MARINA DISTRICT DEVELOPMENT CO., LLC v. IVEY et al

Filing 32

OPINION. Signed by Judge Noel L. Hillman on 3/12/2015. (drw)

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
AGOSTINO & ASSOCIATES, PC
14 WASHINGTON PLACE
HACKENSACK, NJ 07601
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
ERIC H. LUBIN
JACOBS & BARBONE
1125 PACIFIC AVENUE
ATLANTIC CITY, NJ 08401
On Behalf of defendants Phillip D. Ivey and Cheng Yin Sun
HILLMAN, District Judge
This matter concerns the claims of plaintiff, Marina
District Development Co., LLC, which does business as Borgata
Hotel Casino & Spa in Atlantic City, New Jersey, against “high-

stakes” professional gamblers, defendants Phillip D. Ivey and
Cheng Yin Sun, as well as playing card manufacturer, Gemaco,
Inc.

The claims arise out of Ivey and Sun’s alleged deceptive

“edge sorting” scheme to manipulate the odds of the casino game
Baccarat in their favor.

Presently before the Court is Ivey and

Sun’s motion to dismiss Borgata’s claims against them.

For the

reasons expressed below, defendants’ motion will be denied.
BACKGROUND
Borgata’s detailed complaint sets forth the following
background information and alleged facts.

In April 2012, Ivey

contacted Borgata to arrange a visit to play high-stakes
Baccarat. 1

Ivey made five requests: (1) a private area or “pit”

1

Borgata explains the rules of Baccarat in its complaint.
(Docket No. 5 at ¶¶ 23-30.) Mini Baccarat (“Baccarat”) is a game
of chance in which the players bet on the relative value of two
hands of two cards each before the hands are dealt or the cards
are revealed. One hand is referred to as the “player’s” hand,
the other is known as the “banker’s” hand. The “banker” is not
the House, and the “player” does not refer to those playing the
game. Players are free to bet on either hand. The object of
Baccarat is to bet on the hand that will have a total value
closest to nine (9). Tens, face cards, and any cards that total
ten are counted as zero. All other cards are counted at face
value. The scores of hands range from 0 to 9. Neither hand can
“bust.” The game is generally played with six or eight decks of
cards placed into a dealing “shoe.” Before the cards are dealt,
the players must place one of three bets: “banker,” “player,” or
“tie.” A bet on “banker” is a bet that the banker will hold the
hand closest to nine. A bet on “player” is a bet that the
player will have the hand closest to nine. A bet on “tie” is a
bet that the two hands will be tied. Two hands are then dealt
from the shoe, one for the “player” and one for the “banker.”
The first card is dealt to the “player’s” hand. In certain
circumstances, a third card may be dealt to either or both
2

in which to play; (2) a casino dealer who spoke Mandarin
Chinese; (3) a guest (Ms. Sun) to sit with him at the table
while he played; (4) one 8-deck shoe of purple Gemaco Borgata
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.
Ivey’s requests.

Borgata agreed to

In return, Ivey agreed to wire a “front money”

deposit of $1 million to Borgata, and that the maximum bet would
be $50,000 per hand.
Under these parameters, Ivey played 16 hours on April 11,
2012 and won $2,416,000, with his average bet of $25,000.

With

the same terms, Ivey returned to Borgata in May 2012, and over
the course of 56 hours of Baccarat play, Ivey won $1,597,400,
with his average bet of $36,000.
In July 2012, Ivey again returned to Borgata to play

hands, depending on the score of the hands. A winning bet on
“banker” pays 19 to 20. A winning bet on “player” pays even
money. A winning bet on “tie” pays 8 to 1. The house advantage
for Baccarat is approximately 1.06% on “banker” bets, 1.24% on
“player” bets, and 4.84% on “tie” bets. Based on mathematical
probability, when the first card dealt to the “player” has a
value of 6, 7, 8, or 9, the chances of the “player” hand winning
are greatly increased. Conversely, if the “player” hand’s first
card has a value of 10, 1 (Ace), 2, 3, or 4, the chances of the
“banker” hand winning are greatly increased. Thus, if a player
knows the value of the first card in the shoe before it is
dealt, the player can reverse the house advantage, and instead
have a significant advantage over the house. The player with
this “first card knowledge” has an overall advantage of
approximately 6.765% over the house. The advantage is up to
21.5% for “player” bets and up to 5.5% for “banker” bets.
3

Baccarat with his same five requests, but this time he had
prearranged to raise his front money to $3 million, and raise
his maximum bet to $100,000 per hand.

Over the course of 17

hours of Baccarat play, Ivey won $4,787,700, with his average
bet of $89,000.

Under these same terms, Ivey came back to

Borgata in October 2012, and over the course of 18 hours, Ivey
won $824,900 (after being up almost $3.5 million) with an
average bet of $93,800. 2

After each visit to Borgata, Ivey

requested that his front money and winnings be wired to a bank
account in Mexico.

Ivey’s total winnings for his four visits to

Borgata was $9,626,000.
During his last visit to Borgata on October 7, 2012,
Borgata learned through a media report that a casino in London,
Crockfords, was withholding £7.3 million won by Ivey playing
Punto Banco, which is essentially the same game as Baccarat.
After Ivey left Borgata on October 8, 2012, Borgata learned more
about the Crockfords matter, and discovered that Ivey had made
the same five requests to Crockfords as he did to Borgata.
Borgata also discovered that Ivey and Sun committed what it
considers to be an “edge sorting scam.”
According to Borgata, as well as Ivey’s own representations
in his suit against Crockfords to recover his winnings as

