Source: https://www.kirschenbaumesq.com/article/all-star-inc-et-al-v-georgia-atlanta-amusements-llc-a14a2138-court-of-appeals-of-georgia-third-division-2015-ga-app-lexis-206-march
Timestamp: 2019-04-20 04:13:52+00:00

Document:
ALL STAR, INC., et al. v. GEORGIA ATLANTA AMUSEMENTS, LLC.
[*2] explained more fully below, we agree. We therefore reverse the trial court's order granting partial summary judgment against the appellants.
that the contract would automatically renew for additional terms of seven years unless one party notified the other, at least 90 days in advance of the renewal date, that it was electing not to renew. There is no evidence in the record that either party exercised its right of non-renewal; thus, the contract renewed on November 1, 2007, for an additional seven-year term.
On March 28, 2011, All Star entered a written rental agreement with USA Food Mart, a gas station and convenience store located in Carrollton. Under [*4] the terms of this agreement, USA Food Mart agreed to pay All Star 70 percent of the total gross revenue generated by the machines, with USA Food Mart retaining the remaining 30 percent. The contract was for a term of three years.
As of April 2013, All Star had an oral agreement with Tienda Veracruz, a Carrollton grocery, and the agreement had been in place for approximately one year. There is no evidence in the record as to how the parties had agreed to split the revenue from the machine or machines placed at this location.
in place for three months. There is no evidence in the record as to how the parties had agreed to split [*5] the revenue from the machine or machines placed at these locations.
percent of the revenue. Each contract was for a term of 36 months.
revenue. The contract was for a term of ten years and therefore was in effect until August 14, 2018.
amusement machines in a Shell station in Stone Mountain. These agreements had identical revenue terms, and each provided that Ultra would receive 30 percent of the "net revenue" generated by the machines and that the location would retain the remaining 70 percent. The term of the rental agreement for the East Point Texaco was two years, while [*7] the contracts for both the Conyers Chevron and the Stone Mountain Shell had ten-year terms.
As of April 2013, Ultra had in place oral agreements for the placement of its machines at five different locations: Our Convenience Store in Atlanta; Stop'n'Save in Atlanta; the Shell gas station in Norcross; the Texaco gas station in Decatur; and Atlanta Food Mart in East Point. Ultra's agreement with Our Convenience Store had been in place nine years; its agreement with Stop'n'Save had been in place eight years and five months; its agreement with the Norcross Shell had been in place seven years and three months; and its agreement with the Decatur Texaco had been in place for six years and 11 months; and its agreement with the Atlanta Food Mart had been in place for six years. There is no evidence in the record as to how the parties had agreed to split the revenue from the machine or machines placed at these locations.
a Class B accounting terminal to which all Class B machines could be linked by a communications network. OCGA § 50-27-101 (a). Additionally, the law requires all location owners hosting Class B machines to establish a bank account where all proceeds from these machines must be deposited, separate from any other funds belonging to the location owner. OCGA § 50-27-102 (c). Beginning six months after the Lottery Corporation acquired the Class B accounting terminal and after "successful testing" thereof, location owners are required to transmit all funds deposited in their respective Class B bank accounts to the Lottery Corporation. Id. For the first fiscal year following the "successful implementation and certification of the Class B accounting terminal" the Lottery corporation is to retain 5 percent [*9] of the net receipts received from the location owners of Class B machines and is required to provide 47.5 percent of those net receipts to the location owner and 47.5 percent to the machine owner. OCGA § 50-27-102 (a). In each fiscal year following the first year, the Lottery Corporation's share of the net receipts "shall increase 1 percent, taken evenly from the location owner . . . and the [machine owner], to a maximum of 10 percent." OCGA § 50-27-102 (b). Thus, by approximately January 1, 2020, ten percent of the net proceeds from all Class B machines will go to the Lottery Corporation, with the location owner and the machine owner each receiving 45 percent of the remaining proceeds.
The statute also declared that from the time of HB 487's enactment until the implementation of the Class B accounting terminal, it would constitute an unfair business practice for either the machine owner or the location owner "to retain more than 50 percent of the proceeds generated by any Class B machine. . . ." OCGA § 50-27-87.1 (1). The law also makes it an unfair business practice for a location owner to "ask[ ], demand[ ], or accept[ ]," or for a machine owner to provide, "anything of value, including but not limited to a loan or financing arrangement, gift, [*10] procurement fee, lease payments, revenue sharing, or payment of license fees or permit fees from a [machine owner], as an incentive, inducement, or any other consideration to locate bona fide coin operated amusement machines in that establishment." OCGA § 50-27-87.1 (3), (4). Engaging in any of these unfair business practice subjects a location owner or a machine owner to the revocation "of his or her state business license. . . for a period of one to five years per incident" and to a fine of "up to $50,000.00 per incident." OCGA § 50-27-87.1 (3), (4).
per location." OCGA § 50-27-87 (b) (3).
written agreements to execute a new agreement (or an amendment to the existing agreement), which would reflect the statutorily-mandated revenue split. Additionally, All Star, Elite, and Ultra each approached the location owners with whom they had oral agreements and asked those owners to enter a written lease agreement which provided for a 50/50 revenue split. Each of these location owners refused to execute a new or amended agreement, allegedly because they had been offered more lucrative terms by GAA. All Star, Elite, Midtown, and Ultra each refused to match these terms because they believed them to be illegal. Despite the existence of the agreements then in place, the clients of these appellants removed appellants' machines from their respective businesses and replaced those machines with ones owned by GAA.
