J&J Ventures Gaming, LLC v. Wild, Inc. , 2016 IL 119870 ( 2016 )

2016 IL 119870IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket Nos. 119870, 119871, 119872, 119873, 119874 cons.)
J&J VENTURES GAMING, LLC, et al., Appellants, v. WILD, INC.
(Accel Entertainment Gaming, LLC, et al., Appellees).
Opinion filed September 22, 2016.
JUSTICE FREEMAN delivered the judgment of the court, with opinion.
Chief Justice Garman and Justices Thomas, Kilbride, Burke, and Theis
concurred in the judgment and opinion.
Justice Karmeier took no part in the decision.
OPINION
¶1 At issue in these consolidated appeals is whether the circuit courts have
subject-matter jurisdiction to determine whether the location agreements between
plaintiffs and defendants are valid and enforceable contracts that control the
placement of video gaming terminals in defendants’ establishments. The appellate
court held that the circuit courts lack subject-matter jurisdiction because the Illinois
Gaming Board has exclusive authority over contracts for the placement of video
gaming terminals. The appeals are before us pursuant to certificates of importance
granted under article VI, section 4(c), of the Illinois Constitution of 1970 (Ill.
Const. 1970, art. VI, § 4(c)) and Illinois Supreme Court Rule 316 (eff. Dec. 6,
2006). We consolidated the appeals 1 and granted the Illinois Gaming Board leave
to intervene. For the reasons that follow, we affirm the judgments of the appellate
court.
¶2 BACKGROUND
¶3 In July 2009, the General Assembly enacted the Video Gaming Act (Act) (230
ILCS 40/1 et seq. (West 2014)), which legalized the use of video gaming terminals
as a new form of commercial gambling within certain licensed establishments,
including bars, veterans organizations, fraternal organizations, and truck stops. As
provided in the Act, the Illinois Gaming Board (Gaming Board or Board) 2 has
jurisdiction over and shall supervise all video gaming operations governed by the
Act. 230 ILCS 40/78 (West 2014). The Board also has all powers necessary and
proper to effectively execute the provisions of the Act. Id. Those powers include
the authority to adopt regulations for the purpose of administering the Act and “to
provide for the prevention of practices detrimental to the public interest and for the
best interests of video gaming.” Id. In October 2009, the Board adopted emergency
regulations to administer the Act. 11 Ill. Adm. Code 1800, emergency rules
adopted at 33 Ill. Reg. 14793 (eff. Oct. 19, 2009); permanent rules adopted at 34 Ill.
Reg. 2893 (eff. Feb. 22, 2010). After a start-up period of approximately three years,
video gaming operations commenced in October 2012.
1
These consolidated appeals arise from 10 lawsuits filed in three counties. All of the
actions were brought by J&J Ventures Gaming, LLC, and Action Gaming, LLC, and were
based on contracts that contain substantially identical provisions for the placement of video
gaming terminals in the 10 defendant establishments.
2
The Illinois Gaming Board was initially established in 1990 to administer the
Riverboat Gambling Act (230 ILCS 10/5 et seq. (West 2014)). The provisions of the
Riverboat Gambling Act and all of the rules promulgated thereunder apply to the Video
Gaming Act, except where there is a conflict between the two statutes. 230 ILCS 40/80
(West 2014).
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¶4 A video gaming terminal is an electronic device that allows users to play a
video game, such as video poker or blackjack, and permits the user to receive free
games or credits that can be redeemed for cash. 230 ILCS 40/5 (West 2014). The
Act restricts the use of video gaming terminals by requiring that they be operated
only at licensed establishments and by licensed terminal operators. 230 ILCS 40/25
(West 2014). Licenses are granted by the Board, following a background
investigation of the applicant and subject to requirements that are designed “to
preserve the integrity and security of video gaming.” 230 ILCS 40/45 (West 2014);
11 Ill. Adm. Code 1800.420, amended at 37 Ill. Reg. 7750 (eff. May 23, 2013). A
video gaming terminal may be placed in a licensed establishment only if the
establishment has entered into a written use agreement with the licensed terminal
operator for the placement of that device. 230 ILCS 40/25(e) (West 2014). A “use
agreement” is a contract between a licensed terminal operator and a licensed
establishment prescribing the terms and conditions for placement and operation of
terminals at that establishment. Id.; 11 Ill. Adm. Code 1800.320(a) (2010). 3 A use
agreement may be assigned only from one licensed terminal operator to another. 11
Ill. Adm. Code 1800.320(d) (2010).