2

Borgata claims that Ivey intentionally lost a portion of his
winnings during his October 2012 play.
4

described in Borgata’s complaint in this case, the mechanics of
“edge sorting” are as follows:
126. The backs of casino playing cards generally
contain a repeating diamond or geometrical pattern as seen
in Exhibit A.
127. If the cards are not cut symmetrically during
the manufacturing process, the two long edges of the cards
will not be identical. In other words, one edge will have
more of the geometrical pattern than the other. See
Exhibit B.
128. During play, Ivey and Sun used the
accommodations they requested from Borgata to “turn”
strategically important cards so that they could be
distinguished from all other cards in the deck.
129. The dealer would first lift the card so that Sun
could see its value before it was flipped over all the way
and placed on the table. If Sun told the dealer “Hao”
(pronounced “how”), which translates to English as “good
card,” he was instructed to continue to flip the card over
so that the orientation of the long edges of the card
would stay on the same side when flipped. In other words,
the right edge of the card as seen by Sun before the card
was turned all the way over would still be the right edge
of the card as she looked at when it was laid face up on
the table.
130. If Sun told the dealer “Buhao” (pronounced
“boohow”), which translates into English as “bad card,” he
was instructed to flip the card side to side, so that the
long edges would be reversed when flipped. In other words,
the right edge of the card as seen by Sun before the card
was turned all the way over would now be the left edge of
the card as she looked at it when it was laid face up on
the table.
131. By telling the dealer “good card” or “bad card”
in Mandarin, the dealer would place the cards on the table
so that when the cards were cleared and put in the used
card holder, the leading edges of the strategically
important cards could be distinguished from the leading
edges of the other cards in the deck.

5

132. Upon information and belief Ivey and Sun
“turned” the cards with values of 6, 7, 8, and 9, so that
they could be distinguished from all other cards in the
deck.
133. The process of “edge sorting” all the cards in
the decks took more than one shoe.
134. Ivey and Sun knew that if an automatic card
shuffler was used, the edges of the cards would remain
facing in the same direction after they were shuffled.
135. Conversely, Ivey and Sun knew that if the cards
were shuffled by hand, the dealer would turn part of the
deck, rendering their attempts to “turn” the strategically
important cards useless.
136. Keeping the edges of the cards facing the same
direction is the reason Ivey requested the use of an
automatic card shuffler.
137. Ivey also knew that if the same cards were not
reused for each shoe, there would be no benefit to “edge
sorting.”
138. That is why Ivey requested that the same cards
be reused for each shoe.
139. The leading edge of the first card in the shoe
is visible before the cards are dealt.
140. Once the “edge sorting” was completed, Ivey and
Sun were able to see the leading edge of the first card in
the shoe before it was dealt, giving them “first card
knowledge.”
141. If the first card in the shoe was turned, that
meant a strategically important card was being dealt to
the “player” hand, and Ivey would bet accordingly.
142. If the first card in the shoe was not “turned,”
that meant that a less advantageous card was being dealt
to the “player” hand, and Ivey would again bet
accordingly.
143. This “first card knowledge” changed the overall
odds of the game from an approximate 1.06% house advantage
6

to an approximately 6.765% advantage for Ivey.
144. Ivey began each playing session with bets well
below the maximum bet.
145. Ivey bet below the maximum bet until he and Sun
had completed “edge sorting” all the cards in the shoe.
146. Once all the cards in the shoe were “edge
sorted,” Ivey “flatlined” at the maximum bet; i.e. he bet
the maximum amount on every hand.
147. A review of Ivey’s betting pattern shows that
once the cards were “edge sorted,” when he bet on
“player,” the first card dealt was significantly more
likely to be a strategically important card.
148. Conversely, once the cards were “edge sorted,”
when Ivey bet on “banker,” the first card dealt was
significantly more likely to be a strategically
unimportant card.
(Amend. Compl., Docket No. 5 at ¶¶ 126-148.)
By way of this alleged “edge sorting scam,” Borgata claims
that “Ivey’s true motive, intention, and purpose in negotiating
these playing arrangements was to create a situation in which he
could surreptitiously manipulate what he knew to be a defect in
the playing cards in order to gain an unfair advantage over
Borgata.”

(Amend. Compl. Docket No. 5 at ¶ 42.)

As a result,

Borgata has filed a complaint against Ivey and Sun for breach of
contract, fraud, conspiracy, and RICO violations, among other
related claims. 3

3

Borgata has lodged several claims against Gameco, including
breach of contract, breach of warranty, and indemnification.
Gemaco filed its answer to Borgata’s complaint, and no motions
are pending related to Borgata’s claims against Gemaco.
7

Ivey and Sun have moved to dismiss all of Borgata’s claims
against them.

Borgata has opposed their motion.
DISCUSSION

A.

Subject Matter Jurisdiction

This Court has jurisdiction over this matter pursuant to 28
U.S.C. § 1332 because there is complete diversity of citizenship
between the parties and the amount in controversy exceeds
$75,000.

Borgata is a limited liability company.

The members

of Borgata are Boyd Atlantic City, Inc. and MAC Corp., both
corporations organized and existing pursuant to the laws of the
State of New Jersey, with their principal places of business in
New Jersey.

Defendants Ivey and Sun are citizens of the State

of Nevada, and defendant Gemaco is a corporation organized and
existing pursuant to the laws of the State of Missouri, with its
principal place of business in Blue Springs, Missouri.
B.

Standard for Motion to Dismiss

When considering a motion to dismiss a complaint for
failure to state a claim upon which relief can be granted
pursuant to Federal Rule of Civil Procedure 12(b)(6), a court
must accept all well-pleaded allegations in the complaint as
true and view them in the light most favorable to the plaintiff.
Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005).

It is well

settled that a pleading is sufficient if it contains “a short
and plain statement of the claim showing that the pleader is
8

entitled to relief.”

Fed. R. Civ. P. 8(a)(2).

Under the

liberal federal pleading rules, it is not necessary to plead
evidence, and it is not necessary to plead all the facts that
serve as a basis for the claim.
F.2d 434, 446 (3d Cir. 1977).

