Opinion · Illinois Supreme Court
J&J Ventures Gaming, LLC v. Wild, Inc
J&J Ventures Gaming, LLC v. Wild, Inc, (Ill. 2017)
- Type
- Opinion
- Court
- Illinois Supreme Court
- Jurisdiction
- Illinois
- Date
- 2017-01-25
- Topic
- general
Digitally signed by Reporter of Decisions Illinois Official Reports Reason: I attest to the accuracy and integrity of this document Supreme Court Date: 2017.01.25 15:08:06 -06'00' J&J Ventures Gaming, LLC v. Wild, Inc., 2016 IL 119870 Caption in Supreme J&J VENTURES GAMING, LLC, et al., Appellants, v. WILD, INC. Court: (Accel Entertainment Gaming, LLC, et al., Appellees). Docket Nos. 119870, 119871, 119872, 119873, 119874 cons.
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Supreme Court Date: 2017.01.25
15:08:06 -06'00'
J&J Ventures Gaming, LLC v. Wild, Inc., 2016 IL 119870
Caption in Supreme J&J VENTURES GAMING, LLC, et al., Appellants, v. WILD, INC.
Court: (Accel Entertainment Gaming, LLC, et al., Appellees).
Docket Nos. 119870, 119871, 119872, 119873, 119874 cons.
Filed September 22, 2016
Rehearing denied November 21, 2016
Decision Under Appeal from the Appellate Court for the Fifth District; heard in that
Review court on appeal from the Circuit Court of Madison County, the Hon.
Donald M. Flack, Judge, presiding.
Judgment Appellate court judgments affirmed.
Counsel on Christopher A. Koester and Aaron Jones, of Taylor Law Offices, PC,
Appeal of Effingham, and J. Timothy Eaton and Jonathan B. Amarilio, of Taft
Stettinius & Hollister LLP, of Chicago, for appellant J&J Ventures
Gaming, LLC.
William M. Gantz and Gail S. Eisenberg, of Dentons US LLP, of
Chicago, for appellant Action Gaming, LLC.
Steven P. Blonder and Marissa L. Downs, of Much Shelist, P.C., of
Chicago, and G. Patrick Murphy and Patricia S. Murphy, of Murphy &
Murphy LLC, of Marion, for appellee Accel Entertainment Gaming
LLC.
Lisa Madigan, Attorney General, of Springfield (Carolyn E. Shapiro,
Solicitor General, and Frank H. Bieszczat, Assistant Attorney
General, of Chicago, of counsel), for intervenor-appellee Illinois
Gaming Board.
Justices 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
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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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 at34 Ill. Reg. 2893
(eff. Feb. 22,
2010). After a start-up period of approximately three years, video gaming operations
commenced in October 2012.
¶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 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
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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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, 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
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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 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
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
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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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. 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.
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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¶ 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 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, 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
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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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
.
¶ 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
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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 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).
¶ 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
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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
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
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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.”
¶ 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 questions relating to the placement of video gaming terminals
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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 also2015 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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