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Marina District Development Co. v. Ivey

United States District Court · Contracts
Contractsbreach of contractrestitutionstatus quo antevoid contractcasino gamblingCasino Control Actmarked cards

Facts

Ivey and Sun played Baccarat at Borgata on four occasions in 2012 and used an edge-sorting scheme in which Sun identified asymmetries on card backs and had the dealer rotate certain cards, allowing Ivey to gain first-card knowledge and bet accordingly. To make the scheme work, they requested and received specific accommodations from Borgata, including a private pit, a Mandarin-speaking dealer, use of one eight-deck shoe of cards for an entire session, and an automatic shuffler that preserved card orientation. The court had already found that this conduct violated N.J.S.A. 5:12-115(a)(2) and (b) by creating and using marked cards, thereby breaching the parties' contract to abide by the Casino Control Act. Borgata sought damages either by restoring the parties to their pre-contract positions or by awarding the profits Borgata allegedly would have won absent the scheme.

Issue

When casino patrons breach their agreement to gamble in compliance with the Casino Control Act by using marked cards in Baccarat, is the proper contract remedy restitution restoring the parties to the status quo ante, or may the casino recover expectation damages based on what it would have won in a lawful game? Also, may the casino recover the value of complimentary goods and services provided to the patrons?

Rule

Where parties' gambling contract is tainted from the outset because the game violates the Casino Control Act, the contract is rendered unauthorized and void, and the proper remedy is restitution returning the parties to the status quo ante rather than expectation damages. Expectation damages are unavailable when the casino's claimed lost profits depend on speculative predictions about how lawful play would have unfolded. Restitution extends to benefits directly received as a result of the voided contract, but not to complimentary goods or services that were not tied to any obligation by the recipient to win, lose, or do anything beyond visiting the casino.

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Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.
At a casino in Detroit, Nolan Price persuaded staff to use a card setup that violated the state's casino regulations, making the game unauthorized from the moment play began. Over two nights, he won $1.8 million, all of which the casino can document through his front-money account and chip redemptions.

If the casino prevails on a breach of contract theory based on Nolan's agreement to gamble in compliance with the gaming regulations, which remedy is most appropriate?

Explanation. When the gambling arrangement is tainted from the outset by conduct that violates the controlling gaming law, the game is unauthorized and the contract is void. The proper contract remedy is restitution restoring the parties to the status quo ante, not expectation damages based on hypothetical lawful play. The documented winnings are direct benefits obtained under the void contract and may be disgorged.