Opinion ID: 2796350
Heading Depth: 1
Heading Rank: 4

Heading: Merits of the Summary Judgment Ruling.

Text: Having determined the appeal was timely, we turn now to the merits. McKee contends the court committed legal error in granting summary judgment on the three counts of her petition: breach of contract, estoppel, and consumer fraud. We will address each in turn. A. Breach of Contract. McKee claims summary judgment was inappropriate on her contract claim because the court incorrectly concluded there was an express contract. She urges us instead to find that only an implied contract existed and it should be for the factfinder to determine its terms. She further claims that any contract between the two parties was ambiguous, thereby generating another fact question for the jury. Gambling contracts are governed by traditional contract principles. See Blackford v. Prairie Meadows Racetrack & Casino, Inc., 778 N.W.2d 184, 189 (Iowa 2010). A contract can be either express or implied. Rucker v. Taylor, 828 N.W.2d 595, 601 (Iowa 2013). We have recently explained the difference between express and implied contracts: When the parties manifest their agreement by words the contract is said to be express. When it is manifested by conduct it is said to be implied in fact. Both are true contracts formed by a mutual manifestation of assent by the parties to the same terms of the contract. The differentiation arises from the method of proving the existence thereof. Id. (internal quotation marks omitted). “[T]he law will not imply a contract where there is an express contract.” Scott v. Grinnell Mut. Reins. Co., 653 N.W.2d 556, 562 (Iowa 2002) (alteration in original) (internal 14 quotation marks omitted); see also 1 Richard A. Lord, Williston on Contracts § 1:5, at 40 (4th ed. 2007) (“The law may recognize an implied contract in the absence of an express contract on the same subject matter, but not where there is an express contract . . . .”). We agree with the district court that the Miss Kitty rules of the game are the relevant contract here and that they form an express contract. “It is hornbook law that the rules of a contest constitute a contract offer and that the participant’s [entry into] the contest constitute[s] an acceptance of that offer, including all of its terms and conditions.” Sargent v. N.Y. Daily News, L.P., 840 N.Y.S.2d 101, 103 (App. Div. 2007) (first alteration in original) (internal quotation marks omitted); see also Anthony Cabot & Robert Hannum, Advantage Play and Commercial Casinos, 74 Miss. L.J. 681, 682–83 (2005) (“Casino-style gambling involves a contract, which is simply a promise, or set of promises, between the casino and the player.” (Footnote omitted.)). Further, it is undisputed the rules of the Miss Kitty game did not provide for any kind of bonus. Hence, in our view, McKee had no contractual right to a bonus. Any message appearing on the screen indicating the patron would receive a $41 million bonus was a gratuitous promise and the casino’s failure to pay it could not be challenged as a breach of contract. See Margeson v. Artis, 776 N.W.2d 652, 655 (Iowa 2009) (“[C]ontract law exists to enforce mutual bargains, not gratuitous promises.”). Consider the other side of the coin: Suppose the symbols had aligned so that McKee was entitled to a payout under the rules of the game, but the machine did not inform her of a payout. Would the casino have been obligated to compensate her despite the absence of a notification that she had won? We think so. 15 Nor is it relevant that McKee failed to read the rules of the game before playing it. It is sufficient that those rules were readily accessible to her and she had an opportunity to read them. See Huber v. Hovey, 501 N.W.2d 53, 55 (Iowa 1993) (“[F]ailure to read a contract before signing it will not invalidate the contract. Absent fraud or mistake, ignorance of a written contract’s contents will not negate its effect.” (Citation omitted.)). Courts in other jurisdictions, when confronted with bonus payout claims against casinos, have regularly applied the foregoing standard contract principles. In Eash v. Imperial Palace of Mississippi, LLC, the Mississippi Supreme Court held a patron was limited to the $8000 payout listed in the game’s rules rather than the $1,000,000 bonus that had appeared on the game screen. 4 So. 3d 1042, 1048 (Miss. 2009). Eash was playing a slot machine at the casino when a message scrolled across the screen reflecting a 200,000 credit “Jackpot” totaling $1,000,000. Id. at 1043. The rules of the game as displayed on the machine, however, indicated the maximum available award was only $8000. Id. at 1043–44. The court concluded that the display of a higher jackpot amount than was available under the posted rules did not create an ambiguity in the gambling contract: The fact that the electronic displays erroneously stated that Eash won $1,000,000 after she hit the winning combination does not create an ambiguity . . . . Though it unfortunately caused some confusion, there was no indication from anything on the machine before Eash began playing that indicated that a patron could win anything more than $8,000 with three double diamonds lined up on the pay line. In other words, there was no question, ex ante, as to what a winning combination was or what the corresponding award would be on the machine in this case. Id. at 1047. 