Court Opinion

ID: 3066209
Source: CourtListenerOpinion
Date Created: 2015-10-14 23:03:34.046406+00
Date Added: 2024-06-11T08:12:58.366142
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

KONSTANTIN ZOGGOLIS,                  No. 11-17939
       Plaintiff-Appellant,
                                        D.C. No.
            v.                  2:11-cv-01562-PMP-PAL

WYNN LAS VEGAS, LLC,
      Defendant-Appellee.               OPINION

      Appeal from the United States District Court
               for the District of Nevada
     Philip M. Pro, Senior District Judge, Presiding

               Argued and Submitted
     November 6, 2013—San Francisco, California

                 Filed September 23, 2014

   Before: Andrew J. Kleinfeld, Sidney R. Thomas,
      and Johnnie B. Rawlinson, Circuit Judges.

             Opinion by Judge Rawlinson
2               ZOGGOLIS V. WYNN LAS VEGAS

                           SUMMARY*

                        Nevada State Law

    The panel reversed the district court’s dismissal, due to
failure to exhaust claims before the Nevada Gaming Control
Board, of Konstantin Zoggolis’s Nevada state law breach of
contract and recoupment claims concerning gambling debts
that Zoggolis owed to Wynn Las Vegas.

    The panel held that Zoggolis was not required to exhaust
his claims before the Gaming Control Board because the
markers that underlay this case were credit instruments. The
panel also held that because the markers were credit
instruments, Zoggolis’ claims did not trigger the Gaming
Control Board’s exclusive jurisdiction over a “gaming debt
that is not evidenced by a credit instrument” under Nev. Rev.
Stat. § 463.361(2). The panel concluded that Zoggolis’s
claims must be resolved in the same manner as any other
dispute involving the enforceability of a negotiable
instrument. The panel expressed no view on the outcome of
the proceedings on remand.

                            COUNSEL

Gary Logan, Las Vegas, Nevada, for Plaintiff-Appellant.

Lawrence J. Semenza III, Semenza & Semenza, LLP, Las
Vegas, Nevada, for Defendant-Appellee.

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
              ZOGGOLIS V. WYNN LAS VEGAS                    3

                         OPINION

RAWLINSON, Circuit Judge:

    Appellant Konsantin Zoggolis (Zoggolis) challenges the
district court’s dismissal of his state law breach of contract
and recoupment claims concerning gambling debts that
Zoggolis owed to Appellee Wynn Las Vegas (Wynn).
Zoggolis contends that the district court erred in dismissing
his complaint due to Zoggolis’ failure to exhaust his claims
before the Nevada Gaming Control Board. Because
Zoggolis’ gambling debts were evidenced by credit
instruments in the form of markers, we reverse the district
court’s dismissal of Zoggolis’ claims.

I. BACKGROUND

    In his Complaint, Zoggolis alleged that he entered into a
credit agreement with Wynn for a $150,000 credit line. The
credit agreement provided that “[b]efore drawing on [his] line
of credit, if granted, [Zoggolis] agree[d] to sign credit
instruments (i.e. checks) in the amount of the draw.”
Zoggolis also “authoriz[ed] [Wynn] to complete any of the
following missing items on these credit instruments: (1) the
name of a payee; (2) any missing amounts; (3) a date; (4) the
name, account, number and/or address and branch of any
banks and financial institutions and (5) any electronic
encoding of the above items.” Zoggolis agreed that “each
draw against [his] credit line [was] a separate advance of
money by [Wynn]. If [Zoggolis] receive[d] the advance
before [he] executed a credit instrument, [he] promptly
[would] sign a credit instrument in the amount of the
advance.”
4                    ZOGGOLIS V. WYNN LAS VEGAS

    According to Zoggolis, on November 12, 2008, and as
provided in Nevada law, he directed Wynn to limit his credit
line to $250,000. The Complaint alleges that Wynn agreed
one day later, in writing, that Wynn would honor Zoggolis’
request to limit his credit line to $250,000.1

     Zoggolis alleged that Wynn breached the credit
agreement because Wynn did not cancel or reduce Zoggolis’
credit line as agreed, and that any duty to repay markers in
excess of $250,000 was discharged. Zoggolis also asserted a
recoupment claim for $1,300,000 based on eleven markers
Wynn issued to him in excess of the restricted credit line. In
addition, Zoggolis sought $1,050,000 in damages
representing “the amount of casino credit extended to him
beyond his self-limited amount of $250,000.00. . . .” Finally,
Zoggolis sought injunctive relief premised on Wynn’s
initiation of criminal proceedings due to the unpaid markers.

