Desert Palace, Inc. v. Michael

Filing 61

ORDER denying 44 Motion to Compel.; granting 49 Motion to Continue Magistrate Judge Hearing. FURTHER ORDERED that discovery is stayed pending the decisions on Plaintiff's Motion for Partial Summary Judgment (ECF No. 23 ) and Defendant's Counter-Motion for Summary Judgment (ECF No. 40 ). Signed by Magistrate Judge George Foley, Jr on 2/9/2017. (Copies have been distributed pursuant to the NEF - JM)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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Plaintiff,
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vs.
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ANDREW P. MICHAEL,
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__________________________________________)
DESERT PALACE, INC., d/b/a CAESERS
PALACE, a Nevada Corporation,

Case No.: 2:16-cv-0462-JAD-GWF
ORDER

This matter is before the Court on Plaintiff’s Motion to Compel (ECF No. 44), filed on January

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3, 2017. Instead of filing a response to Plaintiff’s motion to compel, Defendant filed his Motion to

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Continue Filing Deadlines and Hearing Regarding Plaintiff’s Motion to Compel (ECF No. 49) on

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January 8, 2017. Plaintiff filed its Opposition (ECF No. 53) on January 13, 2017 and Defendant filed

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his Reply (ECF No. 55) on January 18, 2017. The Court conducted a hearing in this matter on January

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30, 2017.

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BACKGROUND AND DISCUSSION
Plaintiff Desert Palace Inc., d/b/a Caesars Palace (“Caesars”) filed this action in the Nevada

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District Court, Clark County, Nevada on June 25, 2015. Defendant Andrew Michael (“Michael”)

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removed the action to federal court on March 3, 2016. Caesars alleges that Michael, a regular casino

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customer, executed credit applications seeking a credit line pursuant to which he would receive gaming

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chip advances up to a certain approved monetary limit. Complaint (ECF No. 1), ¶¶ 7, 8. The credit

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applications signed by Michael contained the following provisions: (a) “Before drawing on my line of

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credit, if granted, I agree to sign credit instruments (i.e., checks) in the amount of the draw;” (b) “I agree

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that each draw against my credit line is a separate advance of money by [Caesars];” (c) “If I receive an

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advance before I execute a credit instrument, I promptly will sign a credit instrument in the amount of

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the advance;” (d) “I am aware that this application is required to be prepared by the Nevada State

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Gaming Control Board regulations of the State of Nevada, and I may be subject to civil or criminal

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liability if any material information provided by me is willfully false;” (e) “I agree that this application

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and all credit issued pursuant thereto will be governed, construed and interpreted pursuant to the laws of

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the State of Nevada and venue shall lie solely in that state;” and (f) “I agree that [Caesars] may litigate

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any dispute involving the credit line, the debt or the payee in any court, state or federal, in Nevada. I

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submit to the jurisdiction of any court, state or federal, in the state of Nevada.” Complaint (ECF No. 1),

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¶ 8.

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According to Caesars:
Although a credit instrument (also referred to as a “marker”) is generally
signed contemporaneously when funds are advanced on credit to a casino
patron, Nevada law and the regulations of the Nevada Gaming
Commission promulgated thereunder also permit and authorize a licensee
to advance funds on credit to a patron through the initial use of
“lammers” a customary practice when a licensee allows a patron to “play
on the rim” (also referred to as “rim play”). Rim play is generally a
courtesy extended only to high level, ultra-VIP casino patrons.

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During rim play, a licensee uses “lammers” or “rim cards” to track
advances made to a patron during play, while the patron is in action,
thereby allowing the patron to game without interrupting play to obtain
executed markers.

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Complaint (ECF No. 1), ¶¶ 15-16.