16 In Pickle v. IGT, the same court turned down a slot machine player’s claim under similar circumstances. 830 So. 2d 1214, 1223 (Miss. 2002). There the machine displayed three symbols that, per the rules of the game, were not a winning combination. Id. at 1215. However, the machine simultaneously indicated the patron had won a jackpot, and the machine’s bells and whistles went off. Id. at 1215–16. An investigation revealed that the displayed symbols correctly depicted the outcome of the game (i.e., not a winner) rather than the jackpot notification sounds. Id. at 1218. The Mississippi Supreme Court upheld the investigator’s conclusion that “the symbols displayed by the machines correctly depicted the outcome of the game” and the patron was not entitled to the jackpot money despite the noises indicating a win. Id. at 1218, 1222 (internal quotation marks omitted). In another case, the Alabama Supreme Court overturned a multimillion dollar award in favor of a casino patron, finding that genuine issues of material fact necessitated a trial. Macon Cnty. Greyhound Park, Inc. v. Knowles, 39 So. 3d 100, 112–13 (Ala. 2009). The patron, Knowles, had been playing an electronic bingo machine at the casino when she hit a “snake eyes” combination, which was worth only two credits according to the game’s paytable. Id. at 105–06, 112. Nevertheless, the machine’s lights went off and the credits on the machine began to accumulate up to an amount worth at least $10,000,000. Id. at 106. Knowles contended, in part, that the rules should not govern the disputed payout because they were not visible on the face of the machine, but rather were only viewable if she pushed a button to read them—an action she did not do. Id. at 110. The court found it immaterial that Knowles had not actually read the rules. Id. at 111–12. It further determined that summary judgment for Knowles was 17 improper because the casino’s evidence indicated the snake eyes display was worth only two credits. Id. at 112. To the same effect is Miller v. Sodak Gaming, Inc., 93 F. App’x 847, 848 (6th Cir. 2004). There, despite a patron’s claim she had won a $1.5 million jackpot based on lights and music coming from the slot machine she was using, the court held she was not entitled to an award because there was “no genuine issue of material fact that Miller was not a jackpot winner under the rules of the game.” Id. at 848–49. These authorities support the grant of summary judgment in this case. In contrast, the Louisiana Court of Appeals directed a casino to pay bonuses of $65,581.00 and $32,790.50 respectively to two patrons even though the bonuses were allegedly more than the maximum payout the machine had been programmed to award. Ledoux v. Grand Casino– Coushatta, 954 So. 2d 902, 904, 909 (La. Ct. App. 2007). In that case, two plaintiffs on separate occasions had played the same slot machine game. Id. at 908. Both times, the monitor displayed a combination of three “7s” and indicated the patrons had won a “Bonus Spin.” Id. When the patrons played the bonus round, the monitor on the machine indicated they had won the large jackpots in question. Id. In both instances, although employees of the casino initially congratulated the patrons, the casino later refused to pay the bonuses because they were a higher amount than the machine was supposedly programmed to award for a display of three “7s.” Id. at 908–09. Ledoux is distinguishable from the present case. There, the casino did not dispute that the rules of the game included a bonus wheel and that the patrons had qualified for a bonus; moreover, there was no indication in those rules that the amount of any given bonus was limited. See id. at 909–10. This contrasts with the present case, where McKee 18 seeks an award of a random bonus not available under the rules of the game. Additionally, in Ledoux, after rejecting the casino’s rules-of-thegame defense, the court then turned to the issue of whether there had been a machine malfunction, a second defense asserted by the casino. Id. at 910. At that point, the court found the casino had not presented sufficient evidence to show a malfunction had in fact occurred. Id. at 910–11. The court explained, [W]here there was no apparent malfunction indication by the slot machine itself, a casino may not rely on the argument that the machine was not intended to register the particular jackpot to deny payment. That is to say, there must [be] objective proof of a malfunction. Id. at 912. Here, the district court did not reach the question of malfunction, and neither do we. Another case where the patron prevailed because recovery was available under the rules of the game is IGT