Erickson v. Desert Palace, Inc.

• Citation: 942 F.2d 694
• Decision Date: 21 August 1991
• Docket Number: No. 89-16053,89-16053
• Parties: Russell ERICKSON; Beth Erickson; Kirk Erickson, Plaintiffs-Appellants, v. DESERT PALACE, INCORPORATED; Caesars Palace, a Nevada corporation; Caesars Palace Corporation, a Delaware corporation; Donald Abrahamson; Marian Vince, formerly known as Marian Fourno; State of Nevada; Nevada Gaming Control Board, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 694

942 F.2d 694

Russell ERICKSON; Beth Erickson; Kirk Erickson Plaintiffs-Appellants, v. DESERT PALACE, INCORPORATED; Caesars Palace, a Nevada corporation; Caesars Palace Corporation, a Delaware corporation; Donald Abrahamson; Marian Vince, formerly known as Marian Fourno; State of Nevada; Nevada Gaming Control Board, Defendants-Appellees.

No. 89-16053.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 8, 1990.

Decided Aug. 21, 1991.

I. Nelson Rose, Los Angeles, Cal. and James P. Sitter, Las Vegas, Nev., for plaintiffs-appellants.

Robert D. Faiss and Marc H. Rubinstein, Lionel Sawyer & Collins, Las Vegas, Nev., for defendants-appellees Desert Palace, Inc., Caesars Palace, and Caesars Palace Corp.

Appeal from the United States District Court for the District of Nevada.

Before ALDISERT ^*, ALARCON and BRUNETTI, Circuit Judges.

BRUNETTI, Circuit Judge:

Appellants Russell, Beth, and Kirk Erickson appeal the district court's order dismissing their complaint for lack of subject matter jurisdiction and for failure to state a claim. The Ericksons brought this action against corporate defendants operating Caesar's Palace Casino in Las Vegas, Nevada, seeking to recover a $1,061,812.00 slot machine jackpot won by Kirk, a minor. The Erickson's alleged breach of contract, quasi-contract, fraud and cheating, and interference with contract, and sought declaratory judgment regarding the unconstitutional implementation and enforcement of a Nevada statute. The Ericksons appeal only the dismissal of their third cause of action alleging fraud and cheating. We have jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.

We review de novo the dismissal of a complaint for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1) or for failure to state a claim pursuant to Fed.R.Civ.P 12(b)(6). Kruso v. Int'l Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989) cert. denied, --- U.S. ----, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990). Dismissal is proper when it appears the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Love v. United States, 871 F.2d 1488, 1491 (9th Cir.1989).

The Ericksons assert diversity jurisdiction. Therefore state law applies to this action and we are bound by Nevada's Supreme Court case law. Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Olympic Sports Prod., Inc. v. Universal Athletic Sales Co., 760 F.2d 910, 912-13 (9th Cir.1985), cert. denied sub nom Whitaker Corp. v. Olympic Sports Prod., Inc., 474 U.S. 1060, 106 S.Ct. 804, 88 L.Ed.2d 780 (1986).

I.

On August 5, 1987, the Ericksons visited Caesar's Palace Casino in Las Vegas, Nevada. Kirk, then 19, purchased tokens and won a jackpot of $1,061,812.00. Because Kirk was under 21, the legal gambling age in Nevada, the casino refused to pay him the jackpot. See NRS 463.350.

Under Nevada law, an unpaid slot machine jackpot is a gaming debt not evidenced by a credit instrument. Harrah's Club v. State Gaming Control Bd., 104 Nev. 762, 766 P.2d 900 (1988) (casino patron's claim to an unpaid slot machine jackpot considered "disputed gaming debt"); State Gaming Control Bd. v. Breen, 99 Nev. 320, 323, 661 P.2d 1309, 1311 (1983) (patron seeking recovery of unpaid keno winnings found to have "no claim other than a gambling debt").