¶5 Shortly after the Act became effective and prior to the Board’s adoption of
emergency regulations, Action Amusement Company, LLC (Action Amusement),
an unlicensed terminal operator, executed agreements entitled “Exclusive Location
and Video Gaming Terminal Agreements” with each of the defendant
establishments involved in these consolidated appeals. Those agreements, which
are substantially identical, purported to give Action Amusement the exclusive right
to place and operate video gaming terminals within the defendant establishments.
Each agreement included a “Recitals” portion, stating that Action Amusement and
the establishment would obtain a license from the Board and wished to enter into an
exclusive location agreement “for the purpose of placing and operating video
gaming terminals in the Licensed Establishment.” Each agreement also stated that,
“[i]n accordance with the Video Gaming Act,” the parties agreed to evenly split the
3
The Board’s regulation establishing the minimum standards for use agreements was
amended after the location agreements at issue were executed. The amended regulation
requires that, after July 15, 2014, a licensed terminal operator must be licensed by the
Board at the time the use agreement is signed. 11 Ill. Adm. Code 1800.320(a), amended at
38 Ill. Reg. 14275 (eff. June 30, 2014).
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after-tax profits from the operation of the terminals. The term of each agreement
was for a period of five years, beginning on the date the first video gaming terminal
was operated in the licensed establishment.
¶6 In addition, each agreement provided that, during the term of the agreement, the
terminal operator would have the exclusive right to place video gaming terminals in
the licensed establishment and further provided that the agreement would be
binding upon the successors and/or assigns of the parties. Also, each agreement
expressly acknowledged that nothing of value had been offered or received in
exchange for the execution of the agreement and that it is a violation of the Act to
offer anything as an inducement for the procurement of a location.
¶7 On October 5, 2010, Action Amusement assigned its rights under the location
agreements to Action Gaming, LLC (Action Gaming), another unlicensed terminal
operator. In exchange for the assignment of rights under the location agreements,
Action Gaming agreed to pay Action Amusement $10,000 per month until August
1, 2011. After that date, once Action Gaming was operating video gaming
terminals in at least 70 locations, it agreed to pay Action Amusement up to $20,000
per month for the next 10 years, depending on the number of locations at which it
was operating terminals. The assignment was signed by Jason Rowell, as
authorized representative of both Action Amusement and Action Gaming.
¶8 Between January and May 2012, Action Gaming and the defendant
establishments amended their location agreements by adding certain clauses, which
were asserted to be “necessary in order for the Agreement to comply with the [Act]
and the rules and regulations promulgated thereunder.” The additional terms
included a clause providing that Action Gaming could freely assign its rights until it
obtained a terminal operator license, after which it could assign its right only to
another licensed terminal operator. Another clause, titled “IGB Approval,”
provided that the parties acknowledged that their location agreement and the
amendment “are subject to and contingent upon the [Gaming Board’s] review of,
and to the extent required by the [Board], consent to the use of this [a]mendment.”
When the amendments were executed, Action Gaming and the defendant
establishments were not licensed by the Board to participate in video gaming.
¶9 On July 19, 2012, the Board notified Action Gaming that its license application
had been denied based on its findings that Nicky Nichols and Jason Rowell,
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employees and owners of Action Gaming, were personally and professionally
associated with James Koehler, who had been convicted of illegal gambling. The
Board also cited its finding that Nichols had engaged in business practices and
maintained associations with a number of convicted felons. Under the Board’s
regulations, Action Gaming was an “applicant” at the time this letter was issued. 11
Ill. Adm. Code 1800.695 (2010). Action Gaming requested a hearing to contest the
denial of its license application. The Board denied the request for a hearing on
September 20, 2012.
¶ 10 On August 24, 2012, while Action Gaming’s request for a hearing on the denial
of its application was pending, it assigned its rights under the subject location
agreements to J&J Ventures Gaming, LLC (J&J Ventures), a licensed terminal
operator, in exchange for a purchase price. That assignment specifically stated that,
in consideration for the purchase price, Action Gaming agreed to assign and J&J
Ventures agreed to accept all rights “under each Use Agreement.” This assignment
was executed by Nicky Nichols on behalf of Action Gaming, as its
member/manager. At the time of the assignment, J&J Ventures was a licensed
terminal operator, but the 10 defendant establishments were not yet licensed by the
Board.
