American Amusements Co. v. Nebraska Dep't of Revenue

282 Neb. 908

807 N.W.2d 492

AMERICAN AMUSEMENTS CO., a Nebraska corporation, and Greater America Distributing, Inc., a Nebraska corporation, appellees,

v.NEBRASKA DEPARTMENT OF REVENUE, a Nebraska state agency, et al., appellants.

No. S–10–804.

Supreme Court of Nebraska.

Dec. 23, 2011.

Syllabus by the Court

1. Declaratory Judgments. An action for declaratory judgment is sui generis; whether such action is to be treated as one at law or one in equity is to be determined by the nature of the dispute.

2.

Equity:

Appeal and Error

. On appeal from an equity action, an appellate court tries factual questions de novo on the record and, as to questions of both fact and law, is obligated to reach a conclusion independent of the conclusion reached by the trial court. But when credible evidence is in conflict on material issues of fact, an appellate court considers and may give weight to the fact the trial court observed the witnesses and accepted one version of the facts over another.

3.

Statutes:

Appeal and Error

. Statutory interpretation is a question of law, which an appellate court resolves independently of the trial court.

4. Statutes: Appeal and Error. Statutory language is to be given its plain and ordinary meaning, and an appellate court will not resort to interpretation to ascertain the meaning of statutory words which are plain, direct, and unambiguous.

5. Gaming: Words and Phrases. Gambling occurs in Nebraska when a bet is placed on an outcome that is determined predominantly by chance.

6. Injunction. An injunction will not lie unless the right is clear, the damage is irreparable, and the remedy at law is inadequate.

Jon Bruning, Attorney General, L. Jay Bartel, and Michael B. Guinan, and Mark C. Laughlin, Special Assistant Attorney General, of Fraser Stryker, P.C., L.L.O., for appellants.

Thomas J. Culhane and Patrick R. Guinan, of Erickson & Sederstrom, P.C., Omaha, for appellee American Amusements Co.

Thomas M. Locher, Omaha, and Joseph J. Kehm, of Locher, Pavelka, Dostal, Braddy & Hammes, L.L.C., Omaha, for appellee Greater America Distributing, Inc.

HEAVICAN, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER–LERMAN, JJ.

STEPHAN, J.

This appeal focuses on the legality of a video gaming device known as Bankshot, which was developed by American Amusements Co. (American Amusements) and distributed by Greater America Distributing, Inc. (collectively appellees). Appellees filed this lawsuit after the State seized two Bankshot devices as alleged illegal gambling devices, seeking a declaration that they were not illegal. The state agencies and officers who were named as defendants filed a counterclaim seeking a declaration that Bankshot was a “game of chance” and therefore an unlawful gambling device. Following a bench trial, the district court for Lancaster County found that Bankshot was a game of chance when played in some modes, but not when played in others. The court declined the request for injunctive relief by the named state agencies and officers, who now appeal from the judgment. We affirm.

I. FACTS AND PROCEDURAL HISTORY

1. Background

John Fox is the president of American Amusements. In mid–2007, prior to marketing Bankshot, Fox asked a Nebraska State Patrol officer, Don Littrell, to assess the legality of the proto-type. Fox understood that Littrell was the State of Nebraska's gambling device expert, and Littrell agreed that he was the State Patrol's “go-to-guy” in this area. Littrell advised Fox and American Amusements that the initial prototype of Bankshot was not legal, because the game did not involve a predominance of player skill. American Amusements then redesigned Bankshot and again asked Littrell to assess its legality. Littrell recommended submitting Bankshot to a third-party testing facility and suggested two such facilities: Eclipse Compliance Testing and Gaming Laboratories International. In late summer 2007, Eclipse Compliance Testing tested the device and issued a written report in October 2007 concluding that Bankshot was predominantly a game of skill and therefore was a legal device in Nebraska.

Around January 2008, Bankshot games were placed into service in Nebraska. As many as 430 Bankshot games were located in 143 different Nebraska cities. After the Bankshot games had been in place for approximately 1 year, American Amusements received notice from the Nebraska Department of Revenue that additional testing of Bankshot was necessary, and American Amusements agreed to provide a Bankshot device for the additional testing. But before it did so, the State seized two Bankshot devices and submitted the devices for testing at both Eclipse Compliance Testing and Gaming Laboratories International. In a letter dated April 14, 2009, the director of the Charitable Gaming Division stated that the purpose of this testing “was to obtain opinions on whether Bank[s]hot was primarily a game of chance, and therefore illegal, or primarily a game of skill.” The testing again concluded that Bankshot was primarily a game of skill and was thus legal in Nebraska. At least one of the Bankshot devices submitted for testing used the same version of software that was in use at the time of trial in this case.