v. Kelly, 778 So. 2d 773, 774–75 (Miss. 2001) (en banc). There the Mississippi Supreme Court found a patron was entitled to a large bonus for a display of a royal flush on a video poker game. See id. at 779. A sign on the machine stated that a sequential royal flush in hearts would garner a large sum of money. Id. at 774. In parentheses, the sign gave the example of a “10, J, Q, K, A” in hearts. Id. at 775. Kelly played the machine and received an A, K, Q, J, 10 of hearts. Id. at 774. The casino claimed that only an ascending royal flush—rather than a descending one like Kelly had received—was sufficient to win the prize. Id. The gaming commission, in a finding upheld by the Mississippi Supreme Court, determined the patron should prevail because the sign did not specify that only 19 ascending royal flushes would win or that the example on the sign was only accurate if read from left to right. Id. at 774, 779. Unlike in Kelly, in this case, the rules made no mention of the possibility of bonuses or jackpots beyond the actual winnings based on different reel combinations. In short, “there was no question, ex ante, as to what a winning combination was or what the corresponding award would be on the machine.” Eash, 4 So. 3d at 1047. The parties’ express contract did not include the possibility of winning a bonus, but was rather limited to the display of different reel combinations and their corresponding credit values. Therefore, we conclude McKee should be limited to recovering the 185 credits worth $1.85 that the parties agree the displayed reels amounted to, rather than the additional $41,797,550.16 that did not correspond to the displayed reels or the paytable. McKee counters with several arguments. We will discuss each of them, but we do not believe any of them is sufficient to create a genuine issue of fact that would preclude summary judgment. First, McKee argues that her agreement was not an express contract dictated by the rules of the game, but simply an implied one that she would get whatever the machine said she would get. McKee cites no authority for this theory, and as noted above, it is contrary to precedent and general contract principles. Alternatively, McKee insists the “legacy bonus” is separate and apart from the Miss Kitty game, and that she had both an express agreement (the game) and an implied agreement (the bonus) with the casino. However, even assuming McKee could have had both an express agreement and an implied agreement with the casino at the same time, cf. Scott, 653 N.W.2d at 562, she fails to explain the derivation of the 20 latter agreement. McKee had no understanding—implied or otherwise— that she might be eligible for legacy bonuses if she played at the casino, and she points to nothing that could have created an expectation in any patron that he or she might receive such a bonus. At most, the casino, through the machine, made a statement that McKee was going to receive a bonus, which it was entitled to withdraw so long as that statement was not part of a binding contract. McKee also maintains there is a fact issue whether the machine malfunctioned or not. Therefore, McKee continues, a trial needs to occur on whether the casino can avoid liability based upon the sign on the machine and the statement in the game rules that “MALFUNCTION VOIDS ALL PAYS AND PLAYS.” However, we agree with the district court’s rule 1.904(2) ruling that the existence or not of a mechanical malfunction is beside the point. It is only necessary to reach the malfunction defense if McKee otherwise could receive an award under the terms of the contract. Hypothetically, if the casino declined to pay an award that was otherwise payable based on the alignment of the symbols, the casino would then have to establish that the slot machine had a technical malfunction in order to avoid paying the award. See, e.g., Sengel v. IGT, 2 P.3d 258, 262–63 (Nev. 2000) (upholding the gaming control board’s denial of a jackpot to the plaintiff after a slot machine’s reels stopped in a jackpot alignment due to a malfunction). However, when the machine, as here, generates an award that is not within the rules of the game, isolating the cause of what happened is not necessary. It is sufficient for present purposes that the award was erroneous in the sense that it was not a part of the game. Along related lines, McKee maintains that the casino has failed to establish a mistake as a matter of law. Mistake, however, is a defense to 21 be raised when a party wants to avoid the effect of the actual contract terms. See Soults Farms, Inc. v. Schafer, 797 N.W.2d 92, 108–09 (Iowa 2011) (“Where there has been a mistake, whether mutual or unilateral, in the expression of the contract, reformation is the proper remedy.”). The casino does not need to rely on a mistake defense because it is following the contract terms, not seeking to avoid them. On point is a decision of the Michigan Court of Appeals. See Coleman v. State, 258 N.W.2d 84, 87 (Mich. Ct. App. 1977). In Coleman, the plaintiff was