Dotty's Cafe v. Ill. Gaming Bd.
| Decision Date | 23 May 2019 |
| Docket Number | No. 1-17-3207,1-17-3207 |
| Citation | 143 N.E.3d 173,436 Ill.Dec. 678,2019 IL App (1st) 173207 |
| Parties | DOTTY'S CAFE, a/k/a Illinois Cafe & Services Company, LLC, and Stella's Place and Shelby's, a/k/a Laredo Hospitality Ventures, LLC, Plaintiffs-Appellants, v. The ILLINOIS GAMING BOARD ; Donald R. Tracy, Hector Alejandre, Thomas A. Dunn, Dee Robinson, and Steven C. Dolins, in Their Official Capacities as Members of the Illinois Gaming Board ; Mark Ostrowski, in His Official Capacity as Administrator of the Illinois Gaming Board ; The Illinois Gaming Machine Operators Association; J & J Ventures Gaming, LLC ; and Accel Entertainment Gaming, LLC, Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
Dan K. Webb, David E. Dahlquist, Matthew R. Carter, Patrick R. O’Meara, and Ross J. Corbett, of Winston & Strawn LLP, of Chicago, for appellants.
Kwame Raoul, Attorney General, of Chicago (David L. Franklin, Solicitor General, and Frank H. Bieszczat, Assistant Attorney General, of counsel), for appellees Illinois Gaming Board, Donald R. Tracy, Hector Alejandre, Thomas A. Dunn, Dee Robinson, Steven C. Dolins, and Mark Ostrowski.
Kim R. Walberg and Richard Y. Hu, of Taft Stettinius & Hollister LLP, Donna B. More, William Bogot, and Michael J. Neville, of Fox Rothschild LLP, and Christopher B. Wilson, of Perkins Coie LLP, all of Chicago, for other appellees.
¶ 1 Plaintiffs, Dotty's Cafe, Stella's Place, and Shelby's, challenged the constitutionality of two provisions of the Video Gaming Act (Gaming Act) ( 230 ILCS 40/1 et seq. (West 2016)), one that prohibits certain businesses involved in video gaming from being involved in multiple aspects of the video gaming industry (id. § 30) and another that requires the business that owns the video gaming machine and the business where that machine is located to equally split the after-tax profits from operating the machine (id. § 25(c)). Additionally, they sought to invalidate and prevent the enforcement of a policy document that the Illinois Gaming Board posted to its website pertaining to inducements, advertising, and promotions by businesses licensed to be involved in video gaming. Dotty's Cafe, Stella's Place, and Shelby's posited that the Illinois Gaming Board failed to follow proper rulemaking procedures and exceeded its statutory authority in posting the policy document, and the policy document itself was unconstitutional as well as arbitrary and capricious. The circuit court dismissed the lawsuit, finding both provisions of the Video Gaming Act constitutional and all claims related to the policy document moot because the Illinois Gaming Board removed the document from its website.
¶ 2 Dotty's Cafe, Stella's Place, and Shelby's now appeal that dismissal, contending that the two provisions of the Video Gaming Act are unconstitutional and that their challenge to the Illinois Gaming Board's policy document is not moot. Because we find both provisions of the Video Gaming Act rationally related to a legitimate state interest, both provisions are constitutional. However, we find that two counts related to Dotty's Cafe, Stella's Place, and Shelby's challenge to the Illinois Gaming Board's policy document on inducements, advertising, and promotions are not moot because a determination on the procedures employed by the Illinois Gaming Board in posting the policy document could have a direct impact on the rights and duties of the parties. Furthermore, if Dotty's Cafe, Stella's Place, and Shelby's were to prevail on those counts, they could pursue statutory fees and costs as a result. Although we affirm the circuit court's dismissal of all counts related to the constitutionality of the two provisions of the Video Gaming Act (counts I through VI) and affirm its dismissal on three counts related to the policy document (counts IX through XI), we find two counts related to the policy document (counts VII and VIII) are not moot. We therefore remand those counts to the circuit court for further proceedings.
¶ 5 In July 2009, the Illinois legislature enacted the Gaming Act (Pub. Act 96-34 (eff. July 13, 2009) (adding 230 ILCS 40/1 et seq. )), which legalized the use of video gaming machines, such as video poker, blackjack, and slots, as a form of gambling in certain locations. Every individual or business involved in video gaming in Illinois must be licensed, including the manufacturers and distributors of video gaming machines, the owner and operators of the machines, and the establishments where the machines are located. 230 ILCS 40/25, 45 (West 2016). Most relevant in this appeal are the licensed operators and licensed establishments. The operator is the individual or business that buys the video gaming machine from either a manufacturer or distributor, places that machine in a licensed establishment, and becomes responsible for the operation of the machine. Id. § 5; 11 Ill. Adm. Code 1800.250 (2014). The establishment is where the machine is located, and includes places that serve alcohol, veteran and fraternal halls, truck stops as well as other places. 230 ILCS 40/5 (West 2016).