In September 2009, the State seized two more Bankshot devices. At the time of trial, these devices had not been returned. On September 17, appellees filed this declaratory judgment action, naming as defendants the Nebraska Department of Revenue; the Nebraska State Patrol; Col. Bryan Tuma, the superintendent of the Nebraska State Patrol; Doug Ewald, the Nebraska Tax Commissioner; and Jon Bruning, the Nebraska Attorney General (collectively the State).

2. Bankshot Game

(a) Basics of Game

The Bankshot gaming device is equipped with a 19–inch video monitor, on which all game play is displayed; a currency acceptor; and either a thermal voucher printer or a ticket dispenser. A player interacts with the game by using the touchscreen interface to complete game play, and the device also includes a single-button interface (located just below the monitor) which the player can use to initiate game play and stop on puzzles.

A player may insert $1, $5, $10, or $20 into the Bankshot currency acceptor. One hundred game credits are received for each $1 inserted into the machine. The game rules and play instructions are accessed by selecting the “Help” button on the touchscreen. The first screen displayed explains the game play process.

To initiate a game, the player selects the number of credits to put at risk, choosing from 25, 50, 100, or 400. Each Bankshot game consists of a series of puzzles presented to the player as a three-by-three grid of pool balls, and the object of the game is to solve puzzles by creating a winning “tic-tac-toe” combination of three like-colored balls in a row. The puzzles will never by default contain a winning combination of three pool balls in a row of the same color, but a winning combination is possible with respect to each puzzle.

The game begins when the player presses the play button on the touchscreen or button panel. At that time, depending upon the mode of play selected, the pool balls will either start to spin or scroll indefinitely until the player chooses to stop on a given puzzle. Once the balls have stopped, the player then decides where to replace one of the nine displayed pool balls with a ball marked “Wild.” The player does this by touching a ball displayed on the screen to replace it with the “Wild” ball.

(b) Modes of Play

A player may choose from three different modes of puzzle presentation by selecting one of three buttons labeled “Spin,” “Slow,” or “Fast.” All three modes present the same puzzles in slightly different ways. When a player chooses to play in Spin mode, the nine pool balls displayed on the screen begin to spin in place simultaneously when the player presses start. They will then all come to a brief stop, after which they will begin to spin again. This continues indefinitely until the player presses the stop button.

The Slow and Fast modes of play both display the pool balls scrolling across the screen in a backward “S” pattern from left to right, top to bottom. When played in Slow mode, the balls continuously scroll and a green number appears on every ninth ball. The green number denotes where each puzzle in the chain starts. When the player presses the stop button, the scrolling pool balls stop when the ball with the green number then displayed on the screen reaches the lower right position of the play screen. In Fast mode, the balls will pause on each puzzle as it is scrolled, similar to the pause during Spin mode play.

(c) Prizes

Prize amounts are based in part upon how long it takes a player to select a ball and replace it with the “Wild” ball once the player chooses a puzzle. A time meter is displayed graphically by a slider bar directly below the puzzle display. When a player chooses a puzzle, a black dot begins to move across the slider bar from left to right, through four regions colored green, yellow, orange, and red. If the player places the “Wild” ball while the black dot is in the green region, the prize amount is multiplied by 1.5. The yellow and largest region awards the amount risked, the orange region awards one-half of the amount risked, and the red region awards one-quarter of the amount risked. If the player fails to make a selection by the time the black dot reaches the far right side of the slider bar, which takes approximately 6 seconds, no prizes are awarded for that particular puzzle.

Prizes also vary depending on how many credits are put at risk and what color combination of pool balls creates the tic-tac-toe. Each pool ball has both a number and a distinct color: “1–balls” are yellow, “2–balls” are blue, “3–balls” are orange, “4–balls” are purple, “5–balls” are red, “6–balls” are green, “7–balls” are maroon, and “8–balls” are black. Pool balls labeled “Bonus” are also presented. A player may want to...