Authorized Casino Countermeasures Against Card Counters Do Not Violate RICO: An Analysis of Doug Grant, Inc. v. Great Bay Casino Corp.

Introduction

In the landmark case Doug Grant, Inc., et al. v. Great Bay Casino Corporation, et al., decided by the United States Court of Appeals for the Third Circuit on November 2, 2000, the appellants—comprising both individual blackjack players and associated corporations—challenged the legality of various countermeasures employed by Atlantic City casinos against skilled card counters. The core issue revolved around whether these authorized casino practices constituted violations under federal and state Racketeer Influenced and Corrupt Organizations (RICO) statutes, the New Jersey Consumer Fraud Act, and constitutional rights. This commentary delves into the nuances of the court's decision, analyzing the legal reasoning, cited precedents, and the broader implications for the casino industry and professional gamblers.

Summary of the Judgment

The appellants initiated a lawsuit alleging that Atlantic City casinos employed illegal countermeasures to neutralize the advantage of skilled card counters in blackjack games. Specifically, they contended that practices such as "shuffling-at-will," limiting wagers, and surveillance tactics violated various statutes and constitutional protections. The United States District Court for the District of New Jersey dismissed these claims under Fed.R.Civ.P. 12(b)(6), concluding that the plaintiffs failed to state a viable claim for relief. On appeal, the Third Circuit affirmed the dismissal, holding that the casinos' actions were sanctioned by the New Jersey Casino Control Act (CCC regulations) and did not amount to predicate acts under RICO. Additionally, claims under the New Jersey Consumer Fraud Act were deemed inapplicable due to the exclusive regulatory framework established for the casino industry.

Analysis

Precedents Cited

The court extensively referenced prior cases to bolster its reasoning. Notably:

Campione v. Adamar of N.J., Inc., 155 N.J. 245 (1998): This case addressed the authority of the CCC to regulate casino practices, emphasizing that casinos could implement measures to protect their financial interests without overstepping into unlawful territory.
USTON v. RESORTS INTERNATIONAL HOTEL, INC., 89 N.J. 163 (1982): The court in Uston explored the boundaries of casino countermeasures against card counters, ultimately asserting that while casinos couldn't outright exclude card counters without CCC authorization, they could adopt regulated practices to mitigate their impact.
STATE v. SANDERS, 185 N.J.Super. 258 (App.Div. 1982): This case highlighted instances where casinos attempted to exclude card counters aggressively, which was later regulated to prevent abuse.
BLUM v. YARETSKY, 457 U.S. 991 (1982): Cited to elucidate the limitations on holding private entities liable based on their association or approval by state regulatory bodies.

These precedents collectively reinforced the stance that regulated countermeasures are lawful and do not inherently constitute racketeering or fraud.

Legal Reasoning

The court's primary reasoning hinged on the authority granted to the CCC under the New Jersey Casino Control Act. The CCC's regulations explicitly permit casinos to implement certain countermeasures against card counters to preserve the integrity and financial viability of the gaming industry. The court found that:

Regulatory Authorization: The countermeasures, including shuffling-at-will and wager limitations, were within the scope of CCC regulations. As such, casinos acted legally when employing these tactics.
RICO Applicability: For a RICO claim to succeed, plaintiffs must demonstrate that the defendants engaged in a pattern of racketeering activity. The court determined that the casinos' regulated practices did not meet this threshold, as they were not criminal acts but rather authorized regulatory compliance.
Consumer Fraud Act: The court noted that the Consumer Fraud Act is inapplicable to heavily regulated industries where specific regulatory frameworks, like the CCC's, exist. Allowing such claims would create conflicts and undermine the exclusive authority of the CCC.
State Action and Equal Protection: The plaintiffs failed to establish that the casinos' actions constituted state action or violated equal protection standards, especially under the rational basis review applicable to non-protected classes like card counters.

Additionally, the court addressed and dismissed ancillary claims related to harassment and threats, finding them insufficiently linked to the casinos and lacking substantive allegations to establish liability.

Impact

This judgment reaffirms the broad regulatory authority of state gaming commissions over casino operations, particularly concerning countermeasures against advantage players. The decision has several implications:

Strengthened Regulatory Framework: Casinos are empowered to continue using regulated methods to deter card counting without fear of RICO-related litigation, provided they adhere to the established regulations.
Protection for Regulated Entities: Private entities operating under comprehensive regulatory oversight are safeguarded against certain types of litigation, emphasizing the primacy of regulatory statutes over common law claims in specialized industries.
Precedent for Future Cases: The ruling sets a clear precedent that authorized regulatory actions by state bodies are not susceptible to racketeering or consumer fraud claims, thereby limiting the avenues for plaintiffs to challenge industry practices on these grounds.
Clarity for Professional Gamblers: Skilled card counters can recognize that casinos' countermeasures are legally sanctioned, possibly encouraging them to seek alternative legal avenues if they believe their rights are infringed outside the scope of regulation.

Complex Concepts Simplified

Racketeer Influenced and Corrupt Organizations (RICO) Act

RICO is a federal law designed to combat organized crime by allowing leaders of a syndicate to be tried for crimes they ordered others to do or assisted them in doing. To establish a RICO claim, plaintiffs must show that defendants engaged in a pattern of racketeering activity, which includes specific criminal acts.

Shuffling-at-Will

This refers to the casino practice of reshuffling the deck of cards during a blackjack game at the casino's discretion. While this practice is officially regulated to maintain game integrity, it can disrupt card counters who rely on tracking the flow of cards to gain a statistical advantage.

Consumer Fraud Act

A state law aimed at protecting consumers from deceptive business practices. In this context, plaintiffs attempted to use it to argue that casinos were misleading players by manipulating game conditions against card counters.

Equal Protection Clause

Part of the Fourteenth Amendment to the U.S. Constitution, it requires states to provide equal protection under the law to all people within their jurisdictions. The plaintiffs argued that casinos were discriminating against card counters, but the court found no constitutional violation under rational basis review.

Conclusion

The Third Circuit's decision in Doug Grant, Inc. v. Great Bay Casino Corp. underscores the robust authority of state gaming regulators in governing casino operations. By affirming that casinos' countermeasures against card counters are lawful under the New Jersey Casino Control Act, the court delineates the boundaries between regulated industry practices and actionable claims under statutes like RICO and the Consumer Fraud Act. This judgment not only protects casinos from certain legal challenges but also clarifies the legal landscape for professional gamblers and the regulated strategies casinos may employ to maintain game integrity. Ultimately, the case serves as a pivotal reference point for future litigation involving regulated industries and the extent of permissible operational countermeasures.