Sullivan v. Fox

Citations: 189 Cal. App. 3d 673; 235 Cal. Rptr. 5; 1987 Cal. App. LEXIS 1398Docket: Docket Nos. A033205, A033761

Court: California Court of Appeal; January 30, 1987; California; State Appellate Court

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The consolidated appeals involve the legality of law enforcement's actions against the game of pai gow in commercial gaming establishments operated by the plaintiffs in San Mateo and San Bruno. As of spring 1985, the plaintiffs sought assurances from local authorities that playing pai gow would not result in criminal liability. The situation escalated following a letter from the Attorney General, which declared pai gow illegal under Penal Code section 330 when played as a "banking or percentage game." In response, plaintiff Iola Sullivan filed a complaint for declaratory and injunctive relief in August, noting that prior court orders in Los Angeles and Alameda Counties had permitted pai gow play. Despite knowledge of these orders, local police and the District Attorney threatened arrests and closures if pai gow was played. The trial court granted Sullivan a preliminary injunction on September 16, mirroring the Alameda court's order. Two months later, a second complaint was filed with similar allegations, supported by additional court orders. A preliminary injunction was subsequently issued, reflecting the earlier decisions.

Timely notices of appeal were filed by the district attorney, the sole appellant, regarding orders related to gambling regulation under Section 330. This section classifies as a misdemeanor any individual involved in various prohibited gambling games, which include faro, monte, roulette, and others, whether as an owner or employee, and whether for hire or not. Section 330, among other state statutes, allows for local regulation since the state has not fully preempted gambling laws. Notably, Pai gow is not explicitly listed in Section 330, raising the question of its legality based on whether it qualifies as a banking or percentage game, which is a legal issue.

The historical context shows that Section 330 originally prohibited "any banking game," but was amended in 1885 to include "any banking or percentage game." A banking game involves the house as a participant, accepting wagers from players and taking responsibility for payouts. However, no clear definition for a percentage game exists. The analysis of Section 330 emphasizes the legislative intent behind the distinct terminology, suggesting that each term carries separate meanings.

Section 330 reflects a dual approach to regulating gambling: outright bans on specified games and a broader framework addressing banking and percentage games. In the latter, the house may either directly participate in the game or passively benefit by collecting a percentage of the activity without participating in the actual play. This structure allows the house to profit without bearing the risks associated with the outcomes of the games.

The excerpt addresses the legal interpretation of section 330 concerning commercial gambling, emphasizing that the house's participation is non-existent, yet it still benefits financially. This statute aims to eliminate such gambling practices. The definition of a "percentage game" includes any game of chance where the house collects a portion of wagers or winnings, excluding fees for space and facilities. This interpretation aligns with similar definitions adopted in Nevada for tax purposes, where games involve patrons wagering against each other with the house taking a percentage as a "rake-off."

Plaintiffs contest this definition, arguing that section 330 only prohibits actual participation in gaming, a claim unsupported by the statute's clear language. The use of chapter and section headings as extrinsic aids for statutory interpretation is deemed inappropriate in this case, as the plain wording of section 330 encompasses more than just players. The amici curiae, particularly Huntington Park Club Corporation, advocate for applying the doctrine of ejusdem generis, which suggests that general terms should be interpreted in light of the specific terms that precede them to avoid redundancy.

The amici assert that the games specified in section 330 share certain characteristics: the house banks the game, maintains a statistical advantage, offers simple gameplay, and is prone to manipulation due to its control over the game mechanics.

Amicus proposes to restrict the application of section 330's ban on percentage games to scenarios where the house directly participates in gaming, allowing for cheating, and where players can gain an unfair advantage due to game rules. Although the principle of ejusdem generis has been applied to similar statutory language, it cannot be utilized here due to the legislative intent reflected in the amendments. The 1885 revision changed "any banking game" to "any other banking or percentage game," and the deletion of "other" indicates the Legislature's decision to treat "banking games" and "percentage games" as distinct categories. Therefore, applying ejusdem generis would disrupt the legislative distinctions.

Moreover, while some in the gaming industry define "percentage game" as synonymous with "banking game," this interpretation is flawed. It implies that percentage games are merely a subset of banking games, which contradicts the Legislature’s clear differentiation between the two categories. The statute does not support modifying the definition of percentage game based on industry terminology.

The central issue is whether the manner plaintiffs propose to play pai gow complies with the definition of percentage games. In action No. 299638, plaintiff Sullivan’s declaration indicated that pai gow would be played in accordance with the Los Angeles Order. The general manager confirmed adherence to the specified rules, and the Pai Gow manager noted that participants are charged a rental fee based on their wagers, aligning with the Los Angeles order. In action No. 302073, additional declarations affirmed that pai gow would be played per the terms of a proposed injunction matching the previous order. However, a declaration from a law school professor regarding the classification of pai gow as a banking or percentage game included inadmissible opinions and will be disregarded.

The declarant asserts that the proposed preliminary injunction outlines that plaintiffs at their clubs will only impose a rental charge based on participants' winnings, bets, or playtime. An investigator's declaration regarding pai gow at plaintiff Sullivan's club noted that the house took a five percent cut of bets, but after dismissing the investigator's legal conclusions, only this observation remains relevant. Injunctions must be evaluated according to current law, particularly the established definition of a percentage game. The injunctions permit rental fees based on winnings or bets, both of which qualify as percentage games, while charging based on playtime is allowed. However, the plaintiffs' evidence does not demonstrate compliance with the permissible rental structure, and it suggests that pai gow games may not be lawfully conducted. The evidence indicates that Sullivan's operations align with a percentage game definition, thereby legitimizing the district attorney’s ability to prosecute under section 330. Consequently, the trial courts incorrectly applied legal standards and disregarded clear evidence, leading to an abuse of discretion in granting the injunctions, which are now reversed. The orders issued in Los Angeles and Alameda were nearly identical, asserting that pai gow is not a prohibited game under section 330 and preventing defendants from interfering with its play. The game is characterized by specific rules regarding betting and play structure.

The dealer position in the game rotates among participants, with plaintiffs remaining uninvolved in actual gameplay and having no stake in the outcomes. Plaintiffs may charge a rental fee based on participants' winnings, bets, or playtime, but do not place bets or handle winnings or losses. A round concludes when all hands are played or when the dealer position's wager is resolved, resulting in variable numbers of hands played per round. Participants do not wager against the plaintiffs.

An appeal from a Los Angeles order was dismissed, while an appeal from an Alameda order is pending. A San Joaquin order, similar to previous ones, was filed on October 2nd, with no appeal taken. A declaration from a former deputy sheriff, presented as an expert opinion on whether pai gow is a banking game per section 330, was deemed irrelevant and disregarded by the trial court due to the declarant's lack of legal expertise and its irrelevance to the classification of pai gow as a percentage game. The declaration was criticized for lacking support for its claims. 

Legal opinions from attorney I. Nelson Rose indicated that pai gow does not qualify as a percentage game if the house only collects a flat fee unrelated to bets, confirming that in California, pai gow operates neither as a banking game nor a percentage game. The house does not engage in play and does not take a portion of winnings, reinforcing the definition that the game functions without the house's direct participation in betting.