erroneously announced as the winner of a $200,000 lottery prize. Id. at 86. Although the district court had found for the plaintiff, the court of appeals reversed and rejected the plaintiff’s claim as a matter of law. Id. at 87. The appellate court reasoned, A lottery winner’s entitlement to a prize is governed by the principles of contract law. In the instant case the bureau made a public offer that the purchaser of a lottery ticket would have a chance of winning a prize according to the advertised rules and procedures of the lottery. In purchasing her ticket Mrs. Coleman accepted that offer and agreed to the announced rules for determining prize winners. Id. at 86 (citations omitted). The court further commented, In granting judgment for Mrs. Coleman, the lower court relied upon general principles of contract law pertaining to unilateral mistake and recision. The original contract between Mrs. Coleman and the bureau, however, was clear and unambiguous and there was no mistake as to its terms. The body of contract law relating to unilateral mistake and recision, therefore, is not applicable unless it can be established that a new contract was created between the bureau and Mrs. Coleman as a result of the erroneous award. . . . . . . In this case, the bureau did not impose additional conditions but only enforced the previously announced rules for the drawing. 22 Id. at 86–87; see also Sargent, 840 N.Y.S.2d at 103–04 (finding the rules of the game governed rather than an erroneous notification that the plaintiff had won a prize). McKee further criticizes the casino for failing to heed the slot machine manufacturer’s warnings by continuing to use the Miss Kitty machine without affirmatively disabling the legacy bonus capability. However, this is a tort theory, rather than a contract one. From a contract law perspective, what matters is whether some express or implied agreement gave McKee a right to a bonus, not whether the casino may have been negligent. 2 B. Estoppel. McKee claims the trial court erred in granting summary judgment to the casino on her equitable and promissory estoppel causes of action, as well as in failing to consider equitable estoppel as a defense. Equitable estoppel requires McKee to prove the following elements: (1) The defendant has made a false representation or has concealed material facts; (2) the plaintiff lacks knowledge of the true facts; (3) the defendant intended 2As an additional defense, the casino argues that the $41,797,550.16 bonus was invalid because it was far above the maximum award the IRGC had authorized for the game. See Iowa Code § 537A.4 (stating gambling contracts are void except for those authorized by statute, including under chapter 99F); id. § 99F.4 (conferring regulatory and supervisory jurisdiction over all gambling contracts to the IRGC); Iowa Admin. Code r. 491—11.4(3) (requiring submission of game rules to the IRGC in advance); id. r. 491—11.4(5) (stating all gambling games are required to “operate and play in accordance with the representation made to the [Iowa Racing and Gaming C]ommission and the public at all times”). In Blackford, we stated, “The freedom to contract [for gambling under chapter 99F] is not, however, unlimited. When a contract addresses an area of law regulated by a statute, the statutory provisions and restrictions are a part of the parties’ contract.” 778 N.W.2d at 189. Here, the IRGC confirmed after the fact that the maximum award for the game, including any potential bonus, was $10,000. However, because we uphold the district court’s summary judgment based on traditional contract principles, we need not reach the casino’s additional argument that a $41 million bonus would have been illegal under regulatory provisions incorporated into the parties’ contract. 23 the plaintiff to act upon such representations; and (4) the plaintiff did in fact rely upon such representations to his prejudice. Sioux Pharm, Inc. v. Summit Nutritionals Int’l, Inc., 859 N.W.2d 182, 191 (Iowa 2015) (internal quotation marks omitted). The doctrine of equitable estoppel is a common law doctrine preventing one party who has made certain representations from taking unfair advantage of another when the party making the representations changes its position to the prejudice of the party who relied upon the representations. ABC Disposal Sys., Inc. v. Dep’t of Natural Res., 681 N.W.2d 596, 606 (Iowa 2004). Here, there is no evidence the casino made a representation on which McKee relied to her prejudice. See Sioux Pharm, Inc., 859 N.W.2d at 191 (“Because Sioux Pharm did not rely on Summit’s website statement, it cannot prove equitable estoppel . . . .”). Until the “Bonus Award” message appeared on the screen, McKee had received no information about a bonus and therefore could not have played the game in reliance on the possibility of a bonus. Nor is there evidence that McKee prejudicially relied on the machine’s display of a $41 million “Bonus Award” to pursue any subsequent course of action. McKee’s claim of promissory