   Wynn filed a motion to dismiss Zoggolis’ complaint
because Zoggolis failed to pursue his claims before the
Nevada Gaming Control Board as required by Nev. Rev. Stat.
§ 463.361.2 The district court granted Wynn’s motion and

        1
   Zoggolis’ request was made pursuant to Nevada Gaming Control
Regulation § 5.170(4), which provides:

             Each licensee that engages in the issuance of credit,
             check cashing, or the direct mail marketing of gaming
             opportunities, shall implement a program . . . that
             allows patrons to self-limit their access to the issuance
             of credit, check cashing, or direct mail marketing by
             that licensee. . . .
    2
        Nev. Rev. Stat. § 463.361 provides:

             1. Except as otherwise provided in NRS 463.361 to
                 ZOGGOLIS V. WYNN LAS VEGAS                             5

dismissed Zoggolis’ breach of contract and recoupment
claims because the claims arose “from a dispute concerning
a gambling debt which requires that [Zoggolis] exhaust
administrative remedies pursuant to N.R.S. 463.361 . . .”3
Zoggolis filed a timely notice of appeal.

II. STANDARD OF REVIEW

    “We review de novo the district court’s dismissal for lack
of subject matter jurisdiction. . . .” Tritz v. United States
Postal Serv., 721 F.3d 1133, 1136 (9th Cir. 2013) (citation
omitted).

III.     DISCUSSION

   The district court held that dismissal of Zoggolis’ claim
was warranted because the dispute concerned “a gambling
debt.” However, dismissal was warranted only if Zoggolis’

         463.366, inclusive, and 463.780, gaming debts that are
         not evidenced by a credit instrument are void and
         unenforceable and do not give rise to any administrative
         or civil cause of action.

         2. A claim by a patron of a licensee for payment of a
         gaming debt that is not evidenced by a credit instrument
         may be resolved in accordance with NRS 463.362 to
         463.366, inclusive: (a) By the Board; or (b) If the claim
         is for less than $500, by a hearing examiner designated
         by the Board.
  3
   The district court also held that Zoggolis’ claim for injunctive relief
was moot because Wynn had already referred Zoggolis’ unpaid markers
to the Clark County District Attorney’s Office. Zoggolis does not
challenge this ruling.
6             ZOGGOLIS V. WYNN LAS VEGAS

“gambling debt” was of the type required to be exhausted
before the Gaming Control Board under Nevada law.

    Nevada courts “traditionally followed the common law
doctrine . . . that a gaming debt is not legally
enforceable. . . .” Sigel v. McEvoy, 707 P.2d 1145, 1146
(Nev. 1985) (citations omitted). The lack of enforceability
encompassed “gaming debts incurred between two players in
the same game or between a casino and a patron . . .” Id. at
1147 n.2. However, in 1983, the Nevada legislature enacted
Nev. Rev. Stat. § 463.361(1), which provides “that gaming
debts not evidenced by a credit instrument are void and
unenforceable and do not give rise to any administrative or
civil cause of action.” Id. at 1146 (internal quotation marks
omitted). This part of the statute is consistent with the
common-law prohibition against enforcement of gaming
debts. In other words, gaming debts not evidenced by a credit
instrument are subject to the common-law doctrine
precluding enforcement of gaming debts. That would be the
end of the story but for Nev. Rev. Stat. § 463.361(2), which
provides that “[a] claim by a patron of a licensee for payment
of a gaming debt that is not evidenced by a credit instrument
may be resolved . . . (a) By the [Gaming Control] Board . . .”
This statute has been interpreted as conferring exclusive
jurisdiction upon the Gaming Control Board “to resolve a
disputed claim . . . by a patron of a gaming licensee for
payment of a gambling debt that is not evidenced by a credit
instrument. . . .” Sengel v. IGT, 2 P.3d 258, 260 (Nev. 2000)
(citation and footnote reference omitted). In sum, under
Nevada’s statutory scheme, a proceeding before the Gaming
Control Board is the only remedy available “to enforce a
gaming debt not evidenced by a credit instrument . . .” Id.
(citation omitted). To that extent, the Nevada legislature
              ZOGGOLIS V. WYNN LAS VEGAS                    7

