Knowing When To Walk Away: An Analysis of Gambling Debts Under Louisiana Law in Light of Telerecovery of Louisiana, Inc. v. Major and Telerecovery of Louisiana, Inc. v. Gaulon
| Author | Lawrence Andrew Melsheimer |
| Pages | 887-909 |
Page 887
This author wishes to express his gratitude to Professor Saúl Litvinoff for his advice, guidance, teaching and friendship both during the composition of this article and during his law school career.
In 1999, the issue of whether gambling debts are enforceable in Louisiana resurfaced in two appellate courts. In Telerecovery of Louisiana, Inc. v. Major1 and Telerecovery of Louisiana, Inc. v. Gaulon,2 the first and fifth circuit courts of appeal enforced markers3 issued to casinos by their patrons for gambling purposes.4 The Louisiana Supreme Court subsequently denied writs of certiorari.5 With the legalization of gaming in Louisiana, the courts struggled with competing Louisiana Civil Code articles that recognize the validity of obligations with lawful causes but at the same time disallow actions to enforce that which has been won or lost at gaming. Because the courts ignored the relationship between the underlying policies behind the seemingly inconsistent articles, they reversed a long trend of jurisprudence where courts have refused a creditor from recovering money lent for gaming activities. Major and Gaulon reflect a definite change in the law and create new precedent to allow civil actions for the enforcement of gambling debts.6
This article begins with a presentation of Major and Gaulon in Part II. Part III analyzes each court's reasoning and gives an overview of the jurisprudence dealing with gambling debts in Louisiana. Part III, Section A discusses the analysis Louisiana courts have traditionally used to deny actions to enforce gambling debts. Sections B, C and D of Part III demonstrate how the Major and Gaulon courts followed the traditional approach to enforce the gambling markers by relying only on the legality of gaming instead of considering public policy when determining the effects the gaming legislation had on the cause of the obligation. Part IV, Section A explains how courts might justify adherence to the traditional jurisprudential approach of refusing to enforce gambling debts. Finally, Part IV, Section B Page 888 concludes with some proposals, including how the courts, the legislature and the casinos should approach this issue under current Louisiana law.
In Telerecovery of Louisiana, Inc. v. Major,7 the defendant, a gambler, issued three $10,000 markers to the Belle of Baton Rouge8 ("the Belle") riverboat casino and three markers totaling $35,0009 to the Grand Casino of Avoyelles ("the Grand").10 In exchange for the markers, the Belle and the Grand gave Major chips that he used to gamble and later lost on the same day.11 The drawee bank of the markers refused payment and returned them to the casinos marked NSF.12 Both casinos assigned collection to Telerecovery.13
When Telerecovery sought to recover the amounts due on the six markers, Major moved for summary judgment claiming that Louisiana Civil Code articles 2983 and 298414 prevented Telerecovery from collecting on the markers. Without written reasons, the trial judge granted Major's motion and dismissed Telerecovery's claim. The first circuit court of appeal reversed and remanded to allow collection on the markers.15
The first circuit dissected Major's gambling excursion at the casinos into two transactions: (1) when Major issued a marker to purchase chips from the casino (the "marker for chips transaction") and (2) when Major gambled his chips at the casino. The court explained that because parties "do not intend to violate the law" in business transactions,16 the "marker-for-chips transaction" would not be illegal if Page 889 there was a reasonable explanation to support its validity.17 The court approved the transaction because Major "could have walked out of the casinos with [the chips] or he could have converted them to cash and then walked out,"18 and thus it was not "void for want of consideration."19 Because the court found valid consideration in the "marker for chips transaction," it held that Major had incurred an enforceable debt.20
The court noted that a second obligation arose when Major gambled with the chips he received. Because it found that Civil Code articles 2983 and 2984 did not prevent the enforcement of the "marker for chips transaction," the court declined to consider the validity of the second obligation.21
In a concurring opinion, Judge Weimer agreed that the whole transaction should be dissected and that the marker was enforceable because no unlawful gaming activity occurred in the "marker for chips transaction."22 He acknowledged similar Louisiana23and federal24 jurisprudence that had refused to enforce extensions of credit for gambling purposes but did not base his decision on that issue because no such allegation had been asserted.25 Judge Weimer admitted that Louisiana Civil Code articles 2983 and 2984 illustrate "a clear intent to prevent an action for gaming debts,"26 and that to protect problem gamblers, it is not inconsistent with public policy to permit gaming and also prevent the enforcement of gaming winnings or losses.27 He also refused to assume that the enactment of the legislation to legalize gaming modified or implicitly repealed Articles 2983 and 2984.28 Nonetheless, he adhered to the court's dissection of the entire transaction and agreed with its holding that the "markers for chips transaction" was valid and enforceable because it did not directly involve gaming games.29
In Telerecovery of Louisiana, Inc. v. Gaulon,30 Gaulon issued two markers totaling $10,000 to the Belle in return for chips that he used to gamble at the Belle. The drawee Page 890 bank of the markers refused payment because of insufficient funds in Gaulon's account and returned them to the Belle. The Belle assigned collection of the markers to Telerecovery.
