United States: Gaming Legal News – Volume 3, Number 11

Ontario Court Rejects Certification of Class Action: Problem Gambling "Duty of Care" Lawsuit Based on Self-Exclusion Forms

by Michael D. Lipton Q.C. and Kevin J. Weber

The case of Dennis v. Ontario Lottery and Gaming Corporation was brought in June of 2008 on behalf of all individuals who had signed self-exclusion agreements with the Ontario Lottery and Gaming Corporation (the "OLGC") whereby these individuals were to avoid playing at Ontario gaming facilities. The class of plaintiffs included all persons who had signed a particular version of this self-exclusion agreement that was offered by the OLGC from December 1, 1999 to February 10, 2005.

On March 15, 2010, the Dennis lawsuit was denied certification as a class action on the basis that the class of plaintiffs had no rational connection to the issues proposed to be common between those plaintiffs. In the course of his decision on this matter, the motion judge had occasion to make a number of findings regarding the possible bases for a duty of care that might be owed to problem gamblers in Canada, and on the nature of problem gambling generally.

The court noted that the wider question of whether the provincial government (through its agent, the OLGC) owes duties of care or any other legal duties to problem gamblers as such was not at issue in the proceeding. The case was concerned with duties owed to persons who had signed a Self-Exclusion Form provided by the OLGC to patrons upon request during the relevant period. This Self-Exclusion Form directed the OLGC and its commercial casino operators to use their best efforts to deny signatories entry to all gaming venues in the Province.

At the same time, the Self-Exclusion Form stated that the OLGC and commercial casino operators accepted no responsibility in the event the person failed to comply with the ban, and the signatory further released and forever discharged the OLGC and commercial casino operators from any and all liability in the event the signatory failed to comply with the ban.

In the final analysis, the plaintiffs lost their motion because they could not satisfy one particular element of the test for certification of a class

action: the requirement that the class of plaintiffs have a rational connection to the common issues allegedly existing amongst those plaintiffs. The motion judge found that the plaintiffs' claims were predicated and dependent upon their being vulnerable in the sense of being problem gamblers. However, the claim did not limit class membership to problem gamblers. The court recognized that those who signed Self-Exclusion Forms without being a problem gambler would have no tenable claims, while those who were problem gamblers would have experienced varying degrees of problem gambling, as "the disorder is progressive and there is a range of its severity." The defence of the OLGC would have depended to a large extent upon issues relating to personal autonomy and degrees of vulnerability, and allowing the matter to proceed as a class action could not deny the OLGC the right to pursue these issues on an individual basis. The court further found that these issues could not be addressed using statistical probabilities, with the result that the OLGC would need to inquire into the individual circumstances of each plaintiff, overpowering any common issues between the plaintiffs.

This finding can be expected to be raised in defence of any future class action brought on behalf of alleged problem gamblers, whether based upon self-exclusion policies or otherwise.

In the course of coming to this conclusion, the motion judge had the opportunity to address many issues of great relevance to problem gambling lawsuits throughout Canada:

1. Contractual Obligations: Effect of Exculpatory Clauses: The motion judge considered the language in the Self-Exclusion Form exculpating the OLGC from liability for the signatories' failure to comply with the ban. He held that these clauses should be read as excluding liability for gambling losses incurred as a result of the signatories' failure to comply, regardless of the cause of action. He noted that this was a situation in which the OLGC was not obtaining any benefit by offering a self-exclusion policy to the signatories, while the signatories actively sought to frustrate the OLGC in the performance of its contractual duties; he held that the only way the plaintiffs could avoid this outcome would be to prove that it would be unconscionable or contrary to public policy to enforce the exculpatory clauses.
   
   He held that there was nothing inherently unconscionable in an agreement whereby the OLGC undertook to exercise its best efforts to assist the signatories in excluding them from gaming premises, but on the understanding that it would not be liable for gambling losses incurred if self-exclusion failed to achieve its desired effect. The only way this arrangement could be inherently unconscionable would be if the OLGC acted in bad faith: if the OLGC knew its system of enforcing self-exclusion was ineffective, and that the entire self-exclusion program was accordingly "mere window-dressing – a public relations exercise – [that] did not reflect a genuine commitment to...responsible gambling."
   