“modified the common law prohibition against enforcement
of gaming debts. . . .” Sigel, 707 P.2d at 1146.

    Nev. Rev. Stat. § 463.01467 defines a credit instrument as
“a writing which evidences a gaming debt owed to a person
who holds a nonrestricted license at the time the debt is
created . . .” A licensee is defined as “any person to whom a
valid gaming license . . . has been issued. . . .” Id. n.1
(quoting Nev. Rev. Stat. § 463.0171). It is undisputed that
Wynn is a licensee. Therefore, as between Wynn and
Zoggolis, a licensee and a patron, if the gaming debt is not
evidenced by a credit instrument, the only way to enforce that
gaming debt is through a proceeding before the Gaming
Control Board. See Sengel, 2 P.3d at 260. Although these
statutes do not address the situation where the gaming debt is
evidenced by a credit instrument, as discussed below, Nevada
cases indicate that a gaming debt evidenced by a credit
instrument is enforced in the same manner as any other
negotiable instrument.

    To resolve this appeal, we must decide whether markers
like the ones issued to Zoggolis by Wynn are credit
instruments under Nevada law. If the markers are credit
instruments, the Gaming Control Board would not have
exclusive jurisdiction over Zoggolis’ claims, and no
exhaustion would be required. See Nev. Rev. Stat.
§ 463.361(2) (addressing only gaming debts not evidenced by
a credit instrument). The Nevada Supreme Court has defined
a marker as “an instrument, usually dated, bearing the
following information: the name of the player; the name,
location, and account number of the player’s bank; and the
instruction ‘Pay to the Order of’ the casino for a specific
value in United States dollars.” Nguyen v. State, 14 P.3d 515,
516 (Nev. 2000). Part of the content of the marker is a
8             ZOGGOLIS V. WYNN LAS VEGAS

representation by the payor “that the amount drawn by the
marker is on deposit in the referenced financial institution,
and that he guarantees payment. . . .” Id. When a casino
patron has completed his gaming activity, he either pays the
full amount reflected in the marker or leaves the marker
outstanding with the casino. “If the marker remains
outstanding, casino personnel attempt to notify the patron
and, after a specified period of time, submit the marker to the
patron’s bank for collection. . . .” Id. (footnote reference
omitted).

    The markers issued to Zoggolis contained the information
delineated in Nguyen. In the accompanying credit agreement,
Zoggolis committed to “sign credit instruments (i.e. checks)
in the amount of the draw,” and authorized Wynn “to
complete any of the following on these credit instruments:
(1) the name of a payee; (2) any missing amounts, (3) a date,
(4) the name, account number, and/or address and branch of
any banks and financial institutions, and (5) any electronic
coding of the above items. . . .” Zoggolis was also required
to “promptly . . . sign a credit instrument in the amount of
[an] advance.” The markers issued by Wynn were signed by
Zoggolis, contained the requisite credit instrument
information contemplated by the credit agreement, and
confirmed that the marker was “identical to a personal
check.”

