Zoggolis v. Wynn Las Vegas, LLC

• Citation: 768 F.3d 919
• Decision Date: 23 September 2014
• Docket Number: No. 11–17939.,11–17939.
• Parties: Konstantin ZOGGOLIS, Plaintiff–Appellant, v. WYNN LAS VEGAS, LLC, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

768 F.3d 919

Konstantin ZOGGOLIS, Plaintiff–Appellant,

v.WYNN LAS VEGAS, LLC, Defendant–Appellee.

No. 11–17939.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Nov. 6, 2013.

Filed Sept. 23, 2014.

Gary Logan, Las Vegas, NV, for Plaintiff–Appellant.

Lawrence J. Semenza III, Semenza & Semenza, LLP, Las Vegas, NV, for Defendant–Appellee.

Appeal from the United States District Court for the District of Nevada, Philip M. Pro, Senior District Judge, Presiding. D.C. No. 2:11–cv–01562–PMP–PAL.

Before: ANDREW J. KLEINFELD, SIDNEY R. THOMAS, and JOHNNIE B. RAWLINSON, Circuit Judges.

OPINION

RAWLINSON, Circuit Judge:

Appellant Konstantin Zoggolis (Zoggolis) challenges the district court's dismissal of his state law breach of contract and recoupment claims concerning gambling debts that Zoggolis owed to Appellee Wynn Las Vegas (Wynn). Zoggolis contends that the district court erred in dismissing his complaint due to Zoggolis' failure to exhaust his claims before the Nevada Gaming Control Board. Because Zoggolis' gambling debts were evidenced by credit instruments in the form of markers, we reverse the district court's dismissal of Zoggolis' claims.

I. BACKGROUND

In his Complaint, Zoggolis alleged that he entered into a credit agreement with Wynn for a $150,000 credit line. The credit agreement provided that “[b]efore drawing on [his] line of credit, if granted, [Zoggolis] agree[d] to sign credit instruments (i.e. checks) in the amount of the draw.” Zoggolis also “authoriz[ed] [Wynn] to complete any of the following missing items on these credit instruments: (1) the name of a payee; (2) any missing amounts; (3) a date; (4) the name, account, number and/or address and branch of any banks and financial institutions and (5) any electronic encoding of the above items.” Zoggolis agreed that “each draw against [his] credit line [was] a separate advance of money by [Wynn]. If [Zoggolis] receive[d] the advance before [he] executed a credit instrument, [he] promptly [would] sign a credit instrument in the amount of the advance.”

According to Zoggolis, on November 12, 2008, and as provided in Nevada law, he directed Wynn to limit his credit line to $250,000. The Complaint alleges that Wynn agreed one day later, in writing, that Wynn would honor Zoggolis' request to limit his credit line to $250,000.¹

Zoggolis alleged that Wynn breached the credit agreement because Wynn did not cancel or reduce Zoggolis' credit line as agreed, and that any duty to repay markers in excess of $250,000 was discharged. Zoggolis also asserted a recoupment claim for $1,300,000 based on eleven markers Wynn issued to him in excess of the restricted credit line. In addition, Zoggolis sought $1,050,000 in damages representing “the amount of casino credit extended to him beyond his self-limited amount of $250,000.00....” Finally, Zoggolis sought injunctive relief premised on Wynn's initiation of criminal proceedings due to the unpaid markers.

Wynn filed a motion to dismiss Zoggolis' complaint because Zoggolis failed to pursue his claims before the Nevada Gaming Control Board as required by Nev.Rev.Stat. § 463.361.² The district court granted Wynn's motion and dismissed Zoggolis' breach of contract and recoupment claims because the claims arose “from a dispute concerning a gambling debt which requires that [Zoggolis] exhaust administrative remedies pursuant to N.R.S. 463.361 ...” ³ Zoggolis filed a timely notice of appeal.

II. STANDARD OF REVIEW

“We review de novo the district court's dismissal for lack of subject matter jurisdiction....” Tritz v. United States Postal Serv., 721 F.3d 1133, 1136 (9th Cir.2013) (citation omitted).

III. DISCUSSION

The district court held that dismissal of Zoggolis' claim was warranted because the dispute concerned “a gambling debt.” However, dismissal was warranted only if Zoggolis' “gambling debt” was of the type required to be exhausted before the Gaming Control Board under Nevada law.