   Lottery commissions across Canada will take heart from the relative unassailability which the motion judge attributed to the exculpatory clause in the Self-Exclusion Form. Similar language in other self-exclusion forms used across the country will be relied upon heavily in the event of similar lawsuits springing up over gambling losses of signatories who evaded their self-imposed bans.
2. Duty of Care (Negligence): The motion judge accepted that a duty of care to signatories of the Self-Exclusion Form could be based upon an analogy to the existing line of cases in which governmental authorities that had voluntarily undertaken to maintain public roads were held to owe a duty of care to execute that task in a non-negligent manner. Alternatively, the circumstances disclosed the elements of a novel duty of care, in which the Self-Exclusion Form and the public statements of the OLGC could be found to create a relationship of proximity between the signatories and the OLGC, and the casinos could be found to pose an inherent danger to vulnerable individuals.
3. Political Nature of the Issues: At the outset of his reasons, the motion judge indicated his belief that the issues at the heart of the action were more appropriately addressed in the political forum, rather than in court. He stated that the legal issues "must be viewed against a background of a system operated primarily to make profits for the government from the gambling losses of the persons who use its facilities. The tension between maximizing profits and promoting responsible gambling to the financial detriment of OLGC is acute. Government policy is involved to an extent that political resolution may be more appropriate and more effective than judicial proceedings." He foreshadowed that at a trial involving these issues, "the question of distinguishing between justiciable and non-justiciable issues will need to be confronted." This passage will likely be referred to by interest groups seeking government action to restrain what they perceive as the continued spread of gaming, particularly as lottery corporations begin to make greater strides into the realm of online gaming.
4. OLGC Relationships with Private Casino Operators: The plaintiffs raised an argument that was referred to in the 2005 Law Commission of Canada paper concerning gaming in criminal law in Canada, alleging that the structure of casino gaming in Ontario, in which the OLGC enters into joint ventures with "profit-driven commercial casino operators," violates the Criminal Code requirement that such gaming be conducted and managed by the provincial government. The plaintiffs linked this argument to the problem gambling issue by alleging that these joint venture relationships compromise the OLGC's "ability to implement programs consistent with its public commitment" to ensure responsible gaming.
   
   While this argument was not fully litigated on this motion, it is referenced both in the background section of the motion judge's reasons and as a public policy consideration that is posited as potential rationale for rendering the exculpatory clause in the Self-Exclusion Form nugatory.

The judgment provides important guidance on a number of issues relating to problem gambling lawsuits in Canada, and we expect that it will be quoted in any future lawsuits in this area. Should further developments occur in relation to this case, or similar problem gambling lawsuits, we will of course keep our readers apprised.

Settlement of Problem Gambling Class Action in Quebec

by Michael D. Lipton Q.C. and Kevin J. Weber

On March 23, 2010, the Superior Court of Quebec approved a settlement entered into by the parties to the class action of Brochu v. Loto-Quebec in December 2009. The lawsuit had claimed damages for gaming losses of over 119,000 individuals alleged to have problem gambling issues, alleging that the video lottery terminals (VLTs) promoted by the provincial lottery corporation caused or were strongly linked to problem gambling. With this court proceeding, we got our first look at the settlement document.

The short document evidencing the settlement demonstrates that Loto-Quebec obtained a relatively favourable settlement on the issues, though it has the potential to cost the corporation nearly $600 million.

The settlement requires the Quebec government to reimburse problem gamblers in Quebec for gambling addiction treatments, therapy, and related fees if they can establish that they incurred these costs between 1994 and 2002. The Quebec government has in fact paid for such treatment for problem gamblers since 2002, and each individual's reimbursement under the settlement cannot surpass the amount presently being provided by the Quebec government for such therapy, meaning that settlements could average $5,000 per individual. All claims must be made within 18 months from the date of the Court approval of the settlement. As well, the Quebec government must pay $2.75 million in legal fees incurred by the plaintiffs, and $1.01 million incurred by the Fund to Support Class Actions.

