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Desert Palace, Inc. v. Michael

United States District Court, D. Nevada

June 22, 2017

Desert Palace, Inc., d/b/a Caesars Palace, a Nevada corporation, Plaintiff
v.
Andrew P. Michael, et al., Defendants

          ORDER ON MOTIONS FOR SUMMARY JUDGMENT AND PLAINTIFF'S OBJECTIONS TO MAGISTRATE JUDGE'S ORDER [ECF NOS. 23, 40, 43, 62, 63]

          JENNIFER A. DORSEY, UNITED STATES DISTRICT JUDGE

         On a September evening in 2014, defendant Andrew Michael sat down at plaintiff Caesars Palace's casino to play some blackjack and baccarat.[1] This wasn't an unusual way for Michael to spend an evening: he had been gaming at Caesars for years. He gambled there so frequently, in fact, that the casino allowed him to wager on credit. Michael would sign an agreement promising that he was good for his losses, and Caesars would extend him significant credit to wager at the tables. This evening, Caesars extended Michael $3 million in chips on credit. But lady luck was not with him. By the time the night was over, Michael had wagered and lost it all.

         But Michael did something different this visit to Caesars: he refused to sign credit instruments, known as markers, so that Caesars could collect Michael's promised repayment. Michael signed a credit application and a request for the $3 million in credit, but these documents simply required him to endorse the final markers that would obligate him to pay Caesars back.

         Caesars sues to compel Michael to sign the markers as his agreement with Caesars requires. And it now moves for summary judgment, arguing that Michael breached his credit agreement and that I should order him to sign the markers so that Caesars can collect on its debt.

         Michael opposes primarily by pointing to Nevada's long-time prohibition against enforcing gaming debts in court. But Caesars is not seeking to enforce a gaming debt yet; it is seeking to enforce Michael's promise to sign credit instruments (so that Caesars can then enforce the debt). Michael agreed to sign credit instruments in the event that he gambled on Caesars's dime, which he did. Those credit instruments would then create an enforceable gaming debt between Caesars and Michael. That Caesars will ultimately enforce those credit instruments to recover on a gaming debt is of no matter. Nevada law prohibits only the enforcement of gaming debts, not the enforcement of an agreement to perfect a credit instrument like Caesars seeks to do.

         Michael argues that there is no meaningful difference between enforcing a gaming debt and enforcing an agreement to perfect a credit instrument for a gaming debt. He suggests that allowing casinos to enforce agreements like this will create a loophole for them to shirk the Nevada legislature's bar on gaming-debt enforcement actions. But the Nevada legislature has not barred casinos from enforcing gaming debts-it approves of the practice. Nevada's gaming statutes expressly permit casinos to extend gambling credit to patrons and receive credit instruments after the patron has already gambled away that credit. These statutes contemplate that casinos should get a signed credit instrument from the patron at some point before collecting on the underlying debt, and that is precisely what Caesars is trying to do.

         Michael's arguments related to gaming debts fail, as do the host of contractual arguments he raises. I thus deny Michael's motion for summary judgment and grant partial summary judgment in favor of Caesars on Michael's affirmative defenses that challenge this court's subject-matter jurisdiction over this case, and in favor of Caesars on its breach-of-contract claim and request for specific performance.[2]

         Background

         In 2013, Michael signed a written "credit application" in which he agreed that if in future visits he "receive[s] an advance before Pie] execute[s] a credit instrument, [he would] promptly [] sign a credit instrument in the amount of the advance."[3] He also agreed that Caesars "may litigate any dispute involving the credit line, the debt, or the payee in any court, state or federal, in Nevada."[4]In September 2014, Michael signed another document requesting a credit advance of $3 million.[5]

         Over the course of the evening on September 20, 2014, Caesars gave Michael $3 million in chips; Michael gambled away the entire $3 million without first signing any credit instruments.[6] The parties refer to this practice of a casino issuing credit first and getting a signed credit instrument later as "rim credit." Caesars offers evidence that extending rim credit is a common practice in the Nevada gaming industry.[7]

         After losing at the tables, Michael did not sign a credit instrument obligating him to pay back the $3 million. When Caesars contacted him, Michael initially replied in an email that he wanted to "re-iterate" that it was "not" his intention to "not sign" the credit instruments, and that he would indeed sign them.[8] But he never did.

