Fun Arcade, LLC v. City of Hickory

• Docket Number: COA22-557
• Decision Date: 01 August 2023
• Parties: FUN ARCADE, LLC, and BARRACUDA VENTURES, LLC, Plaintiffs, v. CITY OF HICKORY, THURMAN WHISNANT, HICKORY CHIEF OF POLICE, in his official capacity, CITY OF CONOVER, ERIC LOFTIN, CHIEF OF POLICE, in his official capacity, Defendants.
• Court: North Carolina Court of Appeals

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FUN ARCADE, LLC, and BARRACUDA VENTURES, LLC, Plaintiffs,
v.
CITY OF HICKORY, THURMAN WHISNANT, HICKORY CHIEF OF POLICE, in his official capacity, CITY OF CONOVER, ERIC LOFTIN, CHIEF OF POLICE, in his official capacity, Defendants.

No. COA22-557

Court of Appeals of North Carolina

August 1, 2023

Heard in the Court of Appeals 25 January 2023.

Appeal by Plaintiffs from an order entered 15 March 2022 by Judge Gregory R. Hayes in Catawba County No. 18 CVS 2674 Superior Court.

Posch Law Firm, by Gregory A. Posch, and Trapp Law PLLC, by Jonathan W. Trapp, for Plaintiffs-Appellants.

Cranfill Sumner LLP, by Steven A. Bader, Patrick H. Flanagan, Martin &Monroe Pannell, P.A., by Monroe Pannell, and Young, Morphis, Bach &Taylor, LLP, by Paul E. Culpepper, for Defendants-Appellees.

OPINION

WOOD, Judge.

Section 14-306.4 of our General Statutes outlaws the operation of electronic sweepstakes machines and similar games of chance. We are tasked in this appeal with determining whether the controversial game Ocean Fish King has been caught up in the broad net of our state's sweepstakes prohibition.

I. Background

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Fun Arcade, LLC, and Barracuda Adventures, LLC, (together "Plaintiffs") own several businesses that host certain gaming machines in this state. Plaintiffs' facilities allow players to buy gaming e-credits at kiosks and select to play from a host of electronic games. Players can exchange their gaming e-credits for cash value at a sales counter. The games available include titles such as Cop the Lot, Amigos Gold, Super Diamond Deluxe, Wheel of Riches, and Ocean Fish King. The game Ocean Fish King is the subject of this appeal.

In August 2018, the cities of Hickory and Conover and their respective Police Chiefs, Thurman Whisnant and Eric Loftin, (altogether "Defendants") sought to enforce against Plaintiffs this state's prohibition of slot machines and, later, electronic sweepstakes machines for their operation of Ocean Fish King and similar games.

Upon notice of Defendants' intent to enforce the prohibition, Plaintiffs filed a complaint for a declaratory judgment, a temporary restraining order, and a temporary and permanent injunction against Defendants on 20 September 2018 in Catawba County Superior Court. Defendants filed Answers to the complaint in December 2018.

On 14 March 2019, Defendants filed an expert affidavit from Andrew Baran ("Baran"), a Senior Engineering Manager for Gaming Laboratories International, LLC. Baran conducted an analysis of Ocean Fish King to determine the game's configuration settings and the effect of player interactions in relation to the game's

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outcome. The object of Ocean Fish King is to shoot at and destroy sea creatures that move around the screen. There are many sea creatures on the screen at any given time, so it is difficult for a player to miss hitting a sea creature with a shot. During the game, each shot taken at a sea creature equates to one wager being placed. A player is allowed to choose how many credits they wish to wager on each shot fired. Once they have selected the wager, the player uses a joystick to aim and shoot at the sea creatures. After each shot fired, the player's credit balance is debited by the amount of the selected wager. When a shot hits a sea creature, the player is awarded a credit value based on the sea creature that was destroyed.

Baran observed no pattern for the number of shots required to destroy a sea creature. For example, a sea creature requiring thirty shots to be destroyed may require only five shots to be destroyed at a later point in the game. By analyzing the game's software, Baran determined that there was no specific strategy or advantage that a player could learn to receive a better outcome in the game. Furthermore, the game has a measurement called the return to player calculation ("RTP"). The RTP is the ratio of money paid to play the game to the amount of money returned to the player at the end of the game. Ocean Fish King has an RTP of...