Bogosian v. Gulf Oil Corp., 562
However, “[a]lthough the Federal

Rules of Civil Procedure do not require a claimant to set forth
an intricately detailed description of the asserted basis for
relief, they do require that the pleadings give defendant fair
notice of what the plaintiff’s claim is and the grounds upon
which it rests.”

Baldwin Cnty. Welcome Ctr. v. Brown, 466 U.S.

147, 149-50 n.3 (1984) (quotation and citation omitted).
A district court, in weighing a motion to dismiss, asks
“‘not whether a plaintiff will ultimately prevail but whether
the claimant is entitled to offer evidence to support the
claim.’”

Bell Atlantic v. Twombly, 550 U.S. 544, 563 n.8 (2007)

(quoting Scheuer v. Rhoades, 416 U.S. 232, 236 (1974)); see also
Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) (“Our decision in
Twombly expounded the pleading standard for ‘all civil actions’
. . . .”); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.
2009) (“Iqbal . . . provides the final nail-in-the-coffin for
the ‘no set of facts’ standard that applied to federal
complaints before Twombly.”).
Following the Twombly/Iqbal standard, the Third Circuit has
instructed a two-part analysis in reviewing a complaint under
9

Rule 12(b)(6).

First, the factual and legal elements of a claim

should be separated; a district court must accept all of the
complaint's well-pleaded facts as true, but may disregard any
legal conclusions.
S. Ct. at 1950).

Fowler, 578 F.3d at 210 (citing Iqbal, 129
Second, a district court must then determine

whether the facts alleged in the complaint are sufficient to
show that the plaintiff has a “‘plausible claim for relief.’”
Id. (quoting Iqbal, 129 S. Ct. at 1950).

A complaint must do

more than allege the plaintiff's entitlement to relief.

Id.;

see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d
Cir. 2008) (stating that the “Supreme Court's Twombly
formulation of the pleading standard can be summed up thus:
‘stating . . . a claim requires a complaint with enough factual
matter (taken as true) to suggest’ the required element.

This

‘does not impose a probability requirement at the pleading
stage,’ but instead ‘simply calls for enough facts to raise a
reasonable expectation that discovery will reveal evidence of’
the necessary element”).
A court need not credit either “bald assertions” or “legal
conclusions” in a complaint when deciding a motion to dismiss.
In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 142930 (3d Cir. 1997).

The defendant bears the burden of showing

that no claim has been presented.

Hedges v. U.S., 404 F.3d 744,

750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor,
10

Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)).
Finally, a court in reviewing a Rule 12(b)(6) motion must
only consider the facts alleged in the pleadings, the documents
attached thereto as exhibits, and matters of judicial notice.
S. Cross Overseas Agencies, Inc. v. Kwong Shipping Grp. Ltd.,
181 F.3d 410, 426 (3d Cir. 1999).

A court may consider,

however, “an undisputedly authentic document that a defendant
attaches as an exhibit to a motion to dismiss if the plaintiff’s
claims are based on the document.”

Pension Benefit Guar. Corp.

v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.
1993).

If any other matters outside the pleadings are

presented to the court, and the court does not exclude those
matters, a Rule 12(b)(6) motion will be treated as a summary
judgment motion pursuant to Rule 56.
C.

Fed. R. Civ. P. 12(b).

Analysis

As an overall response to Borgata’s claims, Ivey and Sun
maintain,
The sine qua non of plaintiff's theory is that Ivey
was possessed of superior knowledge at the time he
negotiated the special conditions encouraged and offered by
the plaintiff. Specifically that Ivey knew that the backs
of Borgata's purple playing cards sometimes contained
asymmetrical patterns that could be distinguished. It is
the idiosyncratic acumen of Ivey in that keen visual
detection that plaintiff claims constitutes illegal
conduct. Plaintiff's Complaint belies its own imaginative
pleading. It was Borgata, and only the Borgata, that
produced, possessed and maintained absolute control over
all of the implements of gambling, from the cards to the
shoe to the automatic shuffler at all times while defendant
11

Ivey remained on its property. In sum, Ivey's subjective
intent, the use of nothing more than his eyesight and his
reliance upon information that was equally available to
every single casino customer, in no way equates with the
actus and mens rea required to accomplish any of the
multiple criminal statutes upon which plaintiff relies.
After recruiting, enticing and providing defendant Ivey
with the precise gambling environment it agreed to, Borgata
seeks to take it all back because Ivey saw precisely what
anyone of its pit supervisors or employees apparently
should have seen over the course of more than 100 hours of
play. Borgata's Complaint is therefore nothing more than
an attempt to justify its own negligence, motivated by its
subjective intent to take as much money from Phil Ivey as
it could during his specially arranged and agreed visits.
(Def. Opp. Br., Docket No. 10 at 5-6.)
More specifically, Ivey and Sun have moved to dismiss
Borgata’s claims against them on three bases.

First, Ivey and

Sun argue that Borgata’s claims are predicated on violations of
the New Jersey Casino Control Act (“CCA”), N.J.S.A. 5:12-1, et
seq., and that no private cause of action exists under the CCA
for Borgata’s claims against them.

Second, Ivey and Sun argue

that if Borgata’s claim that they played an “illegal game” is
credited, Borgata was required to file their suit within six
months of its payment to Ivey and Sun of their winnings
resulting from the “illegal game,” and Borgata failed to do so.
Third, Ivey and Sun argue that Borgata’s RICO claims fail
because Ivey and Sun did not commit any predicate or fraudulent
acts.
In response, Borgata argues that the CCA only precludes
casino patrons’ claims against casinos, but not casinos’ claims
12

against patrons.

Borgata also argues that the defendants are

mischaracterizing the nature of the amended complaint by viewing
Borgata’s claims as an attempt to enforce the CCA and related
regulations.

