Jay Gerow, an Individual & Zdi Gaming, Inc. v. State
| Decision Date | 18 January 2017 |
| Docket Number | No. 47983-4-II,47983-4-II |
| Court | Washington Court of Appeals |
| Parties | JAY GEROW, an individual and ZDI GAMING, INC., a Washington corporation, Appellants, v. STATE OF WASHINGTON, by and through the WASHINGTON STATE GAMBLING COMMISSION, AND THE Governor's Office of Christine Gregoire; Rick Day, individually and in his official capacity as Director of the Washington State Gambling Commission; John Ellis, individually and in his official capacity as a Gambling Commissioner; Janice Niemi, individually and in her former official capacity as a Gambling Commissioner; Peggy Ann Bierbaum, individually and in her official capacity as a Gambling Commissioner; Kevin Rojecki, individually and in his official capacity as a Gambling Commissioner; and Margarita Prentice, individually and in her official capacity as a Gambling Commissioner, Respondents. |
MAXA, A.C.J. - Jay Gerow and his gambling equipment company ZDI Gaming, Inc. (collectively "Gerow") appeal the dismissal of his claims against the Washington State Gambling Commission, Gambling Commission director Rick Day in his individual and official capacities, the five Gambling Commission commissioners in their individual and official capacities, and Governor Christine Gregoire (collectively "the State").
Gerow's claims arose from the Gambling Commission's denial of his application to use a cash card feature on the electronic pull-tab machine that he marketed and the Gambling Commission's subsequent changes to gambling regulations designed to prevent use of the cash card feature. He asserted claims for, among others, violation of 42 U.S.C. § 1983, negligence, and tortious interference with a contract or business expectancy. The trial court dismissed all of Gerow's claims under CR 12(c) and on summary judgment.
We hold that the trial court properly dismissed Gerow's claims because (1) regarding the § 1983 claims, (a) collateral estoppel based on Gerow's prior federal lawsuit prevented him from contesting that the individual defendants had legislative immunity from claims regarding 2008 amendments to gambling regulations, (b) res judicata based on the prior federal lawsuit barred all claims relating to the State defendants' actions before Gerow filed the federal lawsuit, and (c) Gerow did not present sufficient evidence or argument to avoid summary judgment on any remaining claims; (2) RCW 9.46.095 provided immunity to the Gambling Commission and individual commissioners on Gerow's tort claims; (3) the trial court did not err in dismissing all tort claims against Governor Gregoire; (4) under the public duty doctrine, the Gambling Commission director did not owe Gerow a duty of care; and (5) Gerow did not establish a valid business expectancy to support his tortious interference with a contract claim.
Accordingly we affirm the trial court's dismissal of Gerow's claims against all defendants.
Gerow manufactured and marketed a VIP (video interactive play) electronic pull-tab machine featuring a video display screen and a currency bill acceptor housed in a decorative cabinet. The VIP machine simulated the sounds and displays of a video slot machine, but only issued paper pull-tabs. The machine required a player to purchase the pull-tab with currency and required that players redeem all winning pull tabs with a cashier. The Gambling Commission approved this version of the VIP machine in 2002.
Gerow sought to upgrade his VIP machine by adding a cash card acceptor that would allow a player to purchase pull-tabs with a prepaid cash card instead of currency. The upgraded VIP machine also would automatically credit pull-tab winnings of $20 or less back to the cash card. A player who stopped playing the VIP machine with a balance on the card could use it to purchase food, drink, or merchandise, or redeem it for cash at the establishment featuring the VIP machine.
In 2005, Gerow filed an application with the Gambling Commission seeking approval to market the upgraded VIP machine with the cash card acceptor. The Gambling Commission denied his application. Gerow filed a petition for declaratory relief with the Gambling Commission. An administrative law judge (ALJ) found that the upgraded VIP machine's use of a cash card to initiate gaming and as a way to collect small prizes would violate two regulations: one prohibiting gambling without prepayment by cash, check, or electronic bank transfer and another requiring that all prizes be in either cash or merchandise. The Gambling Commissionissued a final declaratory order upholding the ALJ's decision that the upgraded VIP machine violated gambling regulations.