Instead of seeking enforcement of the obligation to pay as it had in Major, Telerecovery sought recovery pursuant to the Nonsufficient Funds Checks statute.31The trial judge found that the markers were checks under the negotiable instruments law and awarded Telerecovery the penalties set forth in the NSF statutes.32 On appeal, Gaulon asserted that the gambling markers were unenforceable debts because of Article 2983.33 The fifth circuit court of appeal rejected that argument and affirmed the judgment of the trial court.34
The fifth circuit reasoned that Louisiana Civil Code article 2983 did not apply to legalized forms of gaming.35 Because Louisiana statutes authorize riverboat gaming activities36 and exempt them from the crime of gambling,37 the court enforced the markers and held that Civil Code art. 2983 was not applicable.38 In Major and Gaulon, the supreme court subsequently denied writs of certiorari.39
The flawed reasoning of the courts in Major and Gaulon led them to wrongfully enforce markers issued by gamblers to casinos for use in gaming activities at the casinos. The courts should have analyzed the following issues more closely and perhaps then they might have concluded differently: (1) the use of cause instead of consideration in the formation of obligations under Louisiana law, (2) the effect of the gaming legislation on Louisiana obligations law, and (3) the public policy behind the coexistent statutory gaming laws and the Louisiana Civil Code's prohibition of enforcing wins or recovering losses derived from gaming. Had the courts examined these issues, they would have realized that the cause of a gambling debt should be analyzed separately from Articles 2983 and 2984 and thereby concluded that Articles 2983 and 2984 continue to deny civil actions to enforce gambling debts, even ones that may now have a lawful cause.
Page 891
Since its formation and adoption, the Louisiana Civil Code has expressly forbidden civil actions for the recovery of contracts pertaining to gambling winnings and losses.40 Louisiana Civil Code articles 2983 and 2984 deny any action for payment of what has been won at gaming or for recovery of what has been lost.41 Traditionally, courts have used these articles to prevent enforcement of gambling contracts that had an unlawful cause42-a result that is prohibited by law or is against public policy.43 Because gambling establishments were prohibited and deemed contrary to public policy until the 1974 constitutional changes44 and the subsequent legislative authorizations of gambling,45 Louisiana courts almost consistently applied Articles 2983 and 2984 to disallow recovery of gambling debts due to their unlawful cause.
Courts refused recovery of money lent to gamblers by owners or operators of locales where gambling took place. Because the loans were used to pay back what the gamblers had lost to "the house," courts found the cause of the obligation was unlawful or contrary to public policy and good morals.46 For example, in Bagneris v. Smoot the plaintiff owned a gambling house in which the defendant played roulette on credit.47 The defendant ultimately paid his debt with a loan from the plaintiff. The court held that because roulette was a "game" encompassed by Article 2983, the plaintiff's loan had an unlawful cause and thus was unenforceable.48 Temporary operators of gaming establishments have also been denied recovery of money lent to gamblers for gambling purposes.49 Furthermore, Page 892...
To continue reading
Request your trial