Instead, Borgata argues that the alleged conduct

by Ivey and Sun may have violated the CCA, but those violations
also demonstrate fraudulent conduct which supports its common
law contract and fraud claims, and its case does not depend on
the application of the CCA.
With regard to the six-month limitations period raised by
the defendants, Borgata argues that it is not the illegality of
the game that it is alleging, but Ivey and Sun’s “illegality of
purpose” in playing an otherwise lawful game.

As for its RICO

claims, advanced under federal and state law, Borgata argues
that it has pleaded the requisite predicate acts, including Ivey
and Sun’s scheme to commit fraud, as well as their
communications with Borgata via telephone and email. 4

4

Borgata also requests that the Court afford res judicata effect
to the decision of the English court in the Crockfords matter.
There, Ivey filed suit against the Crockfords Club in London for
his £7.7 million in gambling winnings Crockfords refused to pay
Ivey. In a game almost identical to Baccarat, Ivey admittedly
used the same “edge-carding” technique as alleged in Borgata’s
case here. Crockfords argued that Ivey was not entitled to his
winnings on three bases: (1) the game, Punto Banco, was not
actually played by Ivey because he knew the first card dealt
when it was supposed to be random and unknown, (2) there was an
implied term that Ivey would not cheat and that term was broken,
and (3) Ivey violated the Gambling Act by cheating, and he
cannot base his claim against Crockfords on his own criminal
conduct. The judge rejected the first defense, finding that
13

1.
Borgata’s Claims for Breach of Contract (Count
I), Breach of Implied Contract (Count II), and Breach
of the Implied Covenant of Good Faith and Fair Dealing
(Count III)
To support its breach of contract and related claims,
Borgata makes these allegations:
161. On each of the dates in question, as a condition
of their wagering, Ivey and Sun explicitly agreed to abide
and be bound by the rules set forth by New Jersey’s
Division of Gaming Enforcement (“DGE”) pursuant to the
authority granted to it by the New Jersey legislature.

Punto Banco was indeed played. For the second and third
defense, the judge noted that there was no case law on what
amounts to cheating, and that the criminal laws provided little
guidance. The judge also noted that in the civil context there
was “no general agreement as to what one might term the industry
standard of cheating or not cheating,” and that it was
ultimately for the judge to decide whether certain conduct
amounted to cheating. The judge observed that Ivey was
“genuinely convinced that he is not a cheat and even [] that
opinion commands considerable support from others.” The judge
ultimately concluded, however, that Ivey’s conduct was
“cheating” for the purposes of civil law, because, among other
reasons, he manipulated the innocent dealer, gave himself an
advantage throughout the whole game, unlike a card-counter who
only gains advantage towards the end, and he knew the dealer and
the casino management were unaware of the consequences of his
instigation. The judge concluded by stating it was unnecessary
to resolve whether Ivey’s conduct was criminal in nature. (See
Ex. A, Docket No. 23, Ivey v. Genting Casinos UK Limited t/a
Crockfords Club, (2014 EWHC 3394 (QB).)
The Court cannot give the Crockfords case preclusive effect
because not only does it fail to meet the standards for res
judicata principles, see Watkins v. Resorts Int'l Hotel &
Casino, Inc., 591 A.2d 592, 599 (N.J. 1991); United States v.
Athlone Indus., Inc., 746 F.2d 977, 983 (3d Cir. 1984), the
judge in Crockfords was tasked to determine whether Ivey’s
conduct amounted to “cheating” under English common law, which
is a different standard than the one applicable here, where the
concept of cheating falls under the purview of the CCA and U.S.
common law and statutes.
14

162. Borgata, by virtue of New Jersey law, expected
that by meticulously following the rules and regulations
controlling the conduct of its Baccarat games as
intensively prescribed by the Act and DGE rules and
regulations, that its game was fair under controlling law
that mandates “fair odds” to patrons.
163. Because of Ivey and Sun’s misconduct, unfair
play and the use of their influence as “high rollers” to
deceive Borgata, Ivey and Sun succeeded in manipulating
the Baccarat game to deprive the game of its essential
element of chance.
164. Because of Ivey and Sun’s misconduct, unfair
play and deception, the Baccarat games at issue did not
present the legally required “fair odds” or those assumed
attendant circumstances dictated by New Jersey law and
regulations that would assure the fairness, integrity and
vitality of the casino operation in process pursuant to
N.J.S.A. 5:12-100(e).
(Amend. Compl. ¶¶ 161-164.)
Borgata also claims that Ivey and Sun’s actions violated
N.J.S.A. 5:12-115(b) (“It shall be unlawful knowingly to use or
possess any marked cards.”); N.J.S.A. 5:12-115(a)(2) (to “carry
on” with or “expose for play” cards that are marked “in any
manner” is expressly prohibited); N.J.S.A. 5:12-113.1 (making it
a crime to “use or assist another in the use of, a computerized,
electronic, electrical or mechanical device which is designed,
constructed, or programmed specifically for use in obtaining an
advantage at playing any game in a licensed casino or
simulcasting facility”); N.J.S.A. 5:12-114 (a crime “[k]nowingly
to use or possess any cheating device with intent to cheat or
defraud”); and N.J.S.A. 5:12-115(a) (providing that “a person is

15

guilty of swindling and cheating if the person purposely or
knowingly by any trick . . . or by a fraud or fraudulent scheme
. . . wins or attempts to win money or property . . . in
connection to casino gambling”).

(Amend. Compl. ¶¶ 165-171.)

Ultimately, Borgata claims that it “fully performed all
covenants, conditions, and obligations required to be performed
by reason of the contract, except to the extent waived, excused
or made impossible by Ivey and Sun’s breach of the contract,”
and that as “a direct and proximate result of Ivey and Sun’s
breaches, Borgata was injured” in the amount of $9,626,000, plus
attorneys’ fees and costs.
It appears to the Court that Borgata’s breach of contract
claim is that by Ivey and Sun playing Baccarat at Borgata,
Borgata agreed to fulfill its obligations to provide a gaming
experience in compliance with the CCA, and Ivey and Sun agreed
to play the game in compliance with the CCA.

