MARINA DISTRICT DEVELOPMENT CO., LLC v. IVEY et al
Filing
135
OPINION. Signed by Judge Noel L. Hillman on 3/26/2018. (tf, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MARINA DISTRICT DEVELOPMENT
CO., LLC doing business as
BORGATA HOTEL CASINO & SPA,
Plaintiff,
CIVIL NO. 14-2283(NLH/AMD)
OPINION
v.
PHILLIP D. IVEY, JR., GEMACO
INC., and CHENG YIN SUN,
Defendants.
Appearances:
JEREMY M. KLAUSNER
JEREMY KLAUSNER LAW, P.C.
21 SHEFFIELD TER
WEST ORANGE, NJ 07052
On behalf of Plaintiff
JEFFREY W. MAZZOLA
LAW OFFICES OF WILLIAM E. STAEHLE
445 SOUTH STREET
P.O. BOX 1938
MORRISTOWN, NJ 07962-1938
On behalf of Defendant Gemaco, Inc.
EDWIN JOSEPH JACOBS, JR.
MICHAEL F. MYERS
LOUIS M. BARBONE
JACOBS & BARBONE
1125 PACIFIC AVENUE
ATLANTIC CITY, NJ 08401
On behalf of Defendants Phillip D. Ivey and Cheng Yin Sun
HILLMAN, District Judge
Defendants Phillip D. Ivey and Cheng Yin Sun played
Baccarat at the Borgata Hotel Casino & Spa in Atlantic City, on
four occasions in 2012.
They won $9,626,000.
In order to do
so, they used a scheme called “edge-sorting,” where Sun, after
learning the face value of certain strategically important
cards, would have the dealer turn those cards so that they could
be distinguished from other cards in the deck by minute
asymmetries on the repeating pattern on the backs of the cards
as they were dealt.
Ivey and Sun would then be able to see the
leading edge of the first card in the shoe before it was dealt,
giving them “first card knowledge,” and Ivey would bet
accordingly.
To make the edge-sorting scheme work, Ivey required certain
accommodations from Borgata: (1) a private area or “pit” in
which to play; (2) a casino dealer who spoke Mandarin Chinese
and would follow Sun’s directions to turn the cards 180 degrees;
(3) a guest (defendant Sun) to sit with him at the table while
he played; (4) one 8-deck shoe of purple Gemaco playing cards to
be used for the entirety of each session of play; and (5) an
automatic card shuffling device to be used to shuffle the cards
after each shoe was dealt, which retained the orientation of
each card that Sun requested to be turned.
Borgata agreed to
all of Ivey’s requests.
On October 21, 2016, the Court determined that Ivey and Sun
breached their contract with Borgata to abide by the terms of
New Jersey’s Casino Control Act, N.J.S.A. 5:12-1, et seq.
2
(“CCA”).
The Court found that Ivey and Sun breached their
contract with Borgata to play Baccarat in compliance with the
CCA by violating N.J.S.A. 5:12-115(a)(2) and (b) when they
knowingly engaged in a scheme to create a set of marked cards
and then used those marked cards to place bets based on the
markings. 1
(Docket No. 107.)
On December 15, 2016, the Court determined that the remedy
for Ivey and Sun’s breach of their contract with Borgata was to
restore the parties to the status quo ante – i.e., both Borgata
and Ivey and Sun would be returned to their pre-contract
positions, entitling Borgata to the return of all of Ivey and
Sun’s winnings, including the sum Ivey won at Craps following
his Baccarat play.
(Docket No. 117.)
Judgment was entered in
Borgata’s favor on its claims against Ivey and Sun in the amount
of $10,130,000.
(Docket No. 119.)
Ivey and Sun sought to appeal this Court’s decision, but
Borgata still had pending claims against Defendant Gemaco, Inc.,
which manufactured the cards Ivey and Sun specifically requested
to be used in their edge-sorting scheme.
The Court denied Ivey
and Sun’s motion for entry of judgment under Federal Civil
Procedure Rule 54(b), which requires that, in order to avoid
1
The Court found in favor of Ivey and Sun on Borgata’s claim
that the edge-sorting scheme constituted fraud because Ivey and
Sun did not violate the rules specific to Baccarat and Borgata
did not rely upon a material misrepresentation.
3
piecemeal appeals, a court may only order the entry of final
judgment when fewer than all claims have been resolved upon a
finding that there is “no just reason for delay.”
The Court
found that that resolving all of Plaintiff’s claims arising out
of the edge-sorting technique used by Ivey and Sun with Gemaco
playing cards, which serves as the basis for all of Plaintiff’s
claims against Ivey, Sun and Gemaco, would prevent duplicative
review by the court of appeals.
(Docket No. 122.)
