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Crazie Overstock Promotions, LLC v. State

Court of Appeals of North Carolina

June 18, 2019

CRAZIE OVERSTOCK PROMOTIONS, LLC, Plaintiff,
v.
STATE OF NORTH CAROLINA; and MARK J. SENTER, in his official Capacity as Branch Head of the Alcohol Law Enforcement Division, Defendants.

          Heard in the Court of Appeals 24 April 2019.

          Appeal by Plaintiff from order entered 7 August 2018 by Judge Vince M. Rozier, Jr., in Alamance County No. 16 CVS 990 Superior Court.

          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.

          DILLON, JUDGE.

         Plaintiff 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.

         I. Background

         In May 2016, Crazie Overstock commenced the underlying action after the State began investigating its retail establishments. In its complaint, Crazie

         Overstock 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.

         In July 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.

         After a 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.

         II. Crazie Overstock's Enterprise

         Crazie 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:

         Crazie 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 Dexterity Game.

         In 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 Points.

         After 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.[1] The patron, though, is allowed three attempts at stopping the stopwatch with each play, with ...


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