Because Borgata

complied with the CCA, while Ivey and Sun did not, Ivey and Sun
breached their agreement with Borgata.
The parties do not dispute that gambling is illegal, except
in very specific, highly regulated circumstances as detailed by
the CCA.

See Miller v. Zoby, 595 A.2d 1104, 1109 (N.J. Super.

App. Div. 1991) (citing N.J.S.A. 2A:40–1 (“All wagers, bets or
stakes made to depend upon any race or game, or upon any gaming
by lot or chance, or upon any lot, chance, casualty or unknown
16

or contingent event, shall be unlawful.”); N.J.S.A 5:12–124
(“The provisions of N.J.S. 2A:40–1 shall not apply to any person
who, as a licensee operating pursuant to the provisions of this
act, or as a player in any game authorized pursuant to the
provisions of this act, engages in gaming as authorized
herein.”)); Lomonaco v. Sands Hotel Casino and Country Club, 614
A.2d 634, 635 (N.J. Super. Law Div. 1992)(quoting Knight v.
Margate, 431 A.2d 833 (N.J. 1981)) (“[T]he Casino Control Act
was enacted by the legislature in 1977 ( L.1977, c. 110,
N.J.S.A. 5:12–1 to 152) to authorize casino gaming and establish
the regulatory framework for the casino industry.

The Statutory

and administrative controls over casino operations established
by the Act are extraordinarily pervasive and intensive. . . .
Over 11 statutory articles and almost 200 separate provisions
cover virtually every facet of casino gambling and its potential
impact upon the public.

The regulatory scheme is both

comprehensive and minutely elaborate.”).

Thus, the only way

gambling at a casino is lawful is if the patrons and the casino
follow the strictures of the CCA.

It follows then that

contractual agreements, whether express or implied, governing
casino gambling in New Jersey include a provision that both
parties agree to abide by the CCA.
Assuming the validity of the casino/patron contract to
follow the CCA, the question becomes what law governs the breach
17

of that agreement.

Borgata argues that a patron cannot file a

civil suit against a casino if the casino violates the CCA, but
that the casino can file suit against a patron if the patron
violates the CCA.

Conversely, Ivey and Sun argue that the

claims asserted by Borgata against them are preempted by the
CCA, and that there is no support in the law that a casino can
sue a patron, but a patron cannot sue a casino for CCA
violations.

Borgata ultimately side-steps this conflicting

point of view, however, and argues that it is not seeking relief
for Ivey and Sun’s CCA violations, but rather for their breach
of the promise not to commit CCA violations. 5

5

While, as we note infra, the CCA does not create a private
right of action, it is also clear that the CCA does not preempt
all common law claims, because certain private causes of action
may still be advanced by patrons or casinos, depending on the
nature of those claims. Lomonaco v. Sands Hotel Casino and
Country Club, 614 A.2d 634, 638 (N.J. Super. Law Div. 1992)
(allowing an action by a patron against a casino to declare the
credit contract he entered into with the casino for $285,000.00
in casino markers void based on the common law contractual
defenses of duress and unconscionability, and finding that
N.J.S.A. 5:12–101 does not abrogate the common law defenses to
contract actions); Smerling v. Harrah's Entertainment, Inc., 912
A.2d 168, 173 (N.J. Super. App. Div. 2006) (citing Campione v.
Adamar of N.J., 714 A.2d 299 (N.J. 1998)) (explaining that
highly technical areas of the rules of either casino games,
casino gaming equipment, or gaming-related advertising, which
are the subject of comprehensive regulation by the CCC, N.J.S.A.
5:12–69, –70(f), –70( o), fall within the special expertise of
the agency, but “[e]ven in the context of New Jersey's highly
regulated casino industry, the Court has held that the
Legislature did not intend to prevent patrons from seeking
vindication of common-law claims in the courts”). Although the
cases cited are patron as plaintiffs cases we see no reason why
casinos should lose all their common rights simply because they
18

The question then becomes how did Ivey and Sun break their
promise?

Accepting as true Borgata’s claims, Ivey made five

requests of Borgata - (1) a private pit, (2) a Mandarin Chinesespeaking dealer, (3) Ms. Sun to sit with him at the table, (4)
one 8-deck shoe of purple Gemaco Borgata playing cards, and (5)
an automatic card shuffling device - and Sun asked the dealer to
turn certain cards revealing their face value, under the premise
that they were superstitious.

Ivey and Sun’s claims to be

superstitious, however, were false, and the true purpose of the
five requests and the turning of cards was to facilitate “edge
sorting,” which altered the normal odds of the game.

Borgata

claims that Ivey and Sun’s misrepresentation of their purpose is
the breach of their promise to play by the established rules and
odds of the game.
An establishment engaging patrons in gambling activities,
such as Baccarat, is illegal under the common law.

An

establishment and a patron cannot enter into an agreement to
promise to abide by the rules and odds of an unlawful gambling
activity, and one party cannot file suit against the other for
breaching that agreement if one party does not abide by the

engage in a regulated industry. For example, as we also discuss
more fully infra, we do not believe the New Jersey legislature
intended that casinos could be victimized by fraud and
thereafter bar them, indirectly, from seeking redress in the
courts, even if the fraud arose in the context of a regulated
game the rules of which are designed by state regulation.
19

rules of the game or alters the odds. 6

The CCA makes this

unlawful gambling activity lawful, but the CCA does not create a
common law cause of action that does not otherwise exist.

See

Campione v. Adamar of New Jersey, Inc., 714 A.2d 299, 309 (N.J.
1998) (citation omitted) (“Given the elaborate regulatory scheme
[of the casino industry], we likewise decline to imply a cause
of action when no such cause of action exists at common law.”).
Borgata contends that its claims against Ivey and Sun do
not depend on the determination of whether their actions
violated provisions of the CCA.