The Court therefore directed Borgata to prosecute its
claims against Gemaco by either refiling its motion for summary
judgment, which, along with Gemaco’s cross-motion for summary
judgment, had been previously denied without prejudice when the
Court issued its decision as to Borgata’s claims against Ivey
and Sun so that the parties had the benefit of that decision, or
seek other relief that would resolve the claims between Borgata
and Gemaco.
(Id.)
Borgata and Gemaco have renewed their motions for summary
judgment, which are currently pending for resolution. 2
Borgata
claims that in October 2011, it and Gemaco entered into a
2
Summary judgment is appropriate where the Court is satisfied
that the materials in the record, including depositions,
documents, electronically stored information, affidavits or
declarations, stipulations, admissions, or interrogatory
answers, demonstrate that there is no genuine issue as to any
material fact and that the moving party is entitled to a
judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S.
317, 330 (1986); Fed. R. Civ. P. 56(a).
4
contract for (1) “high quality” gaming cards that were suitable
for Baccarat and compliant with the CCA and New Jersey Division
of Gaming Enforcement (“DGE”) regulations, which require that
“[a]ll cards used to game at Baccarat shall be of backs of the
same color and design,” N.J.A.C. 13:69F-3.6, and (2) “first
grade quality” gaming cards that were subject to individual and
intensive inspection, free of any and all defects, and suitable
for use in Borgata’s gaming operations.
Borgata claims that on
the four days Ivey and Sun played Baccarat at Borgata - April
11, May 3, July 26, and October 7, 2012 - Gemaco breached the
agreement with Borgata by delivering defective and asymmetrical
cards that were unsuitable for Baccarat and noncompliant with
the requirements set forth by the CCA.
In addition to its breach of contract claim (Count XIII),
Borgata claims that the defective and asymmetrical cards
breached Gemaco’s express and implied warranties (Counts XIV,
XV), and constituted negligence (Count XVI).
Borgata has also
asserted claims for respondeat superior for a Jane Doe employee
whose duty it was to inspect the cards (Count XVII), as well as
a claim for declaratory judgment for contribution and
indemnification (Count XVIII).
Borgata seeks damages in the
amount of $9,626,000, representing the amount of Borgata’s loss
5
resulting from Gemaco’s breaches. 3 (See Borgata’s amended
complaint, Docket No. 5 at 38-46.)
Gemaco’s arguments for of summary judgment in its favor
Gemaco argues that it is entitled to summary judgment on
all of Borgata’s claims.
Its first, overarching argument for
judgment in its favor is that Borgata has received full recovery
for its losses through the judgment entered in its favor on its
claims against Ivey and Sun, and Borgata is not entitled to a
duplicate recovery from Gemaco.
In addition to that argument,
Gemaco contends that the Uniform Commercial Code (U.C.C.), which
is a comprehensive system for determining the rights and duties
between buyers and sellers of goods, 4 governs the relationship
3
Borgata had sought the same amount in damages against Ivey and
Sun, but the Court awarded Borgata $10,130,000, which included
$504,000 Ivey won at Craps using his ill-gotten Baccarat
winnings.
4
The New Jersey Supreme Court has explained,
By enacting the U.C.C., the Legislature adopted a
comprehensive system for compensating consumers for
economic loss arising from the purchase of defective
products. The U.C.C. represents the Legislature's attempt
to strike the proper balance in the allocation of the risk
of loss between manufacturers and purchasers for economic
loss arising from injury to a defective product.
Alloway v. General Marine Industries, L.P., 695 A.2d 264, 268–69
(N.J. 1997) (citing Spring Motors Distribs. v. Ford Motor Co.,
489 A.2d 660 (N.J. 1985)) (other citations omitted);see also
Pomerantz Paper Corp. v. New Community Corp., 25 A.3d 221, 231
(N.J. 2011) (citing N.J.S.A. 12A:2–101 to –725) (explaining that
the U.C.C. fixes the obligations imposed on both buyers and
sellers relating to the sale of goods, as well as their
6
between it and Borgata, and Borgata’s common law breach of
contract, negligence, respondeat superior, and declaratory
judgment for contribution and indemnification claims are barred.
For Borgata’s breach of warranty claims that fall under the
U.C.C., Gemaco argues that Borgata’s damages for its allegedly
defective cards – to the extent that the cards are deemed to
have breached Gemaco’s agreement to provide Borgata with “high”
and “first grade” quality cards – are limited by the economic
loss rule.
That is, if it is determined that Gemaco breached
any warranties for the cards it provided to Borgata on the four
occasions in 2012, Borgata’s damages are limited to contracttype damages.