Nevada courts “traditionally followed the common law doctrine ... that a gaming debt is not legally enforceable....” Sigel v. McEvoy, 101 Nev. 623, 707 P.2d 1145, 1146 (1985) (citations omitted). The lack of enforceability encompassed “gaming debts incurred between two players in the same game or between a casino and a patron ...” Id. at 1147 n. 2. However, in 1983, the Nevada legislature enacted Nev.Rev.Stat. § 463.361(1), which provides “that gaming debts not evidenced by a credit instrument are void and unenforceable and do not give rise to any administrative or civil cause of action.” Id. at 1146 (internal quotation marks omitted). This part of the statute is consistent with the common-law prohibition against enforcement of gaming debts. In other words, gaming debts not evidenced by a credit instrument are subject to the common-law doctrine precluding enforcement of gaming debts. That would be the end of the story but for Nev.Rev.Stat. § 463.361(2), which provides that “[a] claim by a patron of a licensee for payment of a gaming debt that is not evidenced by a credit instrument may be resolved ... (a) By the [Gaming Control] Board ...” This statute has been interpreted as conferring exclusive jurisdiction upon the Gaming Control Board “to resolve a disputed claim ... by a patron of a gaming licensee for payment of a gambling debt that is not evidenced by a credit instrument....” Sengel v. IGT, 116 Nev. 565, 2 P.3d 258, 260 (2000) (citation and footnote reference omitted). In sum, under Nevada's statutory scheme, a proceeding before the Gaming Control Board is the only remedy available “to enforce a gaming debt not evidenced by a credit instrument ...” Id. (citation omitted). To that extent, the Nevadalegislature “modified the common law prohibition against enforcement of gaming debts....” Sigel, 707 P.2d at 1146.

Nev.Rev.Stat. § 463.01467 defines a credit instrument as “a writing which evidences a gaming debt owed to a person who holds a nonrestricted license at the time the debt is created ...” A licensee is defined as “any person to whom a valid gaming license ... has been issued....” Id. n. 1 (quoting Nev.Rev.Stat. § 463.0171). It is undisputed that Wynn is a licensee. Therefore, as between Wynn and Zoggolis, a licensee and a patron, if the gaming debt is not evidenced by a credit instrument, the only way to enforce that gaming debt is through a proceeding before the Gaming Control Board. See Sengel, 2 P.3d at 260. Although these statutes do not address the situation where the gaming debt is evidenced by a credit instrument, as discussed below, Nevada cases indicate that a gaming debt evidenced by a credit instrument is enforced in the same manner as any other negotiable instrument.

To resolve this appeal, we must decide whether markers like the ones issued to Zoggolis by Wynn are credit instruments under Nevada law. If the markers are credit instruments, the Gaming Control Board would not have exclusive jurisdiction over Zoggolis' claims, and no exhaustion would be required. SeeNev.Rev.Stat. § 463.361(2) (addressing only gaming debts not evidenced by a credit instrument). The Nevada Supreme Court has defined a marker as “an instrument, usually dated, bearing the following information: the name of the player; the name, location, and account number of the player's bank; and the instruction ‘Pay to the Order of’ the casino for a specific value in United States dollars.” Nguyen v. State, 116 Nev. 1171, 14 P.3d 515, 516 (2000). Part of the content of the marker is a representation by the payor “that the amount drawn by the marker is on deposit in the referenced financial institution, and that he guarantees payment....” Id. When a casino patron has completed his gaming activity, he either pays the full amount reflected in the marker or leaves the marker outstanding with the casino. “If the marker remains outstanding, casino personnel attempt to notify the patron and, after a specified period of time, submit the marker to the patron's bank for collection....” Id. (footnote reference omitted).

The markers issued to Zoggolis contained the information delineated in Nguyen. In the accompanying credit agreement, Zoggolis committed to “sign credit instruments (i.e. checks) in the amount of the draw,” and authorized Wynn “to complete any of the following on these credit instruments: (1) the name of a payee; (2) any missing amounts, (3) a date, (4) the name, account number, and/or address and branch of any banks and financial institutions, and (5) any electronic coding of the above items....” Zoggolis was also required to “promptly ... sign a credit instrument in the amount of [an] advance.” The markers issued by Wynn were signed by Zoggolis, contained the requisite credit instrument information contemplated by the credit agreement, and confirmed that the marker was “identical to a personal check.”

In Nguyen, the Nevada Supreme Court reviewed Nguyen's conviction for drawing and passing a check without sufficient funds. The genesis of the criminal charges was a series of markers issued at several licensed Las Vegas gaming establishments. See 14 P.3d at 516. The Nevada Supreme Court framed the primary issue as whether the criminal statute prohibiting the issuance of “bad checks, applies to gaming credit instruments commonlyknown as markers.” Id. at 517 (internal quotation marks omitted). The Nevada Supreme Court noted that the applicable criminal statute prohibits passing a check or draft to obtain credit from a licensed gaming establishment without sufficient funds to pay the check or draft upon presentation. See id. Although the governing statute does not define “check or draft,” the court referenced the Uniform Commercial Code provisions governing negotiable instruments, as codified in the Nevada Revised Statutes. See id. at 517–18. Those provisions define “check” as “an instrument drawn upon a bank and payable on demand, signed by the drawer, containing an instruction to pay a certain amount to another party....” Id....