If, however, it cannot be found

that Ivey and Sun’s actions violated the CCA, how can it be
found that they violated their promise not to violate the CCA?
For example, Borgata claims that Ivey and Sun promised to abide
by the CCA, and, as specified in its breach of contract claim,
not to violate N.J.S.A. 5:12-115(a), which finds that “a person
is guilty of swindling and cheating if the person purposely or
knowingly by any trick . . . or by a fraud or fraudulent scheme

6

If a party engages in illegal gambling and loses money, the
losing party may file a civil action within six months to
recover for that loss. See N.J.S.A. 2A:40–1 (“All wagers, bets
or stakes made to depend upon any race or game, or upon any
gaming by lot or chance, or upon any lot, chance, casualty or
unknown or contingent event, shall be unlawful.”); N.J.S.A.
2A:40-5 (explaining that if a person loses money pursuant to a
violation of N.J.S.A. 2A:40-1, that person may bring a civil
action to recover those losses, but he must do so within six
months). There is no statutory or common law cause of action
for a breach of an agreement to abide by the rules of an illegal
gambling activity.
20

. . . wins or attempts to win money or property . . . in
connection to casino gambling.”

Thus, Borgata is asking the

Court to determine as a matter of law whether Ivey and Sun
breached their promise to follow the CCA because their actions
constituted “swindling and cheating” as defined by the CCA.
The New Jersey Supreme Court has instructed that a court
should not make that determination, because to do so would
affect the stability of the casino industry.

In Campione, the

New Jersey Supreme Court observed that the New Jersey
Legislature “intended to invest the CCC with primary
jurisdiction to regulate the casino industry,” and that the
“elaborate legislative and administrative system for regulating
casinos suggests [] that the [Casino Control Commission] should
exercise primary jurisdiction over issues concerning the
interpretation and application of the Act and the regulations.”
Campione, 714 A.2d at 308.

The court directed that “to the

extent that the resolution of a plaintiff's claim depends on an
interpretation of the Act or administrative regulations, the CCC
should have the first opportunity to provide that
interpretation.”

Id.

This is because “[r]etaining primary

jurisdiction in the courts could dislocate the intricate
regulatory structure governing a sensitive industry,” and
“[p]ermitting courts and juries across the State to interpret
statutory and administrative regulations could introduce
21

confusion where uniformity is needed.”

Id.

In order to achieve

the necessary stability in the interpretations of the CCA, the
New Jersey Supreme Court instructed that a court may retain
jurisdiction over the dispute, but it should defer action until
receipt of the CCC’s or DGE’s views. 7 Id.
Even though Borgata pleads a claim for breach of contract,
rather than a private cause of action for violations of the CCA,
Borgata’s claim is actually just that – a claim that Ivey and
Sun committed various violations of the CCA and they are
therefore not entitled to their gambling winnings.
Consequently, although the CCA does not explicitly preempt
Borgata’s breach of contract claims against Ivey and Sun, it
appears to the Court that the CCC or the DGE should consider in
the first instance whether Ivey and Sun’s actions violated any
provisions of the CCA. 8

7

According to the Division of Gaming Enforcement website, the
Regulatory Enforcement and Regulatory Prosecutions Bureaus are
responsible for enforcing the laws of the Casino Control Act (the
Act) and the CCC Rules and Regulations (Regulations) including
the rules of the games, gaming equipment, patron complaints, and
other matters related to the daily operation of the casino. The
Bureaus investigate and prosecute violations of the Act and
Regulations. See http://www.nj.gov/oag/ge/mission&duties.htm.
8

A recent New Jersey Superior Court decision recognizes the
importance of the CCC or DGE interpreting the CCA, while it also
recognizes that when the CCC or DGE declines to interpret the
CCA, a court must make that determination. Golden Nugget v.
Gemaco, Inc., ATL-L-5000-12 (N.J. Super. Ct. Law Div. Feb. 9,
2015) (finding that because after two and half years, the DGE
investigation resulted in no enforcement and the CCC declined to
22

Borgata, however, has filed a motion for leave to file a
sur reply to address defendants’ statement in their reply brief
regarding whether Borgata brought its concerns about Ivey and
Sun to the DGE, and Borgata indicates that it reported
defendants’ alleged conduct to the DGE, but Borgata does not
provide any other information on what transpired, if anything,
before the DGE.

Thus, the Court will deny Borgata’s motion as a

procedural matter, but the Court will order Borgata to show
cause as to why the Court should not administratively terminate
Borgata’s breach of contract and related claims against Ivey and
Sun, and refer the matter to the appropriate administrative body
as directed New Jersey Supreme Court in order to “assure the
resolution of the controversy consistent with the views of the
entity best positioned to consider the matter.”

Campione, 714

A.2d at 308.

take any action, the court would determine whether a baccarat
game played with unshuffled cards was an “illegal” game under
the CCA). Relatedly, the Court does not find persuasive an
unpublished Third Circuit decision that summarily dismissed a
plaintiff’s claim against a casino because his claims required
an interpretation of the CCA. See Mankodi v. Trump Marina
Associates, LLC, 525 F. App’x 161 (3d Cir. 2013) (citing
Campione, 714 A.2d at 309) (finding that “Count 5 fails because
it attempts to assert a claim based on a violation of the CCA,
which does not provide a private right of action,” and
“[a]lthough Mankodi attempts to frame this claim as a common law
breach of contract and conversion, his complaint evidences that
he is really alleging a violation of the CCA.”).
23

2.
Borgata’s fraud and RICO conspiracy claims (Counts IV,
VI, X, XI, XII)
In addition to its breach of contract claims, Borgata has
alleged fraud, RICO and conspiracy based claims against Ivey and
Sun based upon its contention that they misrepresented that they
intended to abide by the rules of honest play established and
required by the CCA, 9 and they intentionally misrepresented their
true reasons, motivation and purpose for the playing
accommodations they sought.