¶ 11 During late August and early September 2012, each of the defendant
establishments signed separate location agreements with Accel Entertainment
Gaming, LLC (Accel), a licensed terminal operator. Those agreements purported to
grant Accel the exclusive right to operate video gaming terminals within the
defendant establishments.
¶ 12 Thereafter, plaintiffs J&J Ventures and Action Gaming subsequently brought
the 10 underlying lawsuits in the circuit courts seeking declaratory judgments
against the defendant establishments. The complaints asserted that the circuit
courts had jurisdiction over the disputes under the Illinois declaratory judgment
statute (735 ILCS 5/2-701 (West 2012)). In addition, the complaints alleged that
J&J Ventures had the exclusive right to operate video gaming terminals at the
defendant establishments under the location agreements obtained by assignment
from Action Gaming. The complaints also alleged that the assignments were valid
because the exclusive location agreements were “precursor” agreements that were
“not yet” use agreements. Based on this assertion, the complaints claimed that the
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Gaming Board’s regulation precluding the assignment of a use agreement except
from one licensed terminal operator to another (11 Ill. Adm. Code 1800.320(d)
(2010)) did not apply. The complaints further alleged that, because the location
agreements Action Gaming had assigned to J&J Ventures would not become use
agreements until the parties were licensed by the Board, those agreements were
freely assignable. As relief, J&J Ventures and Action Gaming requested
declarations that (1) the agreements between J&J Ventures and the defendant
establishments were binding, (2) the assignments from Action Amusement to
Action Gaming and from Action Gaming to J&J Ventures were valid, (3) J&J
Ventures held the exclusive right to operate video gaming terminals at the
defendant establishments, and (4) the defendant establishments could not allow
other terminal operators to install or operate video gaming terminals without
breaching those agreements.
¶ 13 Accel was granted leave to intervene in all 10 declaratory judgment actions,
over the objections of J&J Ventures and Action Gaming. In answer to the
complaints, Accel alleged that the location agreements that had been assigned to
Action Gaming and later to J&J Ventures were invalid because they did not comply
with the Act and the Board’s regulations. 4
¶ 14 While the declaratory judgment actions were pending, the appellate court for
the Third District issued its opinion in Triple 7 Illinois, LLC v. Gaming &
Entertainment Management-Illinois, LLC, 2013 IL App (3d) 120860, which
involved successive assignments of a location agreement by an unlicensed terminal
operator under factual circumstances that were virtually identical to those on which
the present appeals are based. Id. ¶¶ 2-5. In that case, the Third District addressed
the question of whether the Board’s regulation precluding the assignment of a use
agreement except from one licensed terminal operator to another (11 Ill. Adm.
Code. 1800.320(d) (2010)) rendered the assignment of the exclusive location
agreement by an unlicensed terminal operator invalid. Triple 7, 2013 IL App (3d)
120860, ¶ 15. The Third District held that because the location agreement was
4
In four of the actions—involving Wild, Inc., Lonnie’s Liquor, Denny’s Package
Liquor, and Chiefs—Accel also filed counterclaims against J&J Ventures and Action
Gaming, asserting that it had the exclusive right to place video gaming terminals in those
establishments. Those counterclaims were based on use agreements that were executed
after Accel and each of the defendant establishments had been licensed.
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between an unlicensed establishment and an unlicensed terminal operator, it was
not a use agreement, and the Board’s regulation restricting the assignment of use
agreements did not apply. Id. ¶ 17. The court further held that neither the Act nor
the Board’s regulations specifically prohibited agreements between unlicensed
entities. Id. ¶ 21. Accordingly, the court affirmed the circuit court’s dismissal of the
complaint, which sought a declaration that the exclusive location agreement
between unlicensed entities was invalid. Id. ¶¶ 8, 33. The Third District did not
address the issue of the circuit court’s subject-matter jurisdiction over the claims.
¶ 15 Based on the holding in Triple 7, the circuit courts considering the 10
declaratory judgment actions underlying these appeals ruled that the location
agreements between J&J Ventures and the defendant establishments were not use
agreements and were valid, binding, and enforceable contracts. Accordingly, the
circuit courts enjoined Accel from operating video gaming terminals at the
defendant establishments.