         Caesars filed this action seeking to compel Michael to sign the credit instruments and pay back the $3 million it advanced. Michael filed an answer and counterclaimed for unjust enrichment, breach of contract, and an accounting. Michael now moves for summary judgment, arguing that I have no jurisdiction over this case because Caesars does not have a signed credit instrument to support Michael's gaming debt.[9] Caesars likewise moves for summary judgment on this same point, [10] and also on its breach-of-contract and specific-performance claims.[11]

         With summary judgment motions pending, Michael moved to stay discovery in this case, and the magistrate judge recently granted that motion and stayed discovery.[12] Caesars objects to the magistrate judge's order, arguing that some of the magistrate judge's remarks should not be given any legal effect. The magistrate judge's order simply stayed discovery; it did not purport to affect any of the parties' substantive claims, so I overrule Caesars's objection. The parties also have a pending stipulation to authenticate surveillance videos, which I grant.[13] I now proceed to consider the parties' pending summary-judgment motions.

         Discussion

         A. Summary-judgment standards

         The legal standard governing the parties' motions is well settled: a party is entitled to summary judgment when "the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law."[14] An issue is "genuine" if the evidence would permit a reasonable jury to return a verdict for the nonmoving party.[15] A fact is "material" if it could affect the outcome of the case.[16]

         When considering a motion for summary judgment, I view all facts and draw all inferences in the light most favorable to the nonmoving party.[17] The purpose of summary judgment is "to isolate and dispose of factually unsupported claims"[18] and to determine whether a case "is so one-sided that one party must prevail as a matter of law."[19] It is not my role to weigh evidence or make credibility determinations.[20] If reasonable minds could differ on material facts, summary judgment is inappropriate.[21]

         If the moving party shows that there is no genuine issue as to any material fact, the burden shifts to the nonmoving party, who must "set forth specific facts showing that there is a genuine issue for trial."[22] The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts"; it "must produce specific evidence, through affidavits or admissible discovery material, to show that" there is a sufficient evidentiary basis on which a reasonable fact finder could find in its favor.[23]

         B. Caesars is entitled to summary judgment on its breach-of-contract claim.

         1. A casino may generally enforce a patron's agreement to sign a credit instrument in the future.

         The main thrust of the parties' dispute is whether a licensed casino can judicially enforce a contract in which the casino's patron agrees to sign a credit instrument in the future, after he has already gambled on credit. Michael contends that Nevada's common law and gaming statutes bar this sort of action because they prohibit parties from enforcing gaming debts in court. But while Nevada may have once disapproved of casinos allowing players to gamble first and pay later, the Nevada legislature has made clear that is no longer the case.

         i. Gaming debt enforcement in Nevada

         From the State's founding, Nevada's common law held that any instrument created for "the purpose of reimbursing . . . money knowingly lent... for gaming" was unenforceable.[24] In other words, casinos could not enforce an agreement obligating a patron to payback his gambling losses. So casinos could accept only cash (either at the time of the wager, or in the form of gambling chips); they could not let their patrons gamble on credit.

         But then in 1983, the Nevada legislature decided that allowing casino patrons to gamble on credit was in the State's best interest (subject, of course, to careful oversight by Nevada's Gaming Control Board and Gaming Commission). The legislature enacted NRS 463.368, which abrogated the common law rule against gaming debts and allowed casinos[25] to enforce any gaming "credit instrument" and "the debt that the credit instrument represents." This statute expressly allows casinos to accept credit instruments related to gaming debt "either before, at the time[, ] or after the patron incurs the debt."[26] And a credit instrument is simply "a writing [that] evidences a gaming debt owed" to a licensed casino.[27] In short, casinos can now enforce gaming debts in court, event if a patron doesn't sign a credit instrument until after he dips well into the red.[28]

         ii. Caesars is not attempting to enforce a prohibited gaming debt.

         Caesars is attempting to do precisely what the Nevada legislature said it could: extend credit first and get a signed credit instrument later. Michael cites no authority-common law or statutory-suggesting that this sort of action is barred in Nevada.[29] Nevada's common law is of no help because it bars only enforcement of a gaming debt, and the agreement Caesars seeks to enforce is not a debt at all. It merely obligates Michael to sign a credit instrument-which will then create an enforceable gaming debt between him and Caesars.[30] Michael offers no authority or explanation suggesting that an agreement to sign a credit instrument in the future is not enforceable under Nevada's common law.

         Nor does Nevada's gaming statutory scheme help him. Michael relies on NRS 463.361 and cases interpreting this statute to argue that any action amounting to a gaming debt collection effort is statutorily barred in Nevada. He points to language stating that "gaming debts that are not evidenced by a credit instrument are void . . . and do not give rise to any administrative or civil cause of action." Michael reads this statute to mean that if a casino extends credit to a patron without first getting him to sign a credit instrument, the patron's gaming debt is forever unenforceable.

         But the statute Michael relies on does not even apply to licensed casinos-it governs collection actions brought by patrons. NRS 463.361 is for "recovery of gaming debts by patrons." "Recovery of gaming debts by licensees" like Caesars is governed by a different statute: NRS 463.365. Similarly, all of Michael's authority addresses patrons seeking to enforce gaming debts (most commonly, patrons ...


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