¶ 6 But, under the Gaming Act, there is a prohibition on certain individuals and businesses holding multiple licenses. Id. § 30. One such prohibition is if an individual or business is licensed as an operator, that individual or business may not also hold a license as an owner or manager of a licensed establishment (the dual-license prohibition). Id. Instead, a licensed establishment must contract with an independent individual or business that possesses a license to be an operator. Id. § 25(e). The result of the dual-license prohibition is that, in order to operate a video gaming machine, there must be a joint enterprise between a licensed establishment and a licensed operator.
¶ 7 Not only does the Gaming Act mandate a joint enterprise between a licensed establishment and a licensed operator, the law also regulates it in various ways. See id. § 25(c), (e); 11 Ill. Adm. Code 1800.320 (2018). One such manner is how the income is divided. The money generated from any one video gaming machine, defined under the Gaming Act as the "net terminal income," initially is taxed at 30% and collected by the state. 230 ILCS 40/5, 60(a) (West 2016). Of that 30%, five-sixths goes to a capital projects fund and the remainder to local governments. Id. § 60(b). The remaining 70%, or the after-tax profits, must be split equally between the licensed establishment and the licensed operator (the profit-splitting requirement) (id. § 25(c)), although a small percentage is paid to Scientific Games International, the operator of the central communications system, which helps the state monitor video gaming machines. Id. § 15(15); Ill. Gaming Bd., 2018 Annual Report 7 (2018), http://www.igb.illinois.gov/FilesAnnualReport/2018IGBAnnualReport.pdf [https://perma.cc/3BUM-FAGE] (currently, Scientific Games International receives 0.8513%). Along with the profit-splitting requirement, the Gaming Act also prohibits operators from giving "anything of value" to a licensed establishment "as any incentive or inducement to locate video terminals in that establishment." 230 ILCS 40/25(c) (West 2016).
¶ 8 Under the Gaming Act, the legislature has vested the Illinois Gaming Board (Board) with the complete authority to supervise and manage video gaming in Illinois, including the ability to adopt rules and regulations to administer the law. Id. § 78. In February 2017, the Board posted a document on its website titled "Illinois Gaming Board Policy on Inducements, Advertising and Promotions by Video Gaming Licensees" (the policy document), which included "guidance" for compliance with the Gaming Act's prohibition on inducements as well as statements on how operators and establishments must share expenses such as those related to advertising and promotions.
¶ 10 Plaintiffs Dotty's Cafe, Stella's Place, and Shelby's are cafe-style establishments, licensed under the Gaming Act, where patrons can buy food and alcohol and engage in video gaming. Together, plaintiffs operate over 100 such locations in Illinois, including almost 50 in Cook County. In April 2017, they brought an 11-count complaint against the Board challenging the Gaming Act's dual-license prohibition and profit-splitting requirement as well as the Board's policy document on inducements, advertising, and promotions.
¶ 11 Two months later, the circuit court granted the Illinois Gaming Machine Operators Association, a trade association promoting the interests of operators, and J & J Ventures Gaming, LLC, and Accel Entertainment Gaming, LLC, two licensed operators (collectively, intervenors), leave to intervene as defendants in the lawsuit. Plaintiffs subsequently requested, and received, leave from the circuit court to file an amended complaint. The amended complaint added the Board's members, the Board's administrator, and the intervenors as defendants, in addition to the Board itself, and contained 11 counts based on three main issues.
¶ 12 First, plaintiffs alleged that the Gaming Act's dual-license prohibition violated both the federal and state due process clauses, both the federal and state equal protection clauses, and the special legislation clause of the Illinois Constitution (counts I through III, respectively). All three counts sought a declaration that the dual-license prohibition was unconstitutional and an injunction preventing its enforcement. The federal claims of counts I and II also sought statutory costs and attorney fees.
¶ 13 Second, plaintiffs alleged that the profit-splitting requirement violated both the federal and state due process clauses, both the federal and state equal protection clauses, and the special legislation clause of the Illinois Constitution (counts IV through VI, respectively). All three counts sought a declaration...
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