Borgata claims that Ivey and Sun’s

misrepresentations of their true motivations constitute fraud
and conspiracy to commit fraud in violation of the common law
and the federal and New Jersey Racketeer Influence and
Corruption Organizations Acts (“RICO”).
To state a claim of fraud under the common law, a plaintiff
must allege facts that, if proven, would establish the
following: “‘(1) a material misrepresentation of a presently
existing or past fact; (2) knowledge or belief by the defendant
of its falsity; (3) an intention that the other person rely on
it; (4) reasonable reliance thereon by the other person; and (5)
resulting damages.’”

Hoffman v. Hampshire Labs, Inc., 963 A.2d

849, 855 (N.J. Super. App. Div. 2009) (quoting Gennari v.

9

Consistent with our discussion above regarding the breach of
contract and related claims, plaintiff will not be allowed to
base its fraud claims on assertions of violations of the CCA
until such time as the issue of how those regulations should be
construed is resolved.
24

Weichert Co. Realtors, 691 A.2d 350 (N.J. 1997))(other citation
omitted).
A civil conspiracy is a combination of two or more persons
acting in concert to commit an unlawful act, or to commit a
lawful act by unlawful means, a principal element of which is to
inflict a wrong against or injury upon another, together with an
act that results in damage.

Morgan v. Union Cty. Bd. of Chosen

Freeholders, 633 A.2d 985, 998 (N.J. Super. Ct. App. Div. 1993),
cert. denied, 135 N.J. 468 (1994).

Even though the unlawful

agreement need not be expressed, and the participants need not
know all the details of the plan designed to achieve the
objective or possess the same motives, they must share the
general conspiratorial objective.

Id.

The federal RICO statute, codified at 18 U.S.C. § 1961-68,
provides, in relevant part, that:
It shall be unlawful for any person employed by or
associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign
commerce, to conduct or participate, directly or
indirectly, in the conduct of such enterprise's affairs
through a pattern of racketeering activity or collection
of unlawful debt.
18 U.S.C. § 1962(c).

In order to adequately plead a violation

of the federal RICO statute, a plaintiff must allege: (1)
conduct (2) of an enterprise (3) through a pattern (4) of
racketeering activity.

Lum v. Bank of Am., 361 F.3d 217, 223

(3d Cir. 2004) (citing Sedima, S.P.R.L. v. Imrex Co., Inc., 473
25

U.S. 479, 496 (1985)).
Similarly, New Jersey’s state RICO statute, codified at
N.J.S.A. 2C:41-2a et seq., provides that:
It shall be unlawful for any person through a pattern of
racketeering activity or through collection of an
unlawful debt to acquire or maintain, directly or
indirectly, any interest in or control of any enterprise
which is engaged in or activities of which affect trade
or commerce.
N.J.S.A. 2C:41-2.

To sufficiently allege a violation of the New

Jersey RICO statute, a plaintiff must prove: (1) the existence
of an enterprise; (2) that the enterprise engaged in activities
that affected trade or commerce; (3) that the defendant was
employed by, or associated with the enterprise; (4) that the
defendant participated in the conduct of the affairs of the
enterprise; (5) that the defendant participated through a
pattern of racketeering activity; and (6) that the plaintiff was
injured as a result of the conspiracy.

Ford Motor Co. v.

Edgewood Props., Inc., 2009 WL 150951, at *10 (D.N.J. Jan. 20,
2009) (citing N.J.S.A. 2C:41-2c) (other citations omitted).

It

has previously been recognized that, in certain aspects, the New
Jersey RICO statute is broader in scope than the federal
statute, and that New Jersey courts take a “liberal stance in
permitting plaintiffs to plead NJRICO violations, rejecting the
narrow construction of the federal statute that many circuits,
including this one, have adopted.”

26

Edgewood Props., 2009 WL

150951 at * 10 (citing State v. Ball, 661 A.2d 251 (N.J. 1995)).
A valid RICO claim must be based on one of the predicate
criminal offenses listed in 18 U.S.C. § 1962, or a conspiracy to
commit such an offense.

18 U.S.C. §§ 1962, 1964(c).

For a NJ

RICO claim, the primary criterion of New Jersey's “pattern of
racketeering activity” is “relatedness”; that element calls for
the application of a broad standard involving the totality of
all relevant circumstances, which may include “continuity.”
State v. Ball, 661 A.2d 251, 265 (N.J. 1995).
A defendant in a racketeering conspiracy need not itself
commit or agree to commit predicate acts.
F.3d 532, 537 (3d Cir. 2001).

Smith v. Berg, 247

Rather, “all that is necessary

for such a conspiracy is that the conspirators share a common
purpose.”

Id.

Thus, if defendants agree to a plan wherein some

conspirators will commit crimes and others will provide support,
“the supporters are as guilty as the perpetrators.”
United States, 522 U.S. 52, 64 (1997).

Salinas v.

Each defendant must

“agree to commission of two or more racketeering acts,” United
States v. Phillips, 874 F.2d 123, 127 n.4 (3d Cir. 1989), and
each defendant must “adopt the goal of furthering or
facilitating the criminal endeavor,” Smith, 247 F.3d at 537.
Claims sounding in fraud or misrepresentation “must state
with particularity the circumstances constituting fraud.”
R. Civ. P. 9(b).

The level of particularity required is
27

Fed.

sufficient details to put defendants on notice of the “precise
misconduct with which they are charged.”

In re Riddell

Concussion Reduction Litigation, --- F. Supp. 3d ---, 2015 WL
224429, *8 (D.N.J. Jan. 15, 2015) (citing Seville Indus.
Machinery Corp. v. Southmost Machinery Corp., 742 F.2d 786, 791
(3d Cir. 1984)) (other citation omitted).

“‘This requires a

plaintiff to plead the date, time, and place of the alleged
fraud, or otherwise inject precision into the allegations by
some alternative means.’”

