"the Insiders" for Gambling Lawsuits: Are the Games "fair" and Will Casinos and Gambling Facilities Be Easy Targets for Blueprints for Rico and Other Causes of Action? - John Warren Kindt

• Citation: Vol. 55 No. 2
• Publication year: 2004

"The Insiders" for Gambling Lawsuits: Are the Games "Fair" and Will Casinos and Gambling Facilities Be Easy Targets for Blueprints for RICO and Other Causes of Action?by John Warren Kindt^*

I. Introduction

A. The Insiders for Gambling Lawsuits

As the insider Jeffrey Wigand came forward to rattle the U.S. tobacco industry,¹ insiders within the U.S. and Australian gambling establishments began to go public as the twenty-first century began. By 2002 government officials, scholars, and social activists who were experts on the gambling industry believed that some of the next big industry lawsuits would be targeted at gambling facilities.² Gambling opponents argued that casinos and gambling facilities fueled gambling addiction and pursued players who had gambling addiction problems, even after those players complained to the gambling facility and asked to be banned.³ Casino owners maintained that their industry was not the cause of gambling addiction.⁴ Reportedly concurring with this viewpoint was Keith Whyte, head of the National Council on Problem Gambling (NCPG), who was previously employed by the American Gaming Association (AGA), the gambling industry's lobbying group. Whyte stated that "[c]ausation would be very difficult to prove,"⁵ although several academics and experts disagreed.⁶

B. The "Pandora's Box" of the Gambling Industry: The Legal Discovery of Information

The gambling industry and its associates apparently have a quantum of in-house information that may make legalized gambling interests vulnerable to a cornucopia of lawsuits by attorneys general and plaintiffs' attorneys. After filing cases in many issue areas, trial lawyers were well-advised to watch for the insiders,⁷ who could reveal any potential destruction of relevant documents or concomitant obstruction of justice, as in the tobacco cases.⁸ This type of potential scenario was highlighted in 2001 and 2002 with the felony conviction of Arthur Andersen for obstructing a federal investigation of the Enron Corpora-tion.⁹

With regard to progambling interests, the political history indicates a preoccupation with keeping all information in-house and under control. In 1996 during the formation of the National Gambling Impact Study Commission ("NGISC" or "1996-1999 Commission"), the lobbyists for U.S. gambling interests lobbied desperately to get the subpoena power stricken from the authority of the Commission.¹⁰ The legislative sponsors of the 1996-1999 Commission,¹¹ such as U.S. Senators Paul Simon (D-Ill.) and Richard Lugar (R-Ind.) as well as Charles Morin,¹² chair of the 1976-1977 U.S. Commission on the Review of the National Policy Toward Gambling,¹³ strongly opposed the lobbyists' efforts to strip the subpoena powers from the NGISC.¹⁴

Two types of subpoena powers were at issue: (1) subpoenas to testify (i.e., subpoenas ad testificandum),¹⁵ and (2) subpoenas to produce documents (i.e., subpoenas duces tecum) ¹⁶ In the final legislation, the Commission's subpoena power to compel testimony from witnesses, such as company executives, was stripped.¹⁷ However, the Commission retained the power to subpoena documents.¹⁸

As the debate intensified over the extent of the Commission's subpoena powers, it became apparent that the progambling interests were steadfastly against permitting any process which would allow for the legal discovery of information.¹⁹ The major trade magazine for the gambling industry, International Gaming and Wagering Business,²⁰ referenced its Washington contacts to reassure its readership. "Washington sources also report it's likely that a Senate bill—not the House bill that was passed several months ago—will be adopted. The Senate version would not empower the commission to subpoena records of casino operators."²¹

The gambling industry favored the Senate bill, presumably because there was more opportunity to influence or even control the information that would be forwarded to the 1996-1999 Commission.²²

If the Senate bill is adopted, as is expected, it is proposed that a study group would gather information, which would be delivered to the commission. Early speculation has members of the Washington-based Advisory Commission on Intergovernmental Relations (ACIR), of which [Nevada Governor Robert] Miller is one of 27 members, comprising the study group.²³

These types of industry maneuvers to control information outraged the Congressional sponsors of the Commission.²⁴

During this timeframe, U.S. Representative John Ensign (R-Nev.), who had family in the gambling industry,²⁵ worked to eliminate the Commission's subpoena powers.²⁶ "Ensign said members of the AGIR would gather information on gaming and present it to the gaming commission. Just as important, Ensign said, are the assurances he's received that the subpoena powers of the commission contained in the House bill are not included in the Senate bill."²⁷