Gerow appealed that decision to superior court. In 2007, the superior court reversed the Gambling Commission's decision and held that the upgraded VIP complied with existing regulations because a cash card was equivalent to cash. The superior court ruled that the Gambling Commission's denial of Gerow's application was arbitrary and capricious and remanded the matter to the Gambling Commission for action consistent with the superior court's order and findings. The Gambling Commission appealed and obtained a stay of the superior court's ruling pending the appeal.
In 2009, this court affirmed the superior court's ruling that the cash card feature did not violate regulations existing at the time of the application. ZDI Gaming, Inc. v. Wash. State Gambling Comm'n, 151 Wn. App. 788, 809-10, 214 P.3d 938 (2009). In 2012, the Supreme Court affirmed and held that the upgraded VIP machine with cash card feature did not violate gambling regulations existing at the time of the application. ZDI Gaming, Inc. v. Wash. State Gambling Comm'n, 173 Wn.2d 608, 621-23, 268 P.3d 929 (2012).
In response to the superior court's ruling that the upgraded VIP machine did not violate gambling regulations, the Gambling Commission considered various rule changes. In January 2008, the Gambling Commission ultimately adopted two new regulations (collectively, 2008 regulations).1 First, it adopted former WAC 230-14-047 (2008), a regulation outlining thefeatures that were permitted in electronic pull-tab machines. This regulation allowed the use of cash cards to purchase pull tabs but not to receive a credit for winnings.2 Second, it adopted WAC 230-06-003, a regulation that defined "cash" as currency and as not including electronic representations of money or methods of payment.
In February 2008, Gerow filed a lawsuit in superior court challenging the 2008 regulations under the Administrative Procedure Act (APA). See Gerow v. Wash. State Gambling Comm'n, 181 Wn. App. 229, 236, 324 P.3d 800 (2014). In 2012, the superior court ruled that the Gambling Commission properly adopted the 2008 regulations and that they were not arbitrary and capricious. Gerow appealed. In 2014, this court ruled that the 2008 regulations were invalid because they were not adopted by a three commissioner majority as required by RCW 9.46.050(2). Id. at 244-45.
In addition to challenging the 2008 regulations under the APA in state court, in February 2008 Gerow filed a complaint in federal court against the State and the Gambling Commission director and commissioners. The federal court complaint alleged that the Gambling Commission and its representatives violated 42 U.S.C. § 1983 by adopting the 2008 regulations and taking other actions in retaliation for Gerow's successful appeal of the commission's denial of his application for the VIP upgrade. He also asserted claims for negligence, tortious interference with a contract or business expectancy, and violation of the Washington Constitution.
The State moved for judgment on the pleadings under Fed. R. Civ. P. 12(c). In October, the federal district court dismissed Gerow's § 1983 claim. The court ruled that the Gambling Commission director and commissioners were entitled to legislative immunity for their quasi-legislative rulemaking actions. The court did not reach the merits of the remaining state law claims and ultimately dismissed those claims without prejudice on jurisdictional grounds.
In June 2010, the Ninth Circuit Court of Appeals affirmed. The court held that the district court correctly applied the test for legislative immunity and did not err in finding that the Gambling Commission director and commissioners were entitled to legislative immunity.
In October 2008, after the dismissal of his federal lawsuit, Gerow filed this lawsuit in superior court asserting multiple claims against the Gambling Commission, the Gambling Commission director and commissioners, and Governor Gregoire.
Gerow filed an amended complaint in May 2012. He asserted claims for a violation of 42 U.S.C. § 1983 against the director and commissioners and claims for negligence and tortious interference with a contract or business expectancy against all defendants for their part in denying use of the upgraded VIP machine and adopting the 2008 regulations aimed at keeping the upgraded VIP machine off the market.3
In October 2012, the State filed a CR 12(c) motion for dismissal on the pleadings seeking to dismiss all tort claims against the Gambling Commission and individual commissioners on the grounds that they were immune from suit under RCW 9.46.095. The trial court granted the State's motion and dismissed the negligence and tortious interference claims against the Gambling Commission and its commissioners.
In May 2013, the State filed a summary judgment motion on all remaining claims against all remaining defendants. The trial court granted summary judgment in part, dismissing Gerow's § 1983 claims against the individual defendants and the negligence claims against the Gambling Commission director and the governor. The trial court granted Gerow's CR 56(f) motion to continue the state's motion regarding the tortious...
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