    In Nguyen, the Nevada Supreme Court reviewed
Nguyen’s conviction for drawing and passing a check without
sufficient funds. The genesis of the criminal charges was a
series of markers issued at several licensed Las Vegas gaming
establishments. See 14 P.3d at 516. The Nevada Supreme
Court framed the primary issue as whether the criminal
statute prohibiting the issuance of “bad checks, applies to
              ZOGGOLIS V. WYNN LAS VEGAS                   9

gaming credit instruments commonly known as markers.” Id.
at 517 (internal quotation marks omitted). The Nevada
Supreme Court noted that the applicable criminal statute
prohibits passing a check or draft to obtain credit from a
licensed gaming establishment without sufficient funds to pay
the check or draft upon presentation. See id. Although the
governing statute does not define “check or draft,” the court
referenced the Uniform Commercial Code provisions
governing negotiable instruments, as codified in the Nevada
Revised Statutes. See id. at 517–18. Those provisions define
“check” as “an instrument drawn upon a bank and payable on
demand, signed by the drawer, containing an instruction to
pay a certain amount to another party. . . .” Id. at 518
(footnote reference omitted). The court noted that an
instrument may be a check even though on its face it bears a
different name. See id.

    The court opined that the “bad check statute” applies to
“instruments that are drawn upon a bank, payable on demand,
signed by the payor, and which instruct the bank to pay a
certain amount to the payee.” Id. The court described the
markers as checks because they provided for payment of a
specific sum of money drawn from a bank on demand. See
id. The court rejected the argument that the markers
represented a loan rather than a check. See id.

    Our decision in Las Vegas Sands, LLC v. Nehme,
632 F.3d 526 (9th Cir. 2011) bolsters our conclusion that the
markers are credit instruments under Nevada law. In that
case, we considered whether the Venetian, a hotel and casino
operated by Las Vegas Sands, LLC, could enforce a marker.
See id. at 529. We observed that:
10            ZOGGOLIS V. WYNN LAS VEGAS

       A marker is a gambling credit instrument that
       allows a gambler to receive all or part of the
       credit line the casino has approved for him,
       based on the gambler’s prior credit
       application with the casino. Once the gambler
       and a casino representative sign the marker,
       the gambler may exchange the marker for
       gambling tokens, or chips. If the gambler
       does not pay the marker when he has finished
       gambling, the marker is outstanding and the
       casino may later submit the marker, like a
       check, to the gambler’s bank for payment.

Id. (emphases added).     Applying Nevada’s statutory
framework for gambling debts, we concluded:

       Here, the marker is a negotiable instrument
       and a check because it provides a mechanism
       for payment of $500,000 from Bank of
       America to the order of the Venetian, is
       signed by Nehme, and is payable on demand
       because it states no time or date of payment.
       On the face of the marker, the order is
       unconditional and states no undertakings by
       Nehme other than to pay a specific sum of
       money. The marker therefore was valid and
       enforceable as a negotiable instrument under
       Nevada law. . . .

Id. at 535 (emphasis added) (citations and footnote references
omitted).

   Our conclusion is consistent with other rulings describing
markers as credit instruments under Nevada law. See, e.g.,
                 ZOGGOLIS V. WYNN LAS VEGAS                            11

Summa Corp. v. State Gaming Control Bd., 649 P.2d 1363,
1364 (Nev. 1982), as modified; Miller v. Miller (In re Miller),
292 B.R. 409, 411 (9th Cir. B.A.P. 2003).

    Markers representing gambling debt have been variously
characterized as checks, negotiable instruments and credit
instruments. See Nguyen, 14 P.3d at 518; see also Nehme,
632 F.3d at 529, 535. Regardless of the label assigned, it is
evident that courts in Nevada construe a marker to represent
a gaming debt evidenced by a credit instrument as that term
is used in Nev. Rev. Stat. § 463.361. See Nguyen, 14 P.3d at
517 (describing a marker as a credit instrument). In holding
that Zoggolis was required to exhaust his claims before the
Gaming Control Board, the district court did not have the
benefit of the parties’ factual clarification on appeal
concerning the nature of Zoggolis’ gaming debt. During
argument, Wynn acknowledged that Zoggolis’ claims were
predicated on several markers and that those markers are
credit instruments under Nevada law.4 Because Zoggolis’
gaming debts were evidenced by credit instruments, it is now
apparent that Zoggolis was not required to exhaust his claims
before the Gaming Control Board. See Nev. Rev. Stat.
§ 463.361.