“[E]conomic loss encompasses actions for the recovery of
damages for costs of repair, replacement of defective goods,
inadequate value, and consequential loss of profits,” as well as
“the diminution in value of the product because it is inferior
in quality and does not work for the general purposes for which
it was manufactured and sold.”
Alloway v. General Marine
Industries, L.P., 695 A.2d 264, 267 (N.J. 1997) (citation
omitted).
In New Jersey, the U.C.C. provides “the exclusive
remedy for claims of purely economic loss due to a defective
product.”
Rapid Models & Prototypes, Inc. v. Innovated
respective remedies for nonperformance by the other party).
7
Solutions, 71 F. Supp. 3d 492, 507 (D.N.J. 2014) (citing Goldson
v. Carver Boat Corp., 707 A.2d 193 (N.J. Super. Ct. App. Div.
1998) (“[W]here the harm suffered is to the product itself,
unaccompanied by personal injury or property damage . . .
principles of contract, rather than of tort law, [are] better
suited to resolve the purchaser’s claim.” (citations and
quotations omitted)).
A tort remedy is available, however, for
damages that arise from a contractual relationship when the
breaching party owes a duty imposed by law independent of the
contract.
Saltiel v. GSI Consultants, Inc., 788 A.2d 268, 280
(N.J. 2002).
Gemaco argues that it did not owe Borgata any duty separate
from their contract, and therefore Borgata’s only remedy for the
allegedly defective cards comes from their contract. 5
It points
out that the parties’ contract provides for a limited warranty
where Gemaco warranted that the cards would be fit for their
intended purpose and free from defects of workmanship.
Gemaco
further points out that the contract provides that its liability
is limited to the replacement of the defective cards, or the
5
As discussed below, Borgata argues that Gemaco had an
independent duty under the CCA to provide symmetrical cards free
of defects, which removes Borgata’s claims from the purview of
the U.C.C. and the economic loss rule. Gemaco argues that there
is no private cause of action under the CCA that gives rise to
an independent duty imposed on Gemaco for the benefit of
Borgata, and that a violation of the CCA is not a tort which
provides a remedy outside the parties’ contract.
8
refund of the purchase price for the cards, and only if Borgata
notified Gemaco in writing within 90 days of its receipt of the
cards.
The limited warranty provision also provides that there
are no other warranties, express or implied, and in no event was
Gemaco liable for the loss of profits, indirect, incidental,
special, consequential or other similar damages, including but
not limited to business interruption, loss or revenue, gaming
losses, fines, penalties, loss of use and injury or damage to
persons or property arising out of any breach or obligations
under their contract. 6
(See Docket No. 5 at 56.)
Gemaco argues that in addition to the fact that Borgata’s
damages for the allegedly defective cards are limited to the
economic loss set forth in their contract – i.e., replacement of
the cards or refund of the purchase price – Borgata is not even
entitled to that remedy because it failed to comply with the 90-
6
Gemaco argues that Borgata’s claim for breach of an implied
warranty fails as a matter of law because the contract expressly
excludes any implied warranties, and such an exclusion is proper
under the U.C.C. The Court agrees. (See Docket No. 5 at 56,
the Borgata/Gemaco contract, which provides, “Seller warrants
that the goods covered by the Contract are merchantable and fit
for their intended purpose and are free from defects of material
and workmanship . . . . Except as specifically provided herein,
there are no other warranties, express or implied.”); see also
N.J.S.A. 12A:2–316(2) (providing that “to exclude or modify the
implied warranty of merchantability or any part of it the
language must mention merchantability and in case of a writing
must be conspicuous, and to exclude or modify any implied
warranty of fitness the exclusion must be by a writing and
conspicuous”).
9
day notice requirement under the contract.
Moreover, Gemaco
contends that there is no evidence that its cards used during
Ivey and Sun’s four visits in 2012 were defective or violated
the CCA. 7
Based on all of its arguments, it is Gemaco’s position
that it is entitled to summary judgment in its favor on all of
Borgata’s claims against it.
Borgata’s arguments for summary judgment in its favor
Unsurprisingly, Borgata views the situation very
differently from Gemaco.
Borgata argues that as a card
manufacturer Gemaco has an independent duty, separate from any
contract with the casinos, imposed upon it under the CCA to
ensure that the backs of the cards are uniform, symmetrical, and
cannot be used to determine the face value of the cards.
See
N.J.A.C. 13.69E-1.17(d), 13.69F-3.6, 13.69E-1.17(a), (d),
13.69E-1.18A.
Borgata contends that Gemaco’s failure to inspect
and identify the flawed, marked cards breached an independent
duty giving rise to a negligence claim.
