ZDI Gaming, Inc. v. State

• Decision Date: 21 March 2012
• Docket Number: No. 83745–7.,83745–7.
• Citation: 173 Wash.2d 608,268 P.3d 929
• Court: Washington Supreme Court
• Parties: ZDI GAMING, INC., Respondent, v. The STATE of Washington by and through the WASHINGTON STATE GAMBLING COMMISSION, Petitioner.

173 Wash.2d 608

268 P.3d 929

ZDI GAMING, INC., Respondent,

v.The STATE of Washington by and through the WASHINGTON STATE GAMBLING COMMISSION, Petitioner.

No. 83745–7.

Supreme Court of Washington, En Banc.

Argued Nov. 16, 2010.Decided Jan. 12, 2012.As Corrected March 20, 2012.Reconsideration Denied March 21, 2012.

Jerry Alan Ackerman, Office of the Attorney General, Olympia, WA, for Petitioner.

Joan Kristine Mell, III Branches Law, PLLC, Fircrest, WA, for Respondent.

CHAMBERS, J.

[173 Wash.2d 611] ¶ 1 This case was filed in a county other than where it was to be adjudicated. We are asked today to decide whether, as a consequence, the case will not be heard. We conclude that the proper forum is a question of venue, not the subject matter jurisdiction of superior courts. We affirm the Court of Appeals. ZDI Gaming, Inc. v. Wash. State Gambling Comm'n, 151 Wash.App. 788, 214 P.3d 938 (2009).

FACTS

¶ 2 For many years ZDI Gaming Inc., a family owned business, has provided “ ‘just about anything to do with the gambling industry in the state of Washington.’ ” Administrative Record (AR) at 410 (quoting Verbatim Report of Proceedings (VRP) at 88); Clerk's Papers (CP) at 18. This includes distributing pull-tabs and pull-tab machines. A pull-tab machine is a fairly modern gaming device. A traditional pull-tab involves a paper ticket containing a series of windows that hide numbers or symbols. The player “opens one of the windows to reveal the symbols below to determine if the ticket is a winner.” CP at 1026. If the ticket's combination of numbers or symbols matches those listed on a sheet called a “flare” as a winning ticket, the ticket's purchaser is entitled to a prize. Id. Modern pull-tab machines can both dispense and read pull-tab tickets and can produce sounds and displays mimicking electronic slot machines.

¶ 3 In 1973, when gambling was legalized in Washington State, the legislature declared pull-tabs, along with certain other games of chance, would be authorized, but “closely controlled.” Laws of 1973, ch. 218, § 1 (currently codified as RCW 9.46.010); AR at 410. Accordingly, the Washington State Gambling Commission (Gambling Commission) has heavily regulated pull-tabs and pull-tab machines. E.g., former WAC 230–02–412(2) (2001); former WAC 230–08–017 (2003), former WAC 230–12–050 (2003); former WAC 230–08–010(2) (2004).

¶ 4 Historically, and broadly in the context of games of chance, the commission prohibited giving gifts or extending credit to players for the purposes of gambling. Former WAC 230–12–050. Accordingly, players were required to pay the consideration “required to participate in the gambling activity ... in full by cash, check, or electronic point-of-sale bank transfer, prior to participation,” with some exceptions not relevant here. Former WAC 230–12–050(2). The Gambling Commission also had required a pull-tab player to receive winnings “in cash or in merchandise.” Former WAC 230–30–070(1) (2001).

¶ 5 ZDI Gaming distributes the VIP (video interactive display) machine, an electronic pull-tab machine featuring a video display screen, a currency bill acceptor, and (in later version) a cash card acceptor, all housed in a decorative cabinet. ZDI Gaming intentionally designed the current VIP machine to resemble a video slot machine and programmed it to use the same “attractor” sounds used to lure players. Players see rows of spinning characters that ultimately line up and stop in winning or losing combinations. The version of the machine at issue allows a player to purchase pull-tabs from the machine itself using a prepaid card. The VIP machine credits pull-tab winnings of $20 or less back to the card. If a player wins more than $20, the VIP machine directs the player to an employee to receive payment. A player who stops playing the VIP machine with a balance on the card can use it to purchase food, drink, merchandise, or turn it in for cash at the establishment featuring the VIP machine.