    Relying on Nev. Rev. Stat. § 463.368(1), Wynn asserts
that only gaming licensees, not patrons, may challenge
gambling debts in court. Wynn’s argument is unavailing.

 4
   In response to the panel’s request for a more legible copy of the credit
agreement, Wynn also provided copies of the markers referenced in the
Complaint. The submitted markers only confirmed our conclusion that the
Gaming Control Board lacked exclusive jurisdiction over Zoggolis’ claims
in light of Wynn’s concession that the markers referenced in the
Complaint are credit instruments.
12             ZOGGOLIS V. WYNN LAS VEGAS

Pursuant to Nev. Rev. Stat. § 463.368(1), “[a] credit
instrument accepted on or after June 1, 1983, and the debt
that the credit instrument represents are valid and may be
enforced by legal process.” Although § 463.368(1) provides
that a licensee may enforce a gaming debt premised on a
credit instrument, it does not provide that only licensees may
litigate a gaming debt in court. See id. Rather, Nev. Rev.
Stat. § 463.361(1) provides the only express limitation on
enforcement of a gaming debt through litigation. See Nev.
Rev. Stat. § 463.361(1) (“[G]ambling debts that are not
evidenced by a credit instrument are void and unenforceable
and do not give rise to any administrative or civil cause of
action.”). If the Nevada legislature intended to completely
deprive patrons of the ability to litigate gaming debts, it could
have easily drafted Nev. Rev. Stat. § 463.361(1) to provide
that no gaming debts give rise to “any administrative or civil
cause of action” on the part of gamblers, rather than
addressing only gaming debts not evidenced by a credit
instrument. Id. Because the Nevada legislature only limited
enforcement of gaming debts that are not evidenced by a
credit instrument, the obvious implication is that enforcement
of gaming debts evidenced by a credit instrument is not so
limited. Indeed, as discussed earlier, we have previously
recognized the enforceability of gaming debts evidenced by
a credit instrument. See Nehme, 632 F.3d at 536–37
(recognizing the potential of a defensive claim by the patron
against the casino for failure to reduce the line of credit upon
request).

    Wynn’s reliance on Weisbrod v. Fremont Hotel, Inc.,
326 P.2d 1104 (Nev. 1958) is also misplaced. In that case,
the Nevada Supreme Court considered a patron’s claim that
a casino had improperly refused to pay him $12,500 in keno
winnings. See Weisbrod, 326 P.2d at 1104. The Nevada
              ZOGGOLIS V. WYNN LAS VEGAS                    13

Supreme Court opined that “[i]n 1872 it was established as
the law of this state that an action does not lie for the
collection of money won in gambling. . . .” Id. (citation
omitted). Based on existing law, the Nevada Supreme Court
held that the patron was unable to pursue his claim in court.
See id. at 1105. Notably, Weisbrod was decided prior to the
Nevada legislature’s 1983 modification of “the common law
prohibition against enforcing gaming debts.” Sigel, 707 P.2d
at 1146.

IV.     CONCLUSION

    Because the markers that underlie this case are credit
instruments under Nevada law, Zoggolis was not required to
exhaust his claims before the Gaming Control Board.
Because the markers are credit instruments, Zoggolis’ claims
did not trigger the Gaming Control Board’s exclusive
jurisdiction over “a gaming debt that is not evidenced by a
credit instrument . . .” Nev. Rev. Stat. § 463.361(2). Rather,
Zoggolis’ claims must be resolved in the same manner as any
other dispute involving the enforceability of a negotiable
instrument. See Nehme, 632 F.3d at 535–39. We express no
view on the outcome of the proceedings on remand. We hold
only that Zoggolis is not required to exhaust his claims before
the Gaming Control Board.

      REVERSED and REMANDED.