Despite these efforts to control the information going to the 1996-1999 Commission and to eliminate the Commission's subpoena powers, the Commission still retained a large degree of informational independence as well as the power to subpoena documents (but not witnesses). For attorneys general and plaintiffs' attorneys, however, the salient part of this scenario was to highlight the gambling industry's Pandora's Box—paranoia involving the legal discovery of information. Furthermore, the gambling industry, its associates, and organizations would have difficulty limiting the scope of discovery in many instances. The scope would depend on which gambling issues were addressed, but because gambling issues are by nature interrelated, the Pandora's Box could be almost impossible to control.

C. Does the Obfuscation or Control of Information Detrimental to Gambling Facilities by Progambling Interests Enhance Plaintiffs' Cases? The Interface with Qui Tam Causes of Action and Principles

While various forms of gambling activities were being decriminalized during the last two decades of the twentieth century, progambling interests reportedly denied the existence of health care costs and other costs associated with legalized gambling activities.²⁸ The policies and actions to suppress, obfuscate, or control studies or information reflecting poorly on the gambling industry could interface with future qui tam actions where an individual can file suit like a "private attorney general" on behalf of the government. An example of a potential cause of action interfaces with the health care costs attributed to pathological gamblers.

Enacted in 1863 to curb military procurement fraud, the False Claims Act (FCA)²⁹ allows the U.S. government and private plaintiffs (called "relators") to recover damages from any person or organization that knowingly presented, or caused another party to present, a false or fraudulent payment claim to the government.³⁰ Recovery amounts included the costs of the action, fines up to $11,000 per claim, and treble the government's damages.³¹ Historically in common use, "[ten] of the first [fourteen] statutes enacted by the first United States Congress relied on qui tam actions to aid the police enforcement role of government agencies."³² FCA actions constitute a type of qui tam action, which is the short form of the Latin phrase, qui tam pro domino rege quam pro si ipso in hac parte sequitur which translates to "who as well for the King as for himself sues in this matter."³³ The legal definition of a qui tam action is: "An action brought under a statute that allows a private person to sue for a penalty, part of which the government or some specified public institution will receive."³⁴ Between 1986 and 1999, over 3000 suits were filed using this cause of action—primarily in the health care industry.³⁵

D. The Racketeer Influenced and Corrupt Organizations Act (RICO) and Other Causes of Action

One of the primary areas of legal vulnerability for gambling facilities was RICO³⁶ and its parallel state legislation.³⁷ RICO actions appeared to cover many potential scenarios involving gambling facilities. Kansas City attorney Stephen Bradley Small has sued casinos "a number of times" alleging for example, racketeering.³⁸

He has handled a racketeering case against the Kansas City casinos and has represented patrons who say they were wrongfully detained and accused of cheating.

For "premises liability and garden-variety personal injury claims, realize that the casinos are self-insured, so be prepared to go to trial," advised Small. "From a management perspective, they're paranoid about crimes their employees may commit and they fire people often, so employee claims against casinos are plentiful."³⁹

In private civil cases, several potential causes of action were identi-fied:⁴⁰ (1) RICO (both federal and state); (2) premises liability; (3) tortious breaches of duty; (4) intentional infliction of emotional (and mental) distress; (5) negligent infliction of emotional (and mental) distress; (6) breach of contract (including self-exclusion contract); (7) breach of constructive or implied contract; (8) fraudulent misrepresentation; (9) punitive damages; and (10) admiralty (perhaps).⁴¹ Obviously, other causes of action could be available depending on the factual scenarios.

II. Delimitation of Problems

A. Private Lawsuits against Gambling Facilities: Various Causes of Action: Protect the Surveillance Evidence of Big Brother Casino

By the 1990s, several types of lawsuits were being filed against the rapidly spreading U.S. gambling facilities. These lawsuits included "patron disputes over their winnings, slip-and-falls, employee rights, sexual harassment, premises liability, and casino-related automobile accidents."⁴² Fred Del Marva, a security expert and forensic investigator in over 350 cases, advised plaintiffs' attorneys that the casinos would:

fight you right to the ground. Make sure you can finance [your case], forget about arbitration and mediation and forget about sending out a letter of demand. It's a waste of time...