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Michael gambled at Caesars Palace on September 20-21, 2014, during which he received

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advances that exhausted his entire credit limit of $3 million. Id. at ¶¶ 19-21. After completing his play,

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Michael allegedly avoided Caesars’ employees who attempted to have him execute a marker. Michael

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left Nevada and returned to London, England and has since refused to execute the marker. Id. at ¶¶ 22-

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40. Caesars alleges claims against Michael for breach of contract, breach of the implied covenant of

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good faith and fair dealing, unjust enrichment, fraud, specific performance, account stated,

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promissory/equitable estoppel, and declaratory relief. In his answer to the complaint, Michael denies

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that “Rim Debt” is valid or enforceable. Answer (ECF No. 5), ¶¶ 21-39. Michael also alleges that “[a]t

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the time of the alleged advances, [he] lacked the capacity to contract given Caesars consistent provision

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of alcohol throughout the period in question.” Id. at pg. 12, Affirmative Defense No. 23. Michael also
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asserts a counterclaim for $582,800 that Caesars allegedly owes to him. Both parties have filed motions

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for summary judgment regarding the legal enforceability of Michael’s $3 million gambling debt.

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In its motion to compel, Caesars states that it noticed Defendant Michael’s deposition to be

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taken on December 13, 2016 at Plaintiff’s counsel’s law office in Las Vegas, Nevada. Caesars also

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noticed the depositions of non-parties Chris Michael, Elias Michael, Ian Simpkins and Kai Feller.

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These individuals allegedly accompanied Defendant Michael during his visit to Caesars in September

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2014 and were present when he gambled on September 21-22, 2014. These witnesses apparently reside

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in England or Europe. Caesars seeks their depositions in regard to Michael’s affirmative defense that

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Caesars plied him with alcohol such that he was not legally competent to request advances on his credit

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limit. Caesars served subpoenas for the non-party deponents on Michael’s counsel who indicated that

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he was the contact person for these individuals. Neither Defendant Michael or the witnesses appeared

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for their scheduled depositions. Caesars is willing to take the witnesses’ depositions by remote video

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conferencing so that they need not travel to the United States. Caesars, however, seeks an order

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compelling Defendant Michael to appear in Las Vegas for his deposition.

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Michael requests in his motion that Plaintiff’s motion and its related briefing schedule, and the

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depositions be continued until the motions for summary judgment are decided “and the validity of this

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Court’s jurisdiction over Plaintiff’s action is determined.” Motion to Continue (ECF No. 49), pg 6.

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Defendant, in effect, moves for a stay of discovery pending a decision on the motions for summary

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judgment.

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DISCUSSION
“The Federal Rules of Civil Procedure do not provide for automatic or blanket stays of

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discovery when a potentially dispositive motion is pending.” Kor Media Group, LLC v. Green, 294

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F.R.D. 579, 581 (D.Nev. 2013) (quoting Tradebay, LLC v. eBay, Inc., 278 F.R.D. 597, 601 (D.Nev.

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2011). “Courts in this District have formulated three requirements in determining whether to stay

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discovery pending resolution of a potentially dispositive motion; motions to stay discovery may be

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granted when: (1) the pending motion is potentially dispositive; (2) the potentially dispositive motion

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can be decided without additional discovery; and (3) the Court has taken a ‘preliminary peek’ at the

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merits of the potentially dispositive motion and is convinced that the plaintiff will be unable to state a
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claim for relief.” Id.; see also Jones v. Wirth, 2016 WL 4994962, *3 (D.Nev. Sept. 16, 2016). In this

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case, both parties have filed motions for summary judgment on the issue of whether Michael’s $3

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million gambling debt is legally enforceable under Nevada law. If Defendant Michael’s motion is

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granted, it would be dispositive of the case. The issue can be decided without additional discovery.

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The Court has reviewed the parties’ briefs on the summary judgment motions. Although

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Defendant Michael casts the issue as jurisdictional, it is not jurisdictional in the sense of whether the

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court has personal jurisdiction over the parties or whether the claims fall within federal subject matter

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jurisdiction. Instead, Defendant contends that the court “lacks jurisdiction” because his alleged

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gambling debt is legally unenforceable.

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The Nevada Supreme Court traditionally followed the common law doctrine that a gaming debt

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is not legally enforceable. Sigel v. McEvoy, 101 Nev. 623, 624, 707 P.2d 1145, 1145–46 (1985). The

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Court noted that in 1983, the Nevada Legislature enacted NRS 463.361(1) “which provides in part that

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‘gaming debts not evidenced by a credit instrument are void and unenforceable and do not give rise to

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any administrative or civil cause of action.’ Thus, the legislature to some extent modified the common

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law prohibition against enforcement of gaming debts.” NRS 463.368(1) states that “[a] credit

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instrument accepted on or after June 1, 1983, and the debt that the credit instrument represents are valid

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and may enforceable by legal process.” Subsection 2 further states that “[a] licensee . . . may accept an

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incomplete credit instrument which: (a) Is signed by a patron; and (b) States the amount of the debt in

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figures, and may complete the instrument as is necessary for the instrument to be presented for

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payment.” Subsection 3(b) states that a licensee “[m]ay accept a credit instrument either before, at the

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time or after the patron incurs the debt. The credit instrument and the debt that the credit instrument

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represents are enforceable without regard to whether the credit instrument was accepted before, at the

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time or after the debt is incurred.”