¶ 6 An earlier version of the VIP machine was approved by the Gambling Commission in 2002. However, once the cash card acceptor was added to the machine, things became more complicated. While initially, it appears Gambling Commission employees were “optimistic” that such technology would be approved, once they understood that a player's winnings would be credited directly back onto the card itself, they became concerned. AR at 14. After working with Gambling Commission staff for some time, ZDI Gaming submitted a formal application to the Gambling Commission requesting permission to distribute the new VIP machine, with the cash card acceptor, in Washington. After the assistant director of licensing operations formally denied the application, ZDI Gaming filed a petition for declaratory relief with the Gaming Commission. An administrative law judge (ALJ) agreed with ZDI Gaming that the VIP machines did not violate gambling statutes. However, he found the machines extended credit and allowed gambling without prepayment by “ ‘cash, check, or electronic point-of-sale bank transfer,’ ” violating then-operative regulations. AR at 419, 423 (citing former WAC 230–12–050). ZDI Gaming strenuously contended the cash card utilized by its VIP machine was functionally equivalent to cash. The ALJ rejected the argument, reasoning that the “difficulty with a cash card is that it's only valid at one location. It is impossible to take the cash card from the Buzz Inn to a local Harley Davidson dealer and purchase a new helmet.... [C]ash cards are not cash because they require an additional step on the part of the consumer to utilize in any other location.” AR at 420–21. The ALJ also found that the VIP machine violated a regulation that required that all prizes be in either cash or merchandise. AR at 422–23 (citing former WAC 230–30–070).¹ On August 10, 2006, the full Gambling Commission issued a final declaratory order upholding the ALJ's decision that the VIP machine violated the regulations, though it disavowed the ALJ's decision that the machine complied with the statutory requirements as superfluous. AR at 961–93.

¶ 7 On September 11, 2006, ZDI Gaming filed a petition for judicial review in Pierce County Superior Court challenging the validity of the rules the ALJ and the Gambling Commission found it had violated. Ten days later, the State informed ZDI Gaming that, in its view, RCW 9.46.095 granted exclusive jurisdiction of the matter to the Thurston County Superior Court and suggested that it may wish to withdraw its petition from Pierce County and file in Thurston County before the statute of limitations would run on October 4, 2006. The State told ZDI Gaming that it would otherwise move to dismiss the case for want of jurisdiction after October 4, 2006.² ZDI Gaming declined, and the State so moved. Noting that sometimes “when the Legislature uses the word ‘jurisdiction,’ it really mean[s] ‘venue,’ ” Judge Chushcoff denied the State's motion to dismiss, but did transfer the case to the Thurston County Superior Court. VRP (Dec. 1, 2006) at 5; CP at 8, 17.³

¶ 8 The Thurston County Superior Court reversed the Gambling Commission. It found that cash cards were the equivalent to both cash and merchandise and thus lawful under the regulations. The court denied the Gambling Commission's motion for reconsideration, remanded the case to the Gambling Commission for action, and awarded ZDI Gaming $18,185 in attorney fees under the equal access to justice act, RCW 4.84.350, which was less than ZDI Gaming had sought.

¶ 9 Both parties appealed. The Court of Appeals affirmed in part, holding that the Pierce County Superior Court had subject matter jurisdiction over the appeal under the Administrative Procedure Act, ch. 34.05 RCW, and that substantial evidence did not support the Gambling Commission's determination that the prepaid cards failed to satisfy the regulatory definition of “cash.” ZDI Gaming, 151 Wash.App. at 795, 214 P.3d 938. The court remanded the case to the Thurston County Superior Court, directing it to reconsider its decision to exclude fees that ZDI Gaming spent responding to the Gambling Commission's motion to dismiss. Id. at 812, 214 P.3d 938. The State petitioned for review, contending that the use of the word “jurisdiction” in RCW 9.46.095 was unambiguous, that the courts below erred in concluding that “cash” included cash cards, and that the Court of Appeals shifted the burden of proof to the Gambling Commission. ZDI Gaming answered the petition and sought review of the attorney fee award. We granted the State's petition for review and denied ZDI Gaming's request for review of the attorney fee issue. ZDI Gaming, Inc. v. Wash. State Gambling Comm'n, 168 Wash.2d 1010, 227 P.3d 853 (2010).

ANALYSIS

¶ 10 Whether Pierce County Superior Court had subject matter jurisdiction over this case is controlled by Shoop v. Kittitas County, 149 Wash.2d 29, 37, 65 P.3d 1194 (2003). “[A]rticle IV, section 6 of the Washington Constitution ... states in relevant part: ‘The superior court shall also have original jurisdiction in all cases and of all proceedings in which jurisdiction shall not have been by law vested exclusively in some other court [.]’ That provision precludes any subject matter restrictions as among superior courts.” Id.

¶ 11 Among other things, jurisdiction is a fundamental building block of law. Our state constitution uses the term “jurisdiction” to describe the fundamental power of courts to act. Our constitution defines the irreducible jurisdiction of the supreme and superior courts. It also defines and confines the power of the legislature to either create or limit jurisdiction. See Wash. Const. art. IV, § 4 (defining the power of the supreme court), § 6 (defining the power of the superior courts), § 30(2) (explicitly giving the legislature the power to provide for jurisdiction of the court of appeals). Our constitution recognizes and vests jurisdiction over many types of cases in the various court...