NRS 463.361, enacted in 1983, states: "Except as provided in NRS 463.361 to 463.366, inclusive, 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." NRS 463.362 to 463.366 provide for review of a casino's refusal to pay alleged winnings to a patron by the State Gaming Control Board (the "Board"). NRS 463.3662 to 463.3668 provide for review of the Board's decision by a Nevada District Court and by the State Supreme Court. NRS 463.3668(2) provides that judicial review by the state courts is the exclusive method for review of the Board's actions.

The Ericksons filed a formal complaint under NRS 463.363 with the Board on August 7, 1987. When the Board's Enforcement Division denied the Erickson's claims on November 9, 1988, they filed a petition seeking reconsideration which was also denied. Specifically, the Board found that NRS 463.350 prohibited Kirk Erickson from collecting the slot machine jackpot and that any contract that may have existed between the defendant casino and Erickson was inoperative because it violated NRS 463.350. The Board also held that Erickson had not properly stated a claim for restitution, quasi contract or unjust enrichment, because he sought payment of the jackpot rather than return of the three $1 tokens he had used, and those theories permit only damages to the extent of the benefit to the defendant. Finally, the Board held because the Casino had properly warned Erickson that the legal gambling age is twenty-one and had made no misrepresentations of gambling rules, defendant was not guilty of fraud.

Pursuant to NRS 463.3662, the Ericksons petitioned the Eighth Judicial District Court of Nevada for Clark County to review the Board's ruling. The district court affirmed the denial of the claim, whereupon the Ericksons petitioned the Nevada Supreme Court for judicial review. The Nevada Supreme Court dismissed the appeal on May 21, 1990. The Court agreed with the Board that NRS 463.350 prohibited Erickson from collecting the jackpot, and that there was no evidence the casino "knowingly allowed Kirk Erickson to gamble while underage," which might support a claim of fraud.

II.

The Erickson's filed a complaint in federal district court on August 11, 1988, before the decision of the Board. Defendants State of Nevada, Nevada Gaming Control Board, and Caesars filed motions to dismiss the action. The district court granted the motions dismissing the complaint for lack of subject matter jurisdiction due to the Erickson's failure to exhaust the administrative remedies provided by Nevada law. Because the Nevada Supreme Court has issued its decision, the Ericksons now have exhausted their administrative remedies.

We decline to remand this case to the district court, however, because that court provided an alternative ground for dismissing the complaint. The court found that NRS 463.361 limits a plaintiff to an administrative proceeding followed by judicial review in state court. The court therefore determined the Ericksons could not state a claim upon which relief could be granted. Fed.R.Civ.P. 12(b)(6). The district court held because "plaintiffs claim can most accurately be characterized as an attempt to recover a gaming debt not evidenced by a credit instrument ... plaintiffs cannot maintain a civil action to recover a jackpot, but instead are limited to an administrative proceeding followed by judicial review."

III.

A.

Appellants assert the Nevada statute should not bar this action because it does not involve a "gaming debt." We agree with the district court that "Nevada characteristically categorizes suits to collect unpaid gambling winnings as gaming debts." Harrah's Club v. State Gaming Control Bd., 104 Nev. 762, 766 P.2d 900 (1988); State Gaming Control Bd. v. Breen, 99 Nev. 320, 323, 661 P.2d 1309, 1311 (1983); Corbin v. O'Keefe, 87 Nev. 189, 484 P.2d 565 (1971). The district court correctly held that NRS 463.361 to 463.3688 limits a plaintiff's recovery of a gaming debt to the exclusive administrative/judicial review procedure contained therein.

B.

Plaintiff's also assert the limitation imposed by NRS 463.361 does not apply in this case because the casino's refusal to pay the slot machine jackpot amounts to fraud. They cite Berman v. Riverside Casino Corp., 323 F.2d 977 (9th Cir.1963) and Zaika v. Del E. Webb Corp., 508 F.Supp. 1005 (D.Nev.1981).

In Berman, appellant sued a casino to recover money he lost allegedly as a result of the casino's use of "loaded" dice. Although at the time of the action, Nevada made no statutory provision for suit to recover gambling losses, we held the appellant had properly asserted a cause of action for fraud: "[T]he common law of England, in effect when Nevada became a state is, except as modified by statute or decision of Nevada's courts, the law of...