7
This breach of its
Gemaco asks for a spoliation sanction against Borgata since the
cards from the April and May 2012 visits were inspected by
Borgata employees for defects, and having found none, the cards
were destroyed. Gemaco further points out the 2012 DGE
investigation into Ivey and Sun’s Baccarat play did not result
in any findings that its cards violated the regulations or were
defective. As discussed below, Borgata argues that the Gemaco
cards were presumptively defective, and in violation of the CCA,
because in May 19, 2017 the DGE sent a letter to casinos
advising them of “off-center” backs on Gemaco playing cards.
Gemaco argues that the May 2017 DGE letter is not relevant to
the cards used in 2012.
10
independent duty, Borgata argues, takes its claims against
Gemaco out of the economic loss rule limitation and the confines
of remedies available under the U.C.C.
Relatedly, Borgata argues that the cards failed for their
essential purpose, were the but-for cause of Borgata’s losses,
and Gemaco’s awareness of the inherent asymmetry of its cards
and its failure to apprise Borgata of the defect makes any
damages limitations unconscionable, particularly considering
that the playing cards cost only $0.84 per deck, thus making its
economic loss under the terms of the parties’ contract
significantly disproportionate to the actual losses incurred by
Borgata.
Borgata further argues that the parties’ contract
contained two warranty provisions, including one relating to
regulatory compliance, which Gemaco breached.
Overall, Borgata argues that Gemaco’s liability for the
$10,130,000 in losses under the parties’ contract and Gemaco’s
violation of its independent duties 8 has been established by the
May 19, 2017 letter the DGE sent to Borgata regarding Gemaco’s
8
Borgata argues that contrary to Gemaco’s argument that it has
been fully compensated for its losses by the judgment against
Ivey and Sun and it cannot obtain a double recovery, the
$10,130,000 judgment can also be imposed against Gemaco, with
the defendants apportioning liability for the total among
themselves based on their cross-claims for contribution and
indemnification.
11
cards.
In that letter, the DGE informed the vice-president and
general counsel of Borgata of the following:
The New Jersey Division of Gaming Enforcement
("Division") recently became aware of an issue regarding
the quality of playing cards produced by Gemaco, Inc.
("Gemaco"). The issue came to light when a New Jersey
casino licensee detected a flaw in the playing cards in use
at one of its table games. More specifically, the casino
licensee observed that the cards were cut so that the
pattern on the back of the cards was uneven or off-center.
Playing cards used for casino gaming are required to
consist of 52 cards. The faces of the cards are to contain
four suits and thirteen different denominations or
designations. See N.J.A.C. 13:69E-1.17(a) through (c).
The back of the cards "shall be identical and no card shall
contain any marking, symbol or design that will enable a
person to know the identity of any element printed on the
face of the card or that will in any way differentiate the
back of that card from any other card in the deck". See
N.J.A.C. 13:69E-1.17(d).
The design flaw identified above was observed in play
on two occasions in midFebruary. In the first instance,
playing cards manufactured by Gemaco were initially put
into play at a licensed New Jersey casino. Shortly after
being placed into service, the personnel assigned to a game
noticed that the pattern on the back of the cards was
offcenter. The game supervisor was alerted to the flaw
and acted to remove the cards from active play. In the
second occurrence, Gemaco playing cards were again in play
when the games personnel noticed the design flaw. The
cards were removed from play and retained for further
analysis. In both instances, the shipping box from which
the flawed cards were delivered to the gaming table was
dated October 19, 2016.
By copy of this correspondence, the Division is
advising all casinos licensed in New Jersey of the above
described design flaw. The Division would ask that each
licensed casino conduct an inspection of its playing card
inventories and advise this agency whether or not any
defective cards are located. If defective cards are found,
the licensee is requested to provide details, including but
not limited to the date of manufacture, shipping date and
12
invoice number, to this agency within 30 days from the date
of this letter. Should you have any questions please
contact the undersigned at 441-3449.
(Docket No. 123-3 at 2-3.)
The Court’s Analysis
There cannot be any credible dispute that the Gemaco cards
used by Ivey and Sun in 2012 had patterns on the back that were
not perfectly symmetrical.
The minute asymmetries in the
patterned backs of the purple Gemaco playing cards used in the
Ivey games were the very reason Ivey and Sun requested to use
those cards.
Indeed, as Borgata argues, in one sense Ivey and
Sun could not have pulled off their edge-sorting scheme without
using cards with backs that could be “marked” and
differentiated.
scheme.
But the cards were only one part of the overall
As explained more fully below, the Gemaco asymmetrical
cards were necessary – but in and of themselves not sufficient to accomplish the scheme.
In order to establish that it is entitled to damages for
its claims against Gemaco, Borgata must show that the asymmetry
caused the cards to be “defective.”
For its U.C.C.-based
claims, Borgata must show that the cards were defective in the
sense that they were not the promised “first quality” cards fit
for their intended use.