From the perspective of Loto-Quebec and the Quebec government, two key achievements were that the plaintiffs did not receive any compensation for actual gaming losses. The settlement simply retroactively applies the government program which has paid for problem gambling therapy for the last eight years back to 1994.

As well, as part of the settlement the plaintiffs agreed that the evidence at trial established that VLTs are not the cause of problem gambling. This was the most controversial part of the settlement. Twelve persons alleging to be problem gamblers made submissions before the Superior Court of Justice asking the Court to reject the settlement, but their arguments were rejected by the court.

Detroit Casinos Continue Positive Revenue Trend: Michigan Gaming Control Board Releases March 2010 Revenue Reports

by Brian P. Vincent*

On April 15, 2010, the Michigan Gaming Control Board ("MGCB") released the revenue and wagering tax data for March 2010 for the three Detroit, Michigan commercial casinos. The figures released by the MGCB reflect the recent trend of continued economic recovery: total gaming revenue for the three Detroit casinos increased by 10.7 percent compared to February 2010 and 6 percent compared to March 2009. Revenues for MGM Grand Detroit, MotorCity Casino, and Greektown Casino for the first quarter of 2010 were roughly $149 million, $114 million, and $91 million, respectively – an aggregate increase of 2.8 percent compared to the same period last year.

Greektown Casino reported its best monthly performance since the casino opened in 2000. Total adjusted gross gaming revenue for March 2010 was $33.48 million – a 12.3 percent increase compared to February 2010, and an 11.7 percent increase compared to March 2009. Greektown Casino attributes its recent improvement to "new management, more direct mail to frequent and potential customers and cosmetic changes to the gaming hall."

MGM Grand Detroit maintained its status as the Detroit-based commercial casino with the highest revenue and market share, generating $52.5 million in total adjusted gross gaming revenue for March 2010 – an 8.1 percent increase compared to February 2010 and an 8.5 percent increase compared to March 2009. March was the fourth straight month that MGM Grand Detroit experienced revenue increases.

MotorCity Casino reported total adjusted gross gaming revenue of $41.2 million in March 2010 – an increase of 12.9 percent compared to February 2010 and a decrease of 1 percent compared to March 2009.

In terms of market share, MGM Grand Detroit maintained its top position, with 41.3 percent market share in March 2010, down from 42.3 percent in February 2010. Greektown Casino, meanwhile, increased its market share to 26.3 percent from 25.9 percent in February 2010. MotorCity Casino increased its market share to 32.4 percent from 31.8 percent in February 2010.

The revenue data released by the MGCB also includes the total wagering tax payments made by the casinos to the State of Michigan. For March 2010, gaming taxes for the three Detroit commercial casinos were $8.6 million in comparison to $10.9 million for the same period last year. For the three months ending March 2010, gaming taxes for the three Detroit casinos were $29.2 million in comparison to $31.1 million for the same period last year. This decrease was due in large part to the MGCB's March 9 approval of Greektown Casino's tax rollback request, which had been pending since February 2009. The tax rollback was approved pursuant to the MGCB's determination that Greektown Casino is now "fully operational," as defined under the amended 2004 state law. The tax rollback of over $14.5 million will be offset against future wagering tax payments to the State of Michigan.

The gaming revenue and wagering tax payments for the MGM Grand Detroit, MotorCity Casino, and Greektown Casino for March 2010 were:

Footnotes

* Brian Vincent is an associate in Dickinson Wright's Lansing office. He can be reached at 517.487.4714 or bvincent@dickinsonwright.com.

♦ The state tax rate for MGM and MotorCity was reduced to 8.1% effective as of October 3, 2007 and December 31, 2007, respectively. The state tax rate for Greektown was reduced to 8.1% effective as of March 9, 2010. These figures do not include wagering tax payments made to the City of Detroit.

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