In re August, Bankruptcy No. 09–19337.

CourtUnited States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
Citation448 B.R. 331
Docket NumberAdversary No. 10–0013.,Bankruptcy No. 09–19337.
PartiesIn re Linda AUGUST, Debtor.Adamar of New Jersey, Inc. t/a Tropicana Casino and Resort, Plaintiffv.Linda August, Defendant.
Decision Date03 March 2011

448 B.R. 331

In re Linda AUGUST, Debtor.Adamar of New Jersey, Inc. t/a Tropicana Casino and Resort, Plaintiff
Linda August, Defendant.

Bankruptcy No. 09–19337.

Adversary No. 10–0013.

United States Bankruptcy Court, E.D. Pennsylvania.

March 3, 2011.

[448 B.R. 335]

Barry M. Rothman, Barry M. Rothman, P.C., Collegeville, PA, for Plaintiff.Michael A. Cataldo, Cibik & Cataldo, P.C., Michael A. Cibik, Cibik & Cataldo, P.C., Philadelphia, PA, for Defendant.

BRUCE FOX, Bankruptcy Judge.

In the above-captioned adversary proceeding, the plaintiff, Adamar of New Jersey, Inc. t/a Tropicana Casino and Resort

[448 B.R. 336]

(“Adamar”), seeks to have declared non-dischargeable, under 11 U.S.C. § 523(a)(2) and/or (a)(6), an unpaid $65,000 extension of credit to the debtor, Ms. Linda August. The debtor opposes such relief and has asserted a counterclaim under 11 U.S.C. § 523(d).

Evidence was offered over a multi-day period 1 and the parties have submitted post-trial memoranda. This proceeding is now ripe for determination.


After consideration of the evidence presented and the parties' post-trial submissions, I find that the following material facts were proven.

1. Adamar is a business corporation organized under the laws of a state other than Pennsylvania with its principal place of business at 2831 Boardwalk, Atlantic City, New Jersey. At that location, Adamar operates a hotel and casino under the name Tropicana Casino and Resort. Complaint and Answer, ¶ 1.

2. The debtor, Linda August, is a self-employed consultant for events, such as fund raising and political campaigns. 1 N.T. at 129. She holds college and graduate degrees in music and music education, respectively. 1 N.T. at 138. Although sometimes referring to her consultancy business as Linda August & Associates, she has no employees and never established any business entity. 1 N.T. at 129–31.

3. In 2008, Ms. August reported gross income from her event planning business on her federal tax return of about $78,000, with a net profit of $37,060. In addition, she reported $11,600 in wages. Ex. P–8. On her 2008 federal tax return, she reported “other income” of $2,361,849 and deducted gambling losses in the same amount. Id.

4. In 2009, Ms. August reported on her federal tax return gross income of approximately $71,500 from her business, with net profits of $47,555, and wages of $7,450. Ex. P–9. On her 2009 federal tax return, she reported “other income” of $566,772, and gambling losses in the same amount. Id.2

5. Ms. August first established a line of credit with Adamar on December 1, 1981. Joint Pretrial Statement, Uncontested Fact # # 3, 17; Complaint and Answer, ¶¶ 6, 24.

6. In order to obtain credit from Adamar, the gambling customer provides information on an initial credit application. That information includes the customer's name, address, employment information, income earned and assets held, outstanding indebtedness, and a list of any other casinos at which the patron has established credit. The completed application is signed by the customer. 1 N.T. at 23–24. Ms. August signed such an application. Ex. P–4.

7. During the initial credit application process, Adamar conducts a three-pronged investigation of the customer's credit-worthiness.

[448 B.R. 337]

First, Adamar obtains a consumer credit report. Second, Adamar verifies the customer's bank account information, including the existence of the account and its current and average balances. Third, Adamar obtains a gaming report from a company called Central Credit, which provides detailed information regarding the credit applicant's obligations to numerous casinos. 1 N.T. at 25–26, 28. 3

8. Once credit is approved and a credit line established, Adamar obtains a new credit report for the customer every two years. 1 N.T. at 26.

9. Adamar is required to check the credit customer's bank records every two years, but has discretion to do so more frequently. 1 N.T. at 26. Before any modification is made to a customer's credit limit, Adamar verifies that it has a bank account verification on file from within the past two years and may, but generally does not, check the average and current bank account balances. 1 N.T. at 28–29.4

10. On an Adamar credit application dated December 17, 1988, Ms. August is listed as the owner of a manufacturing business called “Linda August & Associates.” Her income is reported to be $50,000 per year, and she is identified as having $50,000 in other assets. She reports having no other outstanding indebtedness. Ex. P–4.5

11. The credit application, which bears Ms. August's signature, contains the following statement, which is consistent with N.J. Admin. Code 19:45–1.27(a)(8):

I certify that I have reviewed all the information provided above, that it is true and accurate. I authorize Tropicana Hotel Casino to conduct such investigations pertaining to the above information as it deems necessary for the approval of my credit limit. I am aware that this application is required to be prepared by the regulations of the Casino Control Commission, and I may be subject to civil or criminal liability if any material information provided by me is willingly false.