To avoid the application of the
economic loss rule, which limits Borgata’s remedies to the
replacement of the defective cards or the refund of the purchase
13
price for the cards (assuming proper notice), Borgata must
establish that Gemaco had an independent duty not to provide
“defective” cards that could be “marked,” and that Gemaco’s
failure to do so constitutes a tort contemplated by the law
governing exceptions to the economic loss rule.
If Borgata
establishes that Gemaco provided defective cards in violation of
its duty of care, as set forth by the CCA or under common law,
and that violation transcends the economic loss rule, Borgata
must also show that Gemaco’s defective cards were the proximate
cause of its $10,130,000 loss.
The Court finds that the economic loss rule does not
preclude Borgata’s negligence claim premised on Gemaco’s common
law duty of care to Borgata, as well as Gemaco’s obligations
under the CCA.
Borgata’s negligence claim is not “a contract
claim in tort claim clothing,” which “simply seeks to enhance
the benefit of the bargain [it] contracted for alleged harm
beyond that to the cards themselves.”
SRC Constr. Corp. v. Atl.
City Hous. Auth., 935 F. Supp. 2d 796, 801 (D.N.J. 2013) (citing
Saltiel v. GSI Consultants, Inc., 788 A.2d 268, 276 (N.J.
2002)). 9
Through Borgata’s allegations against Gemaco for its
9
See also Corestar Intern. Pte. Ltd. v. LPB Communications,
Inc., 513 F. Supp. 2d 107, 124 (D.N.J. 2007) (quoting New Jersey
Bank, N.A. v. Bradford Sec. Operations, 690 F.2d 339, 346 (3d
Cir. 1982)) (explaining that the New Jersey version of “the UCC
does not displace the common law of tort as it affects parties
in their commercial dealings except insofar as reliance on the
14
negligence, Borgata does not seek damages for the harm that the
asymmetry of the cards caused to the cards themselves.
Borgata
is not asking that Gemaco replace the asymmetrical cards with
symmetrical ones, or refund its purchase price for the cards.
Instead, Borgata seeks a remedy for the harm caused by Gemaco’s
breach of duty of care that goes beyond the cards themselves i.e., the integral and necessary part Gemaco’s asymmetrical
cards played in the edge-sorting scheme that resulted in over
$10 million in damage to Borgata.
These allegations readily
exclude the application of the economic loss rule to Borgata’s
negligence claim.
The ability of Borgata’s negligence claim to proceed
unhindered by the economic loss rule does not, however,
ultimately warrant judgment in Borgata’s favor on its negligence
claim.
Under New Jersey law, 10 in order to prove negligence, the
plaintiff must establish: (1) a duty of care owed to the
plaintiff by the defendant; (2) defendant breached that duty of
care; and (3) plaintiff’s injury was proximately caused by
defendant’s breach.
Smith v. Kroesen, 9 F. Supp. 3d 439, 442
(D.N.J. 2014) (citations omitted).
The burden of proving a
negligence claim rests with the plaintiff, and as part of that
common law would thwart the purposes of the code”).
10
The parties appear to agree that New Jersey law applies to
this case.
15
burden, it is vital that the plaintiff establish that its injury
was proximately caused by the unreasonable acts or omissions of
the defendant.
Id. (citing Camp v. Jiffy Lube No. 114, 706 A.2d
1193, 1195 (N.J. Super. Ct. App. Div. 1998), cert. denied, 718
A.2d 1215 (N.J. 1998)) (other citation omitted); see also People
Exp. Airlines, Inc. v. Consolidated Rail Corp., 495 A.2d 107,
116 (N.J. 1985) (citation and quotations omitted) (“Liability
depends not only on the breach of a standard of care but also on
a proximate causal relationship between the breach of the duty
of care and resultant losses.
Proximate or legal causation is
that combination of logic, common sense, justice, policy and
precedent that fixes a point in a chain of events, some
foreseeable and some unforeseeable, beyond which the law will
bar recovery.”).
In routine tort cases, “the law requires proof that the
result complained of probably would not have occurred ‘but for’
the negligent conduct of the defendant.”
(citations omitted).
Camp, 706 A.2d at 1195
In cases where concurrent causes of harm
are present, the law requires consideration of the “substantial
factor” test.
Id.
“The ‘but for’ standard concentrates on one
cause that sets the other causes in motion, while the
‘substantial factor’ test recognizes that a tortfeasor will be
held answerable if its negligent conduct was a substantial
factor in bringing about the injuries, even where there are
16
other intervening causes which were foreseeable or were normal
incidents of the risk created.”
quotations omitted).
Id. at 1195-96 (citations and
Under the substantial factor test, the law
of negligence recognizes that there may be any number of
concurrent causes of an injury, and it is enough if they are a
“substantial factor” in bringing it about, even if those acts by
themselves are capable of producing the injury.