¶ 16 Accel sought review of those judgments in the Appellate Court, Fifth District,
which consolidated the five appeals for the purpose of oral argument. During that
argument, the appellate court sua sponte raised the issue of the circuit courts’
subject-matter jurisdiction and ordered supplemental briefing on the question of
whether the Gaming Board had exclusive jurisdiction over the disputes. In their
supplemental briefs, all of the parties argued that the circuit courts have
subject-matter jurisdiction to determine the validity of the location agreements
assigned to J&J Ventures by Action Gaming.
¶ 17 The appellate court vacated the circuit courts’ judgments and dismissed the
appeals, holding that the circuit courts lacked subject-matter jurisdiction over the
disputes because the Board had exclusive jurisdiction over the matter that formed
the basis of the parties’ claims. 2015 IL App (5th) 140092; see also J&J Ventures
Gaming, LLC v. Whitlock Chiefs, Inc., No. 5-14-0181 (2015) (unpublished
summary order) (d/b/a Chiefs); J&J Ventures Gaming, LLC v. Coatney, No.
5-14-0180 (2015) (unpublished summary order) (d/b/a Denny’s Package Liquor);
J&J Ventures Gaming, LLC v. Mule Barn, Inc., No. 5-14-0171 (2015) (unpublished
summary order); J&J Ventures Gaming, LLC v. Ole Lonnie’s Liquor, Inc., No.
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5-14-0093 (2015) (unpublished summary order) (d/b/a Lonnie’s Liquor). 5 Those
judgments were based on the court’s determination that the Gaming Board has
exclusive authority over all agreements that purport to control the placement and
operation of video gaming terminals within a licensed establishment. 2015 IL App
(5th) 140092, ¶¶ 32, 62. As a consequence, the appellate court refused to follow the
reasoning employed in Triple 7 and declined to consider the merits of the parties’
disputes. Id. ¶¶ 55, 60.
¶ 18 On the application of J&J Ventures and Action Gaming, the appellate court
granted certificates of importance in all five appeals. Ill. S. Ct. R. 316 (eff. Dec. 6,
2006). Thereafter, this court granted the parties’ joint motion to consolidate the
appeals and also allowed the Board’s motion for leave to intervene and to be
aligned as an appellee.
¶ 19 ANALYSIS
¶ 20 The underlying declaratory judgment actions are predicated on a dispute over
the validity and enforceability of the location agreements assigned to J&J Ventures.
The issue before this court, however, is which tribunal has jurisdiction to determine
whether the location agreements are valid and enforceable.
¶ 21 J&J Ventures and Action Gaming argue that the appellate court erred in holding
that the circuit courts lack subject-matter jurisdiction to determine the validity of
the location agreements. J&J Ventures and Action Gaming further assert that the
judgments of the appellate court operate to deprive them of their right to freely
contract protected by the contract clauses of the United States and Illinois
Constitutions (U.S. Const., art. I, § 10; Ill. Const. 1970, art. I, § 16) and of their
right to a jury trial (U.S. Const., amend. VII; Ill. Const. 1970, art. I, § 13). J&J
Ventures and Action Gaming also ask this court to decide these appeals on the
5
The appellate court issued a published opinion explaining its reasoning in the
appeal involving Wild, Inc., and cited to that opinion in resolving the remaining
four appeals, which were decided in unpublished summary orders under Illinois
Supreme Court Rule 23(c)(1) and (2) (eff. July 1, 2011). Accordingly, in discussing
the appellate court’s analysis, we cite to the opinion in J&J Ventures Gaming, LLC
v. Wild, Inc., 2015 IL App (5th) 140092.
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merits and affirm the circuit courts’ findings that the agreements are valid and
enforceable under the reasoning expressed by the Third District in Triple 7.
¶ 22 Accel agrees that the appellate court erred with respect to the jurisdictional
issue but contends that the appellate court properly declined to follow the ruling in
Triple 7 because the location agreements assigned to J&J Ventures are not valid
and binding. The Gaming Board argues that the appellate court correctly held that
the circuit courts lack subject-matter jurisdiction to adjudicate the validity and
enforceability of the location agreements.