12. During 2009 (and likely before that time) Ms. August traveled to Atlantic City, New Jersey to gamble almost every weekend at one or more of its casinos, including Adamar's Tropicana. 1 N.T. at 150. She had established lines of credit at many of those casinos, as well as casinos in Nevada, at least one as early as 1979. Joint Pretrial Statement, Uncontested Facts # # 4, 5; ex. D–2.

13. Since 1981, Ms. August has lost and repaid to Adamar more than $1 million. 1 N.T. at 41; see Joint Pretrial Statement, Uncontested Facts # # 17–18. Adamar records reflect that she borrowed during this period $2,277,000 (and thus repaid all but $65,000) and lost $1,380,000 in gambling at this casino. Ex. P–3.

14. Adamar provided Ms. August with a “player's card,” referred to by Adamar as a “Diamond” card. 1 N.T. at 38. One purpose of the card is to allow the casino

[448 B.R. 338]

to track the gambler's betting history, i.e., wins and losses. Id. For example, if the gambler inserts the Diamond Card into a slot machine, Adamar will obtain a record of the gambler's betting results. Id.

15. Based upon such tracking activity, Adamar may award to the Diamond card customer gifts of food, beverages, entertainment, travel to other New Jersey casinos, and hotel accommodations. 1 N.T. at 35–36; 2 N.T. at 49; see ex. P–3.

16. Ms. August's preferred gambling activity is to bet on the slot machines. Occasionally she gambled at blackjack. Audiodisk 3:03.

17. Ms. August credibly testified that she did not always use her Diamond card when gambling at Adamar's casino. Sometimes she forgot to bring the card; sometimes she played two slot machines at the same time and used the card on only one machine. And sometimes she did not use the card for reasons of superstition. Audiodisk at 3:04–06.

18. Ms. August also received player's cards from other casinos. Those casinos used their cards as did Adamar: for tracking gambling wins and losses and in order to award gifts. She also did not always use her player's card when gambling at those other casinos. See 1 N.T. at 91 (referring to a notation from July 26, 2008 in Taj Mahal casino credit file, stating that Ms. August “does not always use the player card”).

19. New Jersey law permits casinos to loan money to their customers. See N.J. Stat. Ann. 5:12–101.

20. In order to obtain such a loan, the customer must establish a line of credit with the casino, as Ms. August did with Adamar and other New Jersey casinos.

21. Upon application and approval, Adamar provides its customers with interest-free credit lines to finance their gambling activities. 1 N.T. at 40. The loans are without interest because Adamar expects, on average, that the customer will lose most if not all of the loan amount in gambling at its casino. 1 N.T. at 40.

22. Once a credit limit is established with Adamar, the customer may obtain cash or gambling chips from the casino at any time until the customer has borrowed her credit limit. 1 N.T. at 16, 20.

23. In order to obtain borrowed funds or chips with which to gamble, the customer must execute a counter check, known in casino parlance as “drawing a marker,” in the amount to be loaned by the casino. A marker, prepared by the casino, is encoded with the customer's bank account information, so that the marker may be deposited into Adamar's account and drawn from the customer's bank account. 1 N.T. at 11.6 The customer may execute a marker in any amount up to the unused credit limit previously established by the casino.

24. Adamar uses a form marker for all markers executed at its casino. That form marker contains the following preprinted language: “I represent that I have received cash for the above amount and that said amount is on deposit at said bank or trust company in my name. It is free from claims and is subject to this check.” Joint Pretrial Statement, Uncontested Fact # 8.

25. When a marker is given to the casino by a customer, Adamar has the authority from the customer to, but generally

[448 B.R. 339]

does not, communicate with the customer's bank in order to verify the customer's account balance. 1 N.T. at 28.

26. After the marker is executed and the customer obtains the loan amount in cash or chips, Adamar retains the marker in its main cashier's cage until it is presented to the customer's bank for payment. The date on which the marker is presented for payment varies depending upon the amount of the marker. 1 N.T. at 17.

27. Prior to presentation at the customer's bank, the customer may redeem or reduce the outstanding marker(s), or she may consolidate several outstanding markers. To redeem a marker, the customer must present cash or chips to Adamar's cashier cage in an amount sufficient to eliminate the marker. 1 N.T. at 17.

28. Under New Jersey law, a casino may hold ( i.e., not deposit) a...

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