Id. at 1196
(citations omitted).
Borgata argues that Gemaco’s defective, asymmetrical cards
were the “but for” cause of its losses - that is, if Ivey and
Sun had not used Gemaco playing cards, they could not have
perpetrated their edge-sorting scheme.
Even accepting as true
that the Gemaco cards used by Ivey and Sun during their four
visits to Borgata in 2012 were defective, and those defects were
caused by Gemaco’s breach of its duty of care, the Court finds
that the requisite proximate cause to hold Gemaco liable for
Ivey and Sun’s gambling winnings is lacking.
This is because
Borgata has not shown that the Gemaco cards standing alone were
the precipitating cause of the scheme.
As set forth above, in order to be successful in their
edge-sorting scheme, Ivey and Sun asked Borgata for five things:
(1) a private area or “pit” in which to play; (2) a casino
dealer who spoke Mandarin Chinese; (3) Sun to sit with Ivey at
the table; (4) one 8-deck shoe of purple Gemaco playing cards to
17
be used for the entirety of each session of play; and (5) an
automatic card shuffling device to be used to shuffle the cards
after each shoe was dealt, which retained the orientation of
each card that Sun requested to be turned.
The key elements of
Ivey and Sun’s scheme were cards where Sun could distinguish the
backs from each other, a dealer who would turn the necessary
cards at Sun’s request, an automatic card shuffler that would
maintain the orientation of the turned cards, and the retention
of those cards for the entire session.
If even one of those key
elements were missing, the edge-sorting scheme would not work.
The asymmetry on the backs of the cards were benign without
Sun’s visual acuity under pressure, the card turning, the
automatic shuffler, and the card retention.
Indeed, the
asymmetries in Gemaco cards when dealt in their unaltered
original alignment cause no ill-effect on the regular play of
the game.
It is common sense that a deck of asymmetrical cards
that are not turned individually are, despite an asymmetrical
pattern, actually symmetrical in effect as they are uniformly
asymmetrical.
Moreover, in many Baccarat games, the players bend, tear,
and handle the cards, which actions, similar to the cards’
asymmetry, render the cards defective.
But those defective
cards have no impact on the game because they are thrown away
after every hand and not reintroduced in new hands so that the
18
players would be aware of the cards’ value by those defects,
something which was done here.
Thus, it is not Gemaco’s cards that were the “but for”
cause of Borgata’s losses, but rather all the subsequent
required elements requested by Ivey and agreed to by Borgata,
each a required and integral part, which together caused
Borgata’s losses. 11
It is true that the scheme would not have
worked without asymmetrical cards.
scheme.
They were necessary for the
But they were equally insufficient.
Out of the box,
asymmetrical cards are symmetrical until strategically turned
and maintained in that orientation.
In that sense, it was
Borgata’s acquiescence in Ivey’s accommodations that were the
but for cause of Borgata’s losses.
The foreseeability requirement of proximate cause is also
lacking in this case.
“Foreseeability is a constituent part of
proximate cause,” and “if an injury is not a foreseeable
consequence of a person’s act, then a negligence suit cannot
prevail.”
Komlodi v. Picciano, 89 A.3d 1234, 1251–52 (N.J.
2014) (citations omitted).
If the injury or harm suffered was
11
Borgata views the asymmetries in the Gemaco cards as the
dispositive factor in the scheme, but it appears to ignore its
own participation. Borgata provided the dealer who turned the
cards and Borgata permitted her to do so. Borgata provided the
automatic shuffler. Borgata did not substitute a new deck of
cards during the entire play sessions, which lasted for over
sixteen hours each time. Borgata even provided the requested
type of playing cards.
19
within the realm of reasonable contemplation, the injury or harm
is foreseeable.
Id. (citations omitted).
But “if an injury or
harm was so remote that it could not have been reasonably
anticipated, the injury or harm is not foreseeable.”
Id.
(citations omitted).
While the potential for marking could be said, in the
general sense, to be a foreseeable consequence of the
asymmetrical cards, what is not foreseeable are the extensive
and unusual accommodations extended by the Borgata to Ivey and
Sun.
Foreseeability has it limits and it seems to this Court
unreasonable to hold that Gemaco should anticipate Ivey’s
creative, even ingenious, exploitation of the minute differences
in its mass produced playing cards, as well as Borgata’s
unwitting facilitation of the scheme, when so many are used
without incident and discarded without harm on a no doubt daily
basis.
Proximate cause and foreseeability are also related to
superseding cause.
Id.
“A superseding or intervening act is
one that breaks the ‘chain of causation’ linking a defendant's
wrongful act and an injury or harm suffered by a plaintiff,” and
it is one that is the immediate and sole cause of the injury or
harm.