All Star, Elite, Ideal, Midtown, and Ultra filed the current lawsuit against GAA. Based on the foregoing facts, the appellants asserted claims for tortious interference with contractual relations [*12] and tortious interference with business relations. Additionally, Midtown Vending asserted a claim for destruction of personal property, based on the damage done to one or more of its machines. The appellants sought to recover actual and punitive damages as well as attorney fees and expenses.
a matter of law. The appellants now appeal [*13] from this order.
court for consideration of whether the law, as applied to pre-existing contracts with a revenue split of other than 50/50, violates the contracts clauses of the Constitutions of both Georgia and the United States. Alternatively, if HB 487 did not void the contracts, then the summary judgment order must be reversed.
We start our analysis [*14] with the well-established legal principle that the State may exercise its police powers "to protect the lives, health, morals, comfort, and general welfare of the public." Moore v. Ga. Pub. Svc. Comm., 242 Ga. 182, 183 (1) (249 SE2d 549) (1978) (punctuation omitted). And it is "accepted as a commonplace that the Contract Clause does not operate to obliterate the police power of the States." Allied Structural Steel Co. v. Spannaus, 438 U. S. 234, 241 (II) (A) (98 SCt 2716, 57 LE2d 727) (1978). Thus the State may, in the exercise of its police powers, enact regulations that place reasonable restraints on individuals' freedom to contract. See Energy Reserves Group, 459 U. S. at 410 (II) (A) ("[a]lthough the language of the Contract Clause is facially absolute, its prohibition must be accommodated to the inherent police power of the State to safeguard the vital interests of its people") (citation and punctuation omitted); Moore, 242 Ga. at 183 (1) (the State may exercise its police powers even "though contracts previously entered into between individuals may thereby be affected") (punctuation omitted).
required adjustment is a reasonable means of furthering the public purpose at issue. Id. (citation and punctuation omitted). Moreover, parties who contract with respect to a regulated industry or enterprise enter those contracts subject to further, reasonable regulation; when the subject of the contract is regulated, this fact controls, to some extent, the parties' reasonable expectations under the contract. See Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U. S. 470, 503-504 (IV) (107 SCt 1232, 94 LE2d 472) (1987); Energy Reserves Group, 459 U. S. at 408-409 (I) (D); Union Dry Goods Co. v. Ga. Pub. Svc. Corp., 142 Ga. 841 (83 SE 946) (1914), aff'd, Union Dry Goods Co. v. Ga. Pub. Svc. Corp., 248 U. S. 372 (39 SCt 117, 63 LE 309) (1919). In essence, such parties are presumed to contract with the knowledge that, regardless of the terms they agree to, subsequent reasonable regulation might require them to amend one or more of those terms. Id.
schedules of rates to be charged by the Georgia Public Service Corporation for the classes of service indicated." Id. The maximum rates allowed under these schedules were in excess of the rates specified in the contract between the parties. Id.
[s]tate restriction, cannot remove them from the power of the [s]tate by making [*18] a contract about them. The contract will carry with it the infirmity of the subject-matter.'" Id. at 844, citing Hudson County Water Co. v. McCarter, 209 U. S. 349, 357 (28 SCt 529, 52 LE 828) (1905). In affirming the Georgia Supreme Court, the United States Supreme Court relied on this same rationale. See Union Dry Goods Co., 248 U. S. at 375-376.
Almost 70 years later, the United States Supreme Court applied similar reasoning in Energy Reserves Group, 459 U. S. 400. That case involved two contracts for the intrastate purchase of gas from a specific gas field. Each contract contained two "price escalator" clauses, one of which provided that if any governmental authority fixed a price for any natural gas that was higher than the price specified in the contract, the contract price would be increased to that level. 459 U. S. at 403. After the contracts were executed, the federal government enacted a law that changed the way it regulated the price of natural gas, replacing the federal price controls that had been established under the 1938 Natural Gas Act "with price ceilings that rise monthly based on 'an inflation adjustment factor' and other considerations." Id. at 405-406 (I) (B). In response, the Kansas state legislature passed a law that controlled intrastate natural gas prices and the contracts at issue became subject to the Kansas law. Id. at 407-408 (I) (C).
