in the Court of Appeals 24 April 2019.
by Plaintiff from order entered 7 August 2018 by Judge Vince
M. Rozier, Jr., in Alamance County No. 16 CVS 990 Superior
Morning Star Law Group, by Keith P. Anthony and William J.
Brian, Jr., for the Plaintiff.
Attorney General Joshua H. Stein, by Special Deputy Attorney
General Olga Vysotskaya de Brito, for the State.
Crazie Overstock Promotions, LLC ("Crazie
Overstock"), appeals from an order granting partial
summary judgment to Defendants (the "State") on the
basis that Crazie Overstock operates a gambling enterprise in
violation of Sections 14-306.1A and 14-306.4 of our General
Statutes. After careful review, we affirm in part and reverse
in part. Specifically, we conclude that Crazie Overstock
operates electronic gaming machines in violation of Section
14-306.4, as a matter of law, because these machines award
"prizes" to winning patrons in a game of chance.
However, we conclude that the State was not entitled to
summary judgment as to whether the operation of these
machines violates Section 14-306.1A, as there is an issue of
fact regarding whether patrons are required to pay
consideration for the opportunity to play the machines.
2016, Crazie Overstock commenced the underlying action after
the State began investigating its retail establishments. In
its complaint, Crazie
sought, among other relief, a declaratory judgment that its
gaming machines at those establishments were lawful
and an injunction to prevent the State from
interfering with its business.
2018, the State filed a motion for summary judgment. Crazie
Overstock voluntarily dismissed its claims against any
individual Defendants, leaving only its declaratory judgment
and injunctive relief claims pending for trial.
hearing on the matter, the trial court granted summary
judgment to the State, declaring that Crazie Overstock was
violating two of North Carolina's "Lotteries and
Gaming" statutes, namely Sections 14-306.1A and
14-306.4. The trial court certified its judgment for
immediate appeal. Crazie Overstock timely appealed.
Crazie Overstock's Enterprise
Overstock's enterprise involves two games played on
electronic machines: a game of chance followed by a game of
skill. These games are played as follows:
Overstock sells gift certificates which may be used to
purchase items from its website or its retail stores. For
every ten dollars ($10.00) spent on gift certificates, a
patron also receives one thousand (1, 000) Game Points. With
these Game Points, the patron is eligible to play two games
on electronic machines: (1) a game of chance, called the
Reward Game, followed by (2) a game of skill, called the
first game, patrons use their Game Points to play the Reward
Game, a game of chance on an electronic machine simulating a
traditional slot machine. Patrons wager Game Points for the
chance to win Reward Points. If the patron "wins"
on a particular play, he or she is awarded a number of Reward
Points, equal to some multiple of the Game Points wagered on
that winning play. If the patron loses all of his or her
plays, he or she is still awarded one hundred (100) Reward
playing the Reward Game, the game of chance, the patron takes
Reward Points earned and wagers them in the Dexterity Game, a
game of skill which tests his or her hand-eye coordination.
The Dexterity Game involves a simulated stopwatch which
repeatedly and rapidly counts up from 0 to 1000 and back down
to 0. A patron "wins" Dexterity Points by stopping
the stopwatch between 801 and 1000. If a patron stops the
stopwatch between 951 and 1000, then one hundred percent
(100%) of any wagered Reward Points are converted to
Dexterity Points; if between 901 and 950, then ninety percent
(90%) of any wagered Reward Points are converted to Dexterity
Points; and if between 801 and 900, then fifty percent (50%)
of any wagered Reward Points are converted. Dexterity Points
are redeemable for cash at a rate of one dollar ($1.00) for
every one hundred (100) Dexterity Points. If a patron stops
the stopwatch between 0 and 800, he or she does not win any
Dexterity Points; but all wagered Reward Points are converted
back into Game Points which can be used to play the Reward
Game for more chances to try and win Reward
Points. The patron, though, is allowed three
attempts at stopping the stopwatch with each play, with