¶ 23 Subject-matter jurisdiction refers to a tribunal’s power to hear and determine
cases of the general class to which the proceeding in question belongs. Crossroads
Ford Truck Sales, Inc. v. Sterling Truck Corp., 2011 IL 111611, ¶ 27. In general,
the Illinois Constitution vests the circuit courts with original jurisdiction over all
justiciable matters, except in certain circumstances where this court has exclusive
and original jurisdiction. Ill. Const.1970, art. VI, § 9. However, the legislature may
explicitly vest original jurisdiction in an administrative agency when it enacts a
comprehensive statutory scheme that creates rights and duties that have no
counterpart in common law or equity. Board of Education of Warren Township
High School District 121 v. Warren Township High School Federation of Teachers,
Local 504, 128 Ill. 2d 155, 165 (1989); see also Ferris, Thompson & Zweig, Ltd. v.
Esposito, 2015 IL 117443, ¶ 15. 6
¶ 24 We note that in support of their argument that the circuit courts have
subject-matter jurisdiction, J&J Ventures and Action Gaming rely on Employers
Mutual Cos. v. Skilling, which stated that “if the legislative enactment does divest
the circuit courts of their original jurisdiction through a comprehensive statutory
administrative scheme, it must do so explicitly.” Employers Mutual Cos. v.
Skilling, 163 Ill. 2d 284, 287 (1994). As authority, the Skilling court cited People v.
NL Industries, 152 Ill. 2d 82, 96-97 (1992), for the proposition that the absence of
language explicitly excluding the circuit courts from exercising jurisdiction means
that the legislature did not intend to divest circuit courts of jurisdiction. Skilling,
6
Although the term “jurisdiction” is not strictly applicable to an administrative agency,
it may be used to refer to the authority of the administrative agency to act. Business &
Professional People for the Public Interest v. Illinois Commerce Comm’n, 136 Ill. 2d 192,
243 (1989) (citing Newkirk v. Bigard, 109 Ill. 2d 28, 36 (1985)).
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163 Ill. 2d at 287. Yet, Skilling’s description of the analysis in NL Industries is
truncated and does not represent the full measure of this court’s jurisprudence in
ascertaining legislative intent to vest exclusive jurisdiction in an administrative
agency. In fact, NL Industries considered the relevant statute as a whole, and the
court referenced not only the lack of exclusionary language but also other statutory
provisions that specifically referred to the circuit courts’ ability to adjudicate the
questions at issue. See NL Industries, 152 Ill. 2d at 97-99. Therefore, NL Industries
implicitly recognized that legislative intent to divest circuit courts of jurisdiction
may be discerned by considering the statute as a whole. Several of our other cases
have employed similar analysis (see Ferris, Thompson & Zweig, Ltd., 2015 IL
117443, ¶¶ 17, 19, 24; Crossroads Ford Truck Sales, Inc., 2011 IL 111611, ¶¶ 37,
45, 54), and we do so here.
¶ 25 We look to the statutory framework of the Act to determine whether the
legislature intended to vest the Gaming Board with exclusive jurisdiction to
determine the validity of agreements that affect the placement and operation of
video gaming terminals. See Crossroads Ford Truck Sales, Inc., 2011 IL 111611,
¶ 28. This determination is a matter of statutory interpretation. Ferris, Thompson &
Zweig, Ltd., 2015 IL 117443, ¶ 17. When interpreting a statute, the court’s primary
objective is to ascertain and give effect to the intent of the legislature. Chicago
Teachers Union, Local No. 1 v. Board of Education of the City of Chicago, 2012 IL
112566, ¶ 15; Williams v. Staples, 208 Ill. 2d 480, 487 (2004). The most reliable
indicator of legislative intent is the language of the statute itself, which must be
given its plain and ordinary meaning. Chicago Teachers Union, Local No. 1, 2012
IL 112566, ¶ 15; Williams, 208 Ill. 2d at 487. All provisions of a statute must be
viewed as a whole, with the relevant statutory provisions construed together and
not in isolation. Chicago Teachers Union, Local No. 1, 2012 IL 112566, ¶ 15;
Williams, 208 Ill. 2d at 487. In addition, the court may consider the reason for the
law, the problems sought to be remedied, the purposes to be achieved, and the
consequences of construing the statute in one way or another. Chicago Teachers
Union, Local No. 1, 2012 IL 112566, ¶ 15; Williams, 208 Ill. 2d at 487. Questions
relating to the circuit court’s jurisdiction and the interpretation of a statute both
present issues of law, which we review de novo. Chicago Teachers Union, Local
No. 1, 2012 IL 112566, ¶ 15; Crossroads Ford Truck Sales, Inc., 2011 IL 111611,
¶¶ 26-27.