When the supplier sought to terminate [*19] the contracts based on the buyer's refusal to pay the higher gas rate allowed under federal law, the buyer responded that the Kansas act served to amend the parties price escalator clause, as it limited the supplier to the highest price allowed under Kansas law and prohibited the supplier from charging the higher rate allowed under federal law. Id. at 408 (I) (D). The trial court entered summary judgment in favor of the buyer, finding that the Kansas Act did not void the contracts, even though it amended the price that the supplier could charge. Id. at 409 (I) (D) The Kansas Supreme Court affirmed the trial court, and the supplier then appealed to the United States Supreme Court.
was foreseeable as the type of law that would alter contract obligations.").
achieving this purpose, as they "will aid in the enforcement of the tax obligations that arise from the operation of bona fide coin operated [*22] amusement machine businesses as well as prevent unauthorized cash payouts." OCGA § 50-27-70. See Keystone Bituminous Coal Assn., 480 U. S. at 505 ("we have repeatedly held that unless the State is itself a contracting party, courts should properly defer to legislative judgment as to the necessity and reasonableness of a particular measure" that impacts contract rights) (citations and punctuation omitted).
HB 487 went into effect), and the date on which the Lottery Corporation's Class B accounting terminal became active, the parties to the contract were required to split the revenue realized form any Class B machine on an equal basis. After that time, the parties were to split the revenue as provided in OCGA § 50-27-102 for the duration of the contract term.
Because HB 487 did not void the written contracts at issue in this case, the order of the trial court granting summary judgment in favor of GAA and against appellants on the appellants' [*24] claims for tortious interference with contractual relations is reversed. The case is remanded for further proceedings consistent with this opinion.
Judgment reversed. Barnes, P. J., and Boggs, J., concur.
Class B machines "may accumulate winnings for the[ir] successful play . . . through tokens, vouchers, points, or tickets [and] . . . redeem accumulated tokens, vouchers, or tickets for noncash merchandise, prizes, toys, gift certificates, or novelties so long as the amount of tokens, vouchers, or tickets received does not exceed $5.00 for a single play." OCGA § 16-12-35 (d) (2).
 Appellant Ideal Amusements had two contracts for the placement of Class B Machines. Each of these contracts, however, was executed on or after April 10, 2013, and neither allegedly violated the statute at issue. Accordingly, these contracts were not subject to the trial court's summary judgment order and are not at issue on this appeal.
 Each of All Star's written contracts provides that gross revenue will be calculated after deductions for any amounts expended by the location owner on certain items, including sales tax, [*26] other fees required by law to be paid to the State, and refunds.
 Each of Midtown Vending's written contracts provides that gross revenue will be calculated after deductions for any amounts expended by the location owner on certain items, including sales tax, other fees required by law to be paid to the State, and refunds.
 The contract provides that gross revenue will be calculated after deductions for any amounts expended by the location owner on certain items, including sales tax, other fees required by law to be paid to the State, and refunds.
 Each of these agreements defined net revenue as the "gross revenue" generated by the machines "minus the dollar amount of the noncash redemptions awarded."
 Representatives of All Star, Elite, and Midtown each averred that their respective clients informed them that GAA was offering the client 70 percent of the machine revenue and additional incentives to sign lease agreements with GAA. A representative of Ultra averred that Ultra's clients had informed him that GAA was offering each of the clients more than 50 percent of the machine revenue if the clients would lease their machines from GAA.
breach of public duty was dismissed without prejudice via a consent order. In that same consent order, Virani was dismissed a a defendant.
 GAA also sought summary judgment as to the oral agreements on an additional ground. Specifically, GAA argued that because HB 487 required all rental agreements for Class B machines to be in writing, the oral agreements became void on the day HB 487 went into effect.
 GAA argues that appellants have waived any claim that HB 487 is unconstitutional because they failed to raise that claim in the court below in response to GAA's motion for partial summary judgment. The appellants, however, are not challenging the constitutionality of HB 487. Rather, they are asserting that the trial court erred in applying the statute to the contracts at issue soas to destroy them, because such an interpretation would render HB [*28] 487 unconstitutional as to preexisting contracts providing for a Class B machine revenue split of other than 50/50. In other words, appellants are arguing that the trial court's order created a question as to the constitutionality of HB 487.
 The Railroad Commission is now known as the Public Service Commission.
[#x2011]871 (1) (55 SE2d 618) (1949).
replays was removed and players were permitted to win noncash 'merchandise' and 'gift certificates' not exceeding a wholesale value of $5. Ga. L.1996, p. 309. In 1999, the reward system was expanded to authorize combinations of free replays, merchandise, toys, gift certificates, novelties, points, vouchers and tickets. Ga. L.1999, p. 1224."
Old South Amusements, 275 Ga. at 279 (3), n. 8. Additionally, in 2001 the legislature adopted the Video Poker Act, which outlawed as "gambling devices" a wide variety of video games which had been used previously [*29] in the coin-operated amusement machine business. See OCGA § 16-12-20; OCGA § 16-12-35; OCGA § 48-17-1 (2001). Thus, there were at least five significant legislative changes in the regulation of coin-operated amusement machines over an approximately 15-year period.

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