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Although Caesars alleges that a gambling debt incurred during “rim play,” such as occurred in

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this case, is legally enforceable under Nevada law, it has not cited any statutory or regulatory provision

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that expressly states that a gambling debt can be enforced against a casino patron in the absence of an

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executed credit instrument or marker.1 Nor does there appear to be any Nevada state or federal case so

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holding. The closest case cited by Caesars is Morales v. Aria Resorts & Casino, LLC, in which the

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patron incurred a $500,000 gambling debt and executed several casino markers equal to that debt. 995

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F.Supp.2d 1176 (D.Nev. 2014). The court held that the casino could bring a civil action against the

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patron to recover the amount of the debt without presenting the markers to the designated banks for

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payment. Id. at 1181. The court stated:

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[M]arkers are merely instruments for collecting on a gambling debt, as
distinct from the debt itself, and redeeming a marker is not the only
means by which a gaming establishment may seek to collect on an
outstanding debt. See N.R.S. § 463.368 (enforceability of markers under
Nevada law is not dependent on presentation). Accordingly, Morales
“defense” related to presentment does not raise a triable issue of fact.
Nor does it preclude summary judgment in favor of Aria.

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Id.

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Morales does not hold, however, that a gambling debt is enforceable in the absence of any

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executed credit instrument.
Although Nevada has long since moved past the view that wagering and gaming contracts are

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inconsistent with the interests of the community and at variance with the laws of morality, West Indies,

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Inc. v. First Nat. Bank of Nevada, 67 Nev. 13, 214 P.2d 144, 147 (1950), it has not enacted a law

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making gambling debts enforceable in the absence of an executed credit instrument. Fairness may

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dictate that Defendant should pay his gambling debt to Caesars. There appears to be substantial doubt,

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however, whether that debt is legally enforceable.

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Other circumstances also suggest that a stay of discovery pending a decision on the motions for

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summary judgment is appropriate. A stay of discovery in this case is not likely to result in substantial

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delay. There appears to be no genuine dispute that Michael executed the credit applications and that he

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gambled and lost the $3 million limit of his credit advance. To the extent there is any dispute on these

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issues, Caesars will be allowed to depose Michael if the alleged debt is legally enforceable. The

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depositions of Defendant’s associates can also be taken during a relatively brief discovery period after

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A marker or credit instrument is defined in Morales v. Aria Resorts & Casino, LLC, 995 F.Supp.2d
1176, 1178 n. 2 (D.Nev. 2014).

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the motions for summary judgment are decided. If the foregoing discovery becomes necessary, the

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Court will likely require Defendant Michael to appear in the District of Nevada for his deposition

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absent proof that it will be unduly burdensome for him to appear in this district. The Court will permit

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the non-party witnesses to be deposed by remote video-conferencing. Accordingly,

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IT IS HEREBY ORDERED that Defendant’s Motion to Continue Filing Deadlines and

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Hearing Regarding Plaintiff’s Motion to Compel (ECF No. 49) is granted, and Plaintiff’s Motion to

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Compel (ECF No. 44) is denied, without prejudice.

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IT IS FURTHER ORDERED that discovery is stayed pending the decisions on
Plaintiff’s Motion for Partial Summary Judgment (ECF No. 23) and Defendant’s Counter-Motion for

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Summary Judgment (ECF No. 40). In the event the District Judge holds that the alleged gambling debt

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is legally enforceable, the parties shall file a status report and/or proposed discovery plan and

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scheduling order within fourteen (14) days of the Court’s decision. If necessary, Plaintiff may also

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renew its motion to compel.

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DATED this 9th day of February, 2017.

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______________________________________
GEORGE FOLEY, JR.
United States Magistrate Judge

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