Id. (citations omitted).
“Significantly, intervening
causes that are ‘foreseeable’ or the ‘normal incidents of the
20
risk created’ will not break the chain of causation and relieve
a defendant of liability.”
Id. (citation omitted).
Even accepting that Gemaco breached its duty by providing
defective cards to Borgata, Borgata has not established that
Ivey and Sun, and its own decision to extend them extraordinary
accommodations, were not the superseding cause that breaks the
causal chain of Gemaco’s actions.
Quite the opposite of
Borgata’s position, the fact that Ivey and Sun were successful
in perpetrating the edge-sorting scheme on four separate
occasions in the same exact manner over the course of a year
casts doubt on any claims that the harm was foreseeable.
Along
with the other integral elements of their scheme, Ivey and Sun
exploited a “defect” in the Gemaco cards that under regular
gambling circumstances would not constitute a defect at all.
Consequently, even accepting that Gemaco breached its duty
of care to Borgata through its defective cards, the evidence in
the record shows that Ivey and Sun’s actions were not
foreseeable, and they – not Gemaco - were the ultimate cause of
Borgata’s losses.
The result of the foregoing analysis, which presumes the
Gemaco cards were defective and concludes that Gemaco is not
liable for any tort claims advanced by Borgata, still requires
an analysis of whether the cards were actually defective in the
21
sense they were not fit for their intended purpose under the
parties’ contract.
Borgata rejects Gemaco’s contention that the asymmetries in
the pattern on the back of Gemaco cards is a result of the cardcutting process and is a known and acceptable industry standard.
Even if Gemaco’s position is unavailing, Borgata does not
explain how those asymmetries would actually be a defect in an
ordinary game of Baccarat, or in any other casino card game,
without a player’s efforts to exploit the asymmetry and “mark”
them.
Although the DGE notified the casinos in May 2017
regarding a batch of Gemaco cards from October 2016 that
appeared to be “off-center,” those cards were removed from play
in the unidentified game at an unidentified casino.
The DGE
letter is evidence to confirm the asymmetry of certain Gemaco
cards in general, but it does not establish that the particular
Gemaco cards used five years earlier were unfit for their
purpose absent intervention by Ivey and Sun.
In the Court’s Opinion resolving Borgata’s claims against
Ivey and Sun, the Court determined that Ivey and Sun breached
their contract with Borgata to play Baccarat in compliance with
the CCA by violating N.J.S.A. 5:12-115(a)(2) and (b) when they
knowingly engaged in a scheme to create a set of marked cards
and then used those marked cards to place bets based on the
markings.
By using cards they caused to be maneuvered in order
22
to identify their value only to them, Ivey and Sun adjusted the
odds of Baccarat in their favor, which was in complete
contravention of the fundamental purpose of legalized gambling,
as set forth by the CCA.
The Court concluded that Ivey and
Sun’s violation of the card marking provision in the CCA
constituted a breach of their mutual obligation with Borgata to
play by the rules of the CCA.
(See Docket No. 107 at 17-18.)
The Court determined that the remedy for Ivey and Sun’s breach
of contract was to return the parties to status quo ante – the
position of the parties prior to the formation of the contract.
(See Docket No. 117 at 8.)
If the Court were to find that Gemaco breached its
warranties that its cards would be fit for their intended
purpose and comply with CCA regulations, the remedy would be to
refund Borgata’s purchase price of all the cards used in the
Ivey and Sun play sessions (assuming that Borgata would not
elect to have the cards replaced, and assuming that the 90-day
notice window did not apply because Borgata did not learn of the
breach until well after the contractual notice period). 12
12
This
As the Court noted in its most recent prior Opinion, a breach
of contract provides three remedies: a) restitution returns the
innocent party to the condition he or she occupied before the
contract was executed; b) compensatory damages put the innocent
party into the position he or she would have achieved had the
contract been completed; and c) performance makes the nonbreaching party whole by requiring the breaching party to
fulfill his or her obligation under the agreement. Totaro,
23
remedy is equivalent to the remedy provided to Borgata for Ivey
and Sun’s breach of contract, which restored the parties to
their financial positions as if they had never contracted to
abide by the CCA when Ivey and Sun came to Borgata on those four
occasions.
The best remedy Borgata can obtain by proving Gemaco
breached the contractual warranties is the refund of its
payments for the cards in the amount of $26.88. 13
The Court cannot, however, grant summary judgment in either
parties’ favor on Borgata’s breach of warranty claims because
disputed issues of material fact exist that require the
assessment of credibility on both sides.