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¶ 26 There is no common-law right in Illinois to engage in or profit from gambling.
Schneider v. Turner, 130 Ill. 28, 39 (1889) (recognizing that “[n]othing is more
clearly and firmly established by the common law, than that all gambling contracts
are void”); Mallett v. Butcher, 41 Ill. 382, 384 (1866) (holding that all contracts
having their origin in gaming are void, not voidable); see also Tomm’s Redemption,
Inc. v. Park, 333 Ill. App. 3d 1003, 1009 (2002); Hall v. Montaleone, 38 Ill. App.
3d 591, 592 (1976); Brelsford v. Stoll, 304 Ill. App. 222, 226 (1940). The Act,
which legalized the use of video gaming terminals under certain limited
circumstances, is an exception to the general prohibition against gambling. 230
ILCS 40/1 et seq. (West 2014). Consequently, gambling on video gaming terminals
is permitted in Illinois only as authorized by the Act, and gaming contracts that do
not conform to the applicable regulatory requirements are void.
¶ 27 The Act explicitly vests the Gaming Board with authority to administer the Act
by granting the Board “all powers necessary and proper to fully and effectively
execute [its] provisions” and by directing that the Board “shall have jurisdiction
over and shall supervise all gaming operations governed by [the] Act.” 230 ILCS
40/78(a) (West 2014). The Act expressly obligates the Board to investigate and
determine the eligibility of applicants for licenses and to select from among
competing applicants those applicants who best serve the interests of the citizens of
Illinois. 230 ILCS 40/78(a)(1) (West 2014).
¶ 28 Further, the Act authorizes the Board to adopt regulations under which all video
gaming is to be conducted, and those regulations “are to provide for the prevention
of practices detrimental to the public interest and for the best interests of video
gaming.” 230 ILCS 40/78(a)(3) (West 2014). Pursuant to its authority under the
Act, the Board has adopted regulations establishing certain qualifications and
requirements of licensees in order to “preserve the integrity and security of video
gaming” in Illinois. 230 ILCS 40/45(e) (West 2014); 11 Ill. Adm. Code 1800.420,
amended at 37 Ill. Reg. 7750 (eff. May 23, 2013). The Board also has adopted
regulations governing the license-application process and the procedure for
requesting a hearing upon denial of a license application. 11 Ill. Adm. Code
Subparts E, F.
¶ 29 In addition, the Board has adopted regulations that define the term “[u]se
agreement” (11 Ill. Adm. Code 1800.110, amended at 40 Ill. Reg. 8760 (eff. June
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14, 2016)) and establish the minimum standards that use agreements must satisfy
(11 Ill. Adm. Code 1800.320 (2010)). The term “[u]se agreement” is defined as “[a]
contractual agreement between a licensed terminal operator and a licensed video
gaming location establishing terms and conditions for placement and operation of
video gaming terminals by the licensed terminal operator within the premises of the
licensed video gaming location.” 11 Ill. Adm. Code 1800.110, amended at 40 Ill.
Reg. 8760 (eff. June 14, 2016). The minimum standards for use agreements require
that such contracts only be between “a licensed terminal operator and a licensed
establishment” and that the use agreement “[c]ontain an affirmative statement that
no inducement was offered or accepted regarding the placement or operation of
video gaming terminals in a licensed establishment.” 11 Ill. Adm. Code
1800.320(a), (b) (2010). Further, a use agreement must “[p]rohibit any assignment
other than from a licensed terminal operator to another licensed terminal operator”
and “[c]ontain a provision that releases the video gaming location from any
continuing contractual obligation to the terminal operator in the event that the
terminal operator has its license revoked *** or surrenders its license.” 11 Ill. Adm.
Code 1800.320(d), (e) (2010).
