Bruce D. Stewart, J.
Honorable Richard P. Goldenhersh, J., and
Honorable S. Gene Schwarm, J.,
Concur
_____________________________________________________________________________________
Attorneys Steven P. Blonder, Marissa L. Downs, Much Shelist, P.C., 191 North Wacker
for Drive, Suite 1800, Chicago, IL 60606; Patricia S. Murphy, G. Patrick Murphy,
Appellant Murphy & Murphy LLC, 3415 Office Park Drive, Suite D, Marion, IL 62959
_____________________________________________________________________________________
Attorneys Christopher A. Koester, Aaron C. Jones, Taylor Law Offices, P.C., 122 East
for Washington Avenue, P.O. Box 668, Effingham, IL 62401 (attorneys for J&J
Appellees Ventures Gaming, LLC); Corey M. Shapiro, William M. Gantz, Irina
Dashevsky, Dentons US LLP, 233 South Wacker Drive, Suite 7800, Chicago, IL
60606, Paul P. Waller, III, Walker & Williams, P.C., 4343 West Main Street,
Belleville, IL 62226 (attorneys for Action Gaming, LLC)
____________________________________________________________________________________