Id. (quoting Grant v. Turner, 505 F.

App'x 107, 111 (3d Cir. 2012), cert. denied, ––– U.S. ––––, 133
S. Ct. 2770, 186 L.Ed.2d 219 (2013)).
According to Borgata’s complaint, Borgata, as it sometimes
did for its patrons, indulged Ivey and Sun’s apparently
innocuous requests based on their contention that they were
superstitious.

Borgata claims that it relied on their

representations, but that on four different occasions, Ivey and
Sun knowingly and in concert misrepresented their true
motivations in order to perpetrate a scheme to defraud Borgata
of millions of dollars, which funds were wired to a bank account
in Mexico.

Borgata claims that these acts constitute common law

fraud and conspiracy to commit fraud, and meet the elements of
establishing a pattern of racketeering activity.
Unlike Borgata’s breach of contract claims against Ivey and
Sun, Borgata’s fraud and RICO conspiracy claims, as we construe
28

them, do not rely upon on the interpretation of the CCA.
Regardless of whether Ivey and Sun’s actions are found to have
violated the CCA, Borgata’s fraud and RICO claims hinge on Ivey
and Sun’s misrepresentation of purpose, especially with regard
to their requests for particular Gemaco cards and an automatic
card shuffler, and their instructions to the dealer to turn
cards.

In order for their alleged edge sorting scheme to work,

Ivey and Sun needed playing cards with unsymmetrical edges, the
ability to turn certain cards, and the use of automatic card
shuffler to maintain the sorted order of the cards.

To

effectuate their alleged scheme, they took advantage of a
casino’s indulgence in players’ proclamations of superstition,
and represented that their requests were made because they were
superstitious.

Borgata’s reliance upon the defendants’ alleged

misrepresentations duped Borgata into providing Ivey and Sun
with the tools to commit their edge carding scheme, which
resulted in multiple wire transfers of allegedly ill-gotten
funds to bank accounts in Mexico.
Considering these allegations under the Rule 8, Rule 9(b)
and Iqbal/Twombly pleading standards and the required elements
of fraud, conspiracy and RICO claims, it is clear that Borgata
has pleaded its fraud, conspiracy and RICO claims sufficiently
to survive defendants’ motion to dismiss.
claims against the defendants may proceed.
29

Accordingly, these

3.

Borgata’s other claims (Counts V, VII, VIII, IX)

Based on the same allegations as its breach of contract,
fraud, and RICO claims, Borgata has alleged several other claims
against Ivey and Sun for rescission for unilateral mistake and
illegality of purpose, unjust enrichment, and conversion.

These

claims are in the alternative to its breach of contract, fraud
and RICO claims.

See Sussex Drug Products v. Kanasco, Ltd., 920

F.2d 1150, 1154 (3d Cir. 1990) (“Alternative theories of
recovery based on the same factual situation are but a single
claim, not multiple ones.”); Hilton Hotels Corp. v. Piper Co.,
519 A.2d 368, 372 (N.J. Super. Ch. 1986) (explaining that
rescission is an equitable remedy and only available in limited
circumstances, and that contracts may only be rescinded where
there is either original invalidity, fraud, failure of
consideration or a material breach or default); Goldsmith v.
Camden Cnty. Surrogate's Office, 975 A.2d 459 (N.J. Super. App.
Div. 2009) (internal quotation marks and citations omitted)
(“Unjust enrichment is not an independent theory of liability,
but is the basis for a claim of quasi-contractual liability.

We

have recognized, however, that a claim for unjust enrichment may
arise outside the usual quasi-contractual setting.”); Chicago
Title Ins. Co. v. Ellis, 978 A.2d 281, 288 (N.J. Super. App.
Div. 2009) (“The crux of conversion is wrongful exercise of
dominion or control over property of another without
30

authorization and to the exclusion of the owner's rights in that
property.”).
Because Borgata’s fraud and RICO claims may stand, Borgata
may also proceed with these alternative theories of recovery.
See Illinois Nat. Ins. Co. v. Wyndham Worldwide Operations,
Inc., --- F. Supp. 3d. ---, 2015 WL 381038, *9 (D.N.J. 2015)
(citing Fed. R. Civ. P. 8(d)(2)) (“[A] party may plead in the
alternative and prevail on one of its two theories.”).
CONCLUSION
Borgata alleges that Ivey and Sun won $9 million at
Baccarat by manipulating the standard odds of the game through
cheating techniques disguised as innocuous requests.

Ivey and

Sun argue that Borgata willingly agreed to all of their requests
and provided all the implements of gambling, and that all of
those requests, along with their observation of the patterns on
the playing cards, were lawful.

Ivey and Sun also note that

even though Borgata wishes to cast itself as a victim of
deceptive intentions, the “essential mission of Borgata’s casino
operation is to encourage patrons to lose money by orchestrating
a plethora of deceptive practices, such as loud noises and
flashing lights on slot machines, hiding the clocks, making exit
signs almost impossible to find, having cocktail waitresses wear
revealing clothing, and comping copious amounts of alcohol to
‘loosen up’ their patrons.”

(Docket No. 12 at 13.)
31

There is no doubt that much of the defendants’
characterization of the casino milieu is accurate, as tangential
a defense as it may be.

And there is also the begged and

largely ignored question inherent in Plaintiff’s allegations of
why the casino – especially its own card dealer – took so long
to figure out the defendants’ alleged scheme.

But at this stage

of the proceedings Borgata has pled plausible claims sounding in
fraud.

The Court will therefore allow the case, in addition to

Borgata’s claims against Gemaco, to proceed through discovery,
and it will be for the CCC, DGE, and perhaps this Court or a
jury to consider the validity of Borgata’s claims and the
propriety of Ivey and Sun’s actions.
An appropriate Order will be entered.

Date: March 12, 2015
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

32