estoppel fails for similar reasons. “The theory of promissory estoppel allows individuals to be held liable for their promises despite an absence of the consideration typically found in a contract.” Schoff v. Combine Ins. Co. of Am., 604 N.W.2d 43, 48 (Iowa 1999). Promissory estoppel requires a party to prove “(1) a clear and definite oral agreement; (2) proof that plaintiff acted to his detriment in reliance thereon; and (3) a finding that the equities entitle the plaintiff to this relief.” Id. (internal quotation marks omitted). Again, McKee has no evidence of detrimental reliance. See, e.g., Merrifield v. Troutner, 269 24 N.W.2d 136, 138 (Iowa 1978) (“Edgar cannot rely on promissory estoppel because he has not shown he relied to his detriment upon any promise made by Claudia.”). In Miller, the Sixth Circuit rejected the casino patron’s promissory estoppel claim under comparable circumstances. See 93 F. App’x at 851. The patron in Miller had played a slot machine that did not register a winning series of symbols. Id. at 849. Miller claimed, however, that the lights and sounds of the machine indicated a jackpot win. Id. The court determined the casino should not be estopped from denying payment to Miller. The court reasoned, “There is no evidence, however, that [the defendant gaming machine operator] made a promise to pay a primary progressive jackpot when a player did not win pursuant to the clearly posted rules of the game.” Id. at 851. Likewise, in this case, the rules and paytable of the Miss Kitty game listed all the winning combinations of reels and did not include the possibility of additional bonus wins. The only possible representation of a bonus, i.e., the “Bonus Award” message, did not induce detrimental reliance on McKee’s part. The district court therefore properly granted summary judgment to the casino on McKee’s estoppel claims. C. Consumer Fraud. Chapter 714H is the Private Right of Action for Consumer Frauds Act. See Iowa Code § 714H.1. It prohibits certain unfair and fraudulent acts: A person shall not engage in a practice or act the person knows or reasonably should know is an unfair practice, deception, fraud, false pretense, or false promise, or the misrepresentation, concealment, suppression, or omission of a material fact, with the intent that others rely upon the unfair practice, deception, fraud, false pretense, false promise, misrepresentation, concealment, suppression, or omission in connection with the advertisement, sale, or lease of consumer merchandise . . . . 25 Id. § 714H.3(1). The act establishes a private right of action: “A consumer who suffers an ascertainable loss of money or property as the result of a prohibited practice or act . . . may bring an action at law to recover actual damages.” Id. § 714H.5(1). We agree with the district court that McKee cannot show “an ascertainable loss of money or property.” See id. McKee’s consumer fraud claim rises or falls with her breach of contract claim. If McKee had no contractual right to the bonus, and we have already determined she did not, then she could not have suffered an ascertainable loss of money or property when she was denied that bonus. This is analogous to the situation in Blackford, where we held the plaintiff’s lack of a contractual right to a jackpot foreclosed his conversion claim. See 778 N.W.2d at 190. In addition, McKee made money on her gambling that evening, so she had no out-of-pocket loss. McKee cites a decision of the Missouri Court of Appeals that reversed the dismissal of a casino patron’s consumer fraud claim. See Raster v. Ameristar Casinos, Inc., 280 S.W.3d 120, 131 (Mo. Ct. App. 2009). In Raster, the casino made changes to its compensation program, which was like a frequent-flyer program and rewarded customers based on their overall gaming volume. See id. at 123. These changes included restructuring the point-award formulas so it was more difficult to earn certain awards or achieve elite status. Id. at 123–24. The casino sent a letter to its program members, including the plaintiffs, indicating that “[n]othing really has changed” despite the new formulas and policies. Id. at 124 (internal quotation marks omitted). The plaintiffs thought otherwise and brought claims under that state’s consumer fraud act which, much like Iowa’s, required the plaintiffs to have suffered an “ascertainable loss” due to an unfair act “in connection with the sale or 26 advertisement of any merchandise.” Id. at 128 (internal quotation marks omitted). The appellate court concluded that the claims should go forward. Id. at 131. We find Raster distinguishable. This is not a situation as in Raster where the casino changed the rules of the game after the plaintiffs had spent money and accumulated points, which were now devalued by the casino’s rule changes. See id. at 123–24. Rather, in this case, the rules of the game did not provide for the bonus in question and McKee therefore did not suffer an “ascertainable loss” when the casino refused to pay it. See Iowa Code § 714H.5(1).