Better Bets Ventures, LLC v. Pa. Gaming Control Bd.

304 A.3d 66

BETTER BETS VENTURES, LLC, Petitioner v. PENNSYLVANIA GAMING CONTROL BOARD, Respondent Michael Brozzetti, Petitioner v. Pennsylvania Gaming Control Board, Respondent Frank Brozzetti, Petitioner v. Pennsylvania Gaming Control Board, Respondent Lendell Gaming, LLC, Petitioner v. Pennsylvania Gaming Control Board, Respondent Richard Teitelbaum, Petitioner v. Pennsylvania Gaming Control Board, Respondent

No. 386 C.D. 2022

No. 387 C.D. 2022

No. 388 C.D. 2022

No. 389 C.D. 2022

No. 390 C.D. 2022

Commonwealth Court of Pennsylvania.

Argued September 11, 2023

Decided October 12, 2023

Helen L. Gemmill and J. Andrew Crompton, Harrisburg, for Petitioners.

Daniel Straszynski, Assistant Chief Counsel, Harrisburg, for Respondent.

BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE ELLEN CEISLER, Judge

OPINION BY JUDGE McCULLOUGH

In these consolidated appeals, Petitioners Better Bets Ventures, LLC (Better Bets), Michael Brozzetti and Frank Brozzetti, Jr. (together, the Brozzettis), Lendell Gaming, LLC (Lendell Gaming), and Richard Teitelbaum (Teitelbaum) (collectively, Petitioners or Applicants) seek review of the Pennsylvania Gaming Control Board's (Board) orders and Corrected Adjudication issued on March 23, 2022, and March 24, 2022, respectively. Therein, the Board denied Petitioners’ several applications (Applications) for both video gaming terminal operator (Better Bets and Lendell) and video gaming terminal principal (Teitelbaum and the Brozzettis) licenses pursuant to the act relating to video gaming terminals, also commonly known as the Video Gaming Act. ¹ The Board denied the Applications, in essence, because of Petitioners’ involvement in and association with the "skill games" industry in Pennsylvania. On appeal, Petitioners argue that the Board committed legal error and abused its discretion in denying the Applications on that basis. After careful review, we agree. We accordingly reverse the Board.

I. FACTS AND PROCEDURAL HISTORY

The facts material to the issues presented in these appeals are not disputed. The Board made extensive findings of fact in its Corrected Adjudication, a large portion of which was based on stipulations of fact submitted by the parties. See Reproduced Record (R.R.) at 80a, 594a. We summarize the Board's pertinent findings as follows. ²

A. Teitelbaum and Lendell Gaming

Teitelbaum is the sole owner, corporate officer, and decision-maker of Lendell Gaming, a Pennsylvania limited liability company. Teitelbaum also is the sole owner, corporate officer, and decision-maker of Lendell Vending, Inc., a Pennsylvania Corporation formed in 2003 (Lendell Vending). ³ Lendell Vending operates amusement equipment, automated teller machines, and jukeboxes in Pennsylvania and New Jersey. Teitelbaum first became aware of "skill games" ⁴ in 2015 when he was approached by Lou Miele, the owner of Miele Manufacturing, Inc. (Miele), which manufactures skill games for vending companies. Miele provided to Teitelbaum a copy of the Beaver County Court of Common Pleas decision in In re Pace-O-Matic, Inc. Equipment I.D. No. 142613 , 2014 WL 12999182 (Pa. C.P., Beaver Cnty., No. M.D. 965-2013, filed December 23, 2014) ( Beaver County Case ), which held that a skill game manufactured by Miele, branded as "Pennsylvania Skill," was not an illegal gambling device subject to forfeiture. See R.R. at 963a-75a. Miele also provided Teitelbaum with a copy of testimony given by Major Thomas Butler, the Director of the Pennsylvania State Police Bureau of Liquor Control Enforcement (BLCE), before the Pennsylvania House of Representatives regarding skill games, their distribution throughout the Commonwealth, and BLCE's decision not to take action against skill game operators given the current state of Pennsylvania law.

In 2016, Teitelbaum, through Lendell Vending, began purchasing skill games from Miele and offering them to customers. Teitelbaum purchased and marketed only the brand of "Pennsylvania Skill" games found to be legal in the Beaver County Case . In August 2018, Lendell Gaming applied for a video gaming terminal operator license, and Teitelbaum applied for an associated video gaming terminal principal license. In October 2018, during the investigation conducted by the Board's Bureau of Investigations and Enforcement (BIE), ⁵ the Board issued Lendell Gaming and Teitelbaum conditional licenses. BIE confirmed with Teitelbaum that he operated skill games and requested a list of the names of Teitelbaum's skill games and their locations, which Teitelbaum provided.

On June 10, 2019, the Pennsylvania House of Representatives Gaming Oversight Committee conducted a hearing on electronic gambling devices, at which Major Scott T. Miller, then-director of BLCE, and Drew Svitko, the Executive Director of the Pennsylvania Lottery (Lottery), testified regarding the problems they believed skill games posed in Pennsylvania. Major Miller testified that skill games do not have controls in place to prevent underage gambling like those that are in place at casinos. He further testified that proceeds from skill games typically are paid to owners in cash, and, because they