Borgata and Gemaco
present testimony of their corporate representatives and
employees, as well as experts, to opine as to, among other
things, whether the 1/32 of an inch tolerance in the
manufacturing process is an accepted industry standard, whether
Borgata knew and accepted this tolerance, whether Borgata knew
and accepted general asymmetries in the back of all playing
cards, and whether the particular cards used in the Ivey and Sun
Baccarat games exceeded this tolerance.
Only after the
Duffy, Cannova and Company, L.L.C. v. Lane, Middleton & Company,
L.L.C., 921 A.2d 1100, 1107 (N.J. 2007) (citations omitted).
13
Borgata explains that each pack of Gemaco cards consists of 8
decks at $0.84 each, totaling $6.72 per pack. One pack was used
for each of Ivey and Sun’s four visits to the Borgata, thus
totaling $26.88 in Gemaco cards. (Docket No. 123-1 at 20.)
24
assessment of the evidence at trial 14 can it be determined
whether the cards were not “first quality” as warranted by
Gemaco or violative of the CCA. 15
CONCLUSION
Ivey and Sun won over $9.6 million playing Baccarat at
Borgata in April, May, July and October 2012 by using an edgesorting scheme made possible, in part, because of asymmetries on
the backs of Gemaco playing cards.
Even if those Gemaco playing
cards were determined to be defective, and as a result Gemaco
breached its duty of care to Borgata, Borgata has not
established that Gemaco’s cards were the precipitating factor
which enabled Ivey and Sun’s scheme.
In contrast, it is clear
from the record that despite Borgata and Gemaco’s own unwitting
participation in the scheme, Ivey and Sun’s unforeseeable
actions were the superseding cause of Borgata’s losses.
Without a viable tort remedy against Gemaco, Borgata’s only
potential relief against Gemaco are U.C.C.-governed breach of
14
The docket reflects that Borgata made a jury demand, but the
contract between Borgata and Gemaco contains a jury waiver
provision. (Docket No. 5 at 58.) The Court will address
whether Borgata’s claim against Gemaco would result in a bench
or jury trial at another time if necessary.
15
It is unclear to the Court whether Borgata stopped using the
same type of Gemaco playing cards in its casino card games after
it uncovered Ivey and Sun’s edge-sorting scheme.
25
warranty claims. 16
The Court cannot enter summary judgment in
either party’s favor on those claims, however, because disputed
material facts exist that require the assessment of credibility
on both sides.
If, after trial, Borgata is successful on its
breach of warranty claims against Gemaco, its recovery would be
limited to $26.88.
The Court wonders whether, under such
circumstances, the game is worth the candle.
The Court will therefore provide Borgata and Gemaco with
three options.
The Court can (1) proceed to trial on Borgata’s
16
Borgata’s common law breach of contract claim is subsumed by
its breach of warranty claims governed by the U.C.C. See, e.g.,
Pro–Spec Painting, Inc. v. Sherwin–Williams Company, 2017 WL
2106123, at *6 (D.N.J. 2017) (“The Court will dismiss Count I as
duplicative of Count III because Plaintiff alleges only that
Defendant breached the contract . . . by providing a defective
product, which is also the basis for the breach of warranty
claim in Count III,” which is governed by the U.C.C.). Because
Borgata’s negligence claim is unsuccessful, its counts for
respondeat superior and declaratory judgment for contribution
and indemnification based on its negligence claim also fail.
See Celestin v. West Deptford Township, 2016 WL 5539584, at *13
(D.N.J. 2016) (dismissing plaintiff’s claim against defendant
under a theory of respondeat superior because it was derivative
of the alleged negligence against defendant’s employees, which
claim was also dismissed); cf. Dunn v. Praiss, 656 A.2d 413,
420–21 (N.J. 1995) (holding that in certain circumstances there
may be contribution between one whose breach of contractual duty
is a proximate cause of personal injury and one whose negligence
is a proximate cause of the same injury). Thus, only Count XIV,
breach of express warranty, remains. The Court refers to
“breach of warranties” to recognize that the contract provides
for a warranty of merchantability, fitness for the intended
purpose, goods free from defects of material and workmanship,
and regulatory compliance. The Court noted, supra, that
Borgata’s claim for breach of the implied warranty is
unsupportable under the U.C.C.
26
breach of warranty claims, (2) stay Borgata’s claims against
Gemaco and certify as final Borgata’s judgment against Ivey and
Sun pursuant to Rule 54(b) so that Ivey and Sun’s appeal may
proceed, or (3) afford Borgata and Gemaco a period of time to
enter into a private resolution of Borgata’s claims against
Gemaco.
The parties will have 15 days to notify the Court which
path they wish to take, or suggest any other reasonable path
forward not anticipated by the Court.
An appropriate Order will be entered.
Date: March 26, 2018
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
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