¶ 30 The Gaming Board’s jurisdiction under the Act also includes the authority
conferred by the Riverboat Gambling Act and the regulations promulgated
thereunder, provided the terms of the two statutes do not conflict. 230 ILCS 40/80
(West 2012). Under the Riverboat Gambling Act, the Board has the authority to
conduct hearings, require the attendance of witnesses, and compel the production
of evidence in accordance with the Illinois Administrative Procedure Act (5 ILCS
100/1-1 et seq. (West 2014)) when the Board determines that it is necessary for the
administration or enforcement of the Act or the Board’s regulations. 230 ILCS
10/5(c)(9) (West 2014); 230 ILCS 40/80 (West 2014). The Board may discipline
any licensee who fails to comply with the terms of the Act or the Board’s
regulations (11 Ill. Adm. Code 1800.310(a) (2010)), and the licensee may contest
any disciplinary action through the hearing process prescribed by the Board’s
regulations (11 Ill. Adm. Code 1800.720-790 (2010)). 230 ILCS 10/5(c)(5) (West
2014); 230 ILCS 40/80 (West 2014). The Board’s final decision is subject to
review under the Administrative Review Law (735 ILCS 5/3-101 et seq. (West
2014)). 230 ILCS 10/17.1 (West 2014); 230 ILCS 40/80 (West 2014). Further, the
Board may “take any other action as may be reasonable or appropriate to enforce”
the Act and the Board’s regulations. 230 ILCS 10/5(c)(21), 40/80 (West 2014).
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¶ 31 J&J Ventures, Action Gaming, and Accel argue that, although the General
Assembly enacted legislation that created a new form of legalized gambling
through the use of video gaming terminals, it did not explicitly divest the circuit
courts of jurisdiction to adjudicate the validity and enforceability of location
agreements that provide for the placement and operation of such terminals. We
disagree.
¶ 32 By legalizing the use of video gaming terminals for commercial gambling
purposes, the legislature enacted a comprehensive statutory scheme, creating rights
and duties that have no counterpart in common law or equity. Considered in its
entirety, this statutory scheme demonstrates the legislature’s explicit intent that the
Gaming Board have exclusive jurisdiction over the video gaming industry and the
use agreements that are a necessary prerequisite of engaging in that industry. The
Act, therefore, confers authority on the Gaming Board to determine the validity and
enforceability of contracts that purport to control the location and operation of
video gaming terminals within licensed establishments.
¶ 33 The question remaining is whether the agreements at issue here fall within the
purview of the comprehensive statutory scheme granting the Board exclusive
jurisdiction over video gaming in Illinois. The underlying declaratory judgment
actions are predicated on the contention that J&J Ventures has the exclusive right to
place and operate video gaming terminals in the defendants’ establishments, based
on the exclusive location agreements and subsequent assignments. As the appellate
court observed, resolution of those claims requires a determination of whether the
contracts assigned to J&J Ventures are valid use agreements, which is a matter that
falls within the exclusive province of the Board. 2015 IL App (5th) 140092, ¶ 30.
¶ 34 J&J Ventures and Action Gaming argue that, despite its exclusive jurisdiction
and broad authority to supervise all video gaming operations in Illinois, the Board
lacks authority to determine the validity of the location agreements because those
contracts are not “use agreements” under the Act and the Board’s regulations.
According to J&J Ventures and Action Gaming, the location agreements are
“precursor” contracts, the validity of which falls within the jurisdiction of the
circuit courts. The Gaming Board counters that the location agreements must fall
within the Board’s exclusive jurisdiction because contracts relating to video
terminal gaming are legal only if they comply with the Act and the corresponding
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regulations and because any such contract that does not comply with the Act and
regulations is an illegal gambling contract. In addressing these arguments, we
consider the nature of the location agreements through the lens of the governing
statutory and regulatory framework.
¶ 35 The location agreements provide that the terminal operator and the licensed
establishment will obtain the necessary licenses under the Act. In addition, the
agreements expressly state that they are “for the purpose of placing and operating
video gaming terminals” in the licensed establishments. The agreements require the
terminal operator to provide all video gaming terminals in the licensed
establishment and obligate the licensed establishment to allow terminals to be
placed in a “prominent, gaming oriented spot in the building.” The agreements
obligate the licensed establishment to work with the terminal operator “to
maximize gaming revenues for the benefit of both parties” and provide that the
licensed establishment is “responsible for maintaining an adequate video gaming
terminal fund, with the amount being determined by the Illinois Gaming Board.”
¶ 36 The initial terms of the agreements “commence upon the date the first video
gaming terminal described herein first operates in the [l]icensed [e]stablishment.”
Further, the agreements state that, in accordance with the Act, the after-tax profits
of the video gaming operations are to be divided equally between the terminal
operator and the licensed establishment. The agreements also expressly
acknowledge that nothing of value was offered or received in exchange for the
execution of the agreements and that it is a violation of the Act to offer anything as
an inducement for the procurement of a location.
