Marina District Development Co. v. Ivey
216 F. Supp. 3d 426, 2016 U.S. Dist. LEXIS 146084, 2016 WL 6138239 (2016)
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Rule of Law:
A gambler's use of an 'edge-sorting' technique to alter the odds of a casino game constitutes a violation of the New Jersey Casino Control Act's prohibition on marked cards, thereby breaching the implied contract to abide by all gaming regulations. However, failing to disclose the true purpose of requests made to a casino does not constitute fraud if the requests themselves do not violate the rules of the game and the casino was not required to grant them.
Facts:
- Professional gambler Phillip Ivey contacted the Borgata casino in April 2012 to arrange high-stakes Baccarat games.
- Ivey made five specific accommodations requests: a private pit, a Mandarin-speaking dealer, a guest (Cheng Yin Sun) to sit with him, one 8-deck shoe of specific purple Gemaco cards to be used for the entirety of each session, and an automatic card shuffler.
- During gameplay, Sun, who could identify minute asymmetries on the back patterns of the cards, would instruct the dealer in Mandarin to turn strategically important cards (values 6, 7, 8, 9) 180 degrees before placing them on the table.
- This process oriented the asymmetrical patterns on the long edges of the valuable cards differently from the other cards in the deck.
- The automatic card shuffler maintained the orientation of the 'sorted' cards, while the continued use of the same deck preserved the arrangement across multiple hands.
- This technique, known as 'edge sorting,' allowed Ivey and Sun to identify the value of the first card to be dealt, shifting the game's odds from a 1.06% house advantage to a 6.765% advantage for Ivey.
- Over four visits to Borgata in 2012, Ivey and Sun won a total of $9,626,000 using this method.
- Borgata became aware of the scheme only after reading a media report that a London casino was withholding similar winnings from Ivey for using the same technique.
Procedural Posture:
- Marina District Development Co., LLC (Borgata) filed a lawsuit against Phillip D. Ivey and Cheng Yin Sun in the U.S. District Court for the District of New Jersey.
- Borgata's complaint asserted claims for, among other things, breach of contract, fraud, and violations of the federal and New Jersey RICO Acts.
- Ivey and Sun filed a motion to dismiss the complaint, which the district court denied, allowing the case to proceed to discovery.
- Following discovery, both Borgata (plaintiff) and Ivey and Sun (defendants) filed cross-motions for summary judgment on Borgata's claims.
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Issue:
Does a gambler's use of an 'edge-sorting' technique, which exploits manufacturing defects on cards to gain an advantage, violate the New Jersey Casino Control Act's prohibition on 'marked cards,' thereby breaching an implied contract with the casino?
Opinions:
Majority - Hillman, District Judge
Yes, the use of edge-sorting violates the New Jersey Casino Control Act (CCA) by creating and using 'marked cards,' which constitutes a breach of the gambling contract. The court holds that the term 'marked cards' is not limited to physical alterations like crimping or daubing. Rather, it extends to any method that surreptitiously identifies a card's value to a player and no one else. By instructing the dealer to orient cards based on their value to exploit manufacturing flaws, Ivey and Sun effectively 'marked' them. Because adherence to the CCA is an essential, implied term of any legal gambling contract in New Jersey, their violation of the statute was a material breach of their contract with Borgata. However, the court found their actions did not constitute fraud. Ivey and Sun made no material misrepresentation because their requests (e.g., turning cards) were permissible under Baccarat rules, and Borgata was not required to grant them. Borgata's reliance on their cover story of 'superstition' was not detrimental, as it could have granted the same accommodations for no reason at all.
Analysis:
This decision significantly broadens the legal definition of 'marked cards' beyond direct physical tampering to include any technique that systematically reveals a card's value to a player through manipulation. It establishes that a violation of state gaming regulations is a per se breach of the implied contract between a casino and a patron, regardless of whether the specific rules of the table game were broken. The ruling also sets a high bar for proving fraud in a casino context, distinguishing between impermissible cheating that violates statute and clever deception that, while dishonest, does not rise to a legally actionable misrepresentation if it operates within the permissible actions of the game.
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