¶ 37 The amendments to the location agreements state they were “necessary in order
for the Agreement to comply with the [Act] and the rules and regulations
promulgated thereunder.” In addition, the amendments include a clause entitled
“IGB Approval,” stating that the location agreements and amendments “are subject
to and contingent upon the [Gaming Board’s] review of, and to the extent required
by the [Board], consent to the use of this [a]mendment.” This clause further states
that the parties will modify the amendment “to comply with the requirements of the
[Gaming Board] or any change in the [Act] or the rules and regulations
promulgated thereunder.”
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¶ 38 We agree with the appellate court’s conclusion that the agreements fall within
the Board’s exclusive jurisdiction because they purport to control the placement
and operation of video gaming terminals within licensed establishments. See 2015
IL App (5th) 140092, ¶¶ 32, 62. In addition, we note that the agreements require
each party to obtain the requisite license, and the agreements specifically provide
that they take effect when the first video gaming terminal first operates in the
licensed establishment—a circumstance that cannot occur unless and until the
parties are licensed and the Board has approved the agreements. In addition, the
agreements and amendments are “subject to and contingent upon” the Gaming
Board’s review and consent. These express conditions providing for licensure of
the parties and Board approval further support the conclusion that the Board has
exclusive jurisdiction to decide their validity and enforceability.
¶ 39 J&J Ventures and Action Gaming assert that the agreements are merely
“precursor” contracts and, therefore, cannot be considered to be use agreements.
We reject this assertion for two reasons. First, there is nothing about these fully
negotiated agreements that can be characterized as preliminary in nature. The terms
and conditions are definite, setting forth the rights and obligations of the parties. All
of those rights and obligations relate to the placement of video gaming terminals
and to the division of profits derived from the operation of those terminals. Also,
the amended agreements are complete and do not require or contemplate the
execution of any subsequent agreements or amendments, except as required to
comply with the requirements of the Board or with any changes in the Act or the
Board’s regulations. Second, as noted above, the amended agreements specifically
acknowledge that they are governed by the terms of the Act and the Board’s
regulations and also are “subject to” the Board’s review and consent. These are
restrictions that apply to use agreements. Therefore, the claim that the agreements
are “precursor” contracts is refuted by the language of the agreements themselves.
¶ 40 Moreover, the argument of J&J Ventures and Action Gaming would lead to an
anomalous result where the circuit court could determine that a contract for the
placement and operation of video gaming terminals is valid but the court could not
enforce the terms of that contract. Also, the Board would be bound by a judicial
determination as to the validity and enforceability of such a contract. Such a
circumstance directly conflicts with and undermines the exclusive and original
jurisdiction of the Board to oversee all video gaming operations and to decide
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questions relating to the placement of video gaming terminals within licensed
establishments in Illinois. Therefore, the Board’s jurisdiction necessarily includes
jurisdiction over the agreements and assignments at issue in these appeals.
¶ 41 In urging a contrary result, J&J Ventures and Action Gaming cite
representations of the Board indicating that the validity of prelicensure location
agreements does not fall within the purview of the Act. In particular, they rely on
forms and information relating to the application process, as well as comments
made by an attorney of the Gaming Board. As recognized by the appellate court,
however, these representations do not control the determination of the Board’s
jurisdiction, which is a judicial function and not a question for the agency itself.
County of Knox ex rel. Masterson v. The Highlands, L.L.C., 188 Ill. 2d 546, 554
(1999); see also 2015 IL App (5th) 140092, ¶ 64 (citing Gallaher v. Hasbrouk,
2013 IL App (1st) 122969, ¶ 19).
¶ 42 In sum, the General Assembly has enacted a comprehensive statutory scheme
that vests jurisdiction over video gaming operations with the Illinois Gaming
Board. The agreements at issue in these cases purport to control placement and
operation of video gaming terminals, and the Illinois Gaming Board has exclusive,
original jurisdiction to determine their validity and enforceability. Accordingly, we
are precluded from addressing the merits of the parties’ claims, as were the
appellate court and the circuit courts. Our disposition renders unnecessary any
discussion of the constitutional arguments raised by J&J Ventures and Action
Gaming.
¶ 43 CONCLUSION
¶ 44 For the foregoing reasons, the judgments of the appellate court, vacating the
circuit courts’ judgments for lack of subject-matter jurisdiction and dismissing the
appeals, are affirmed.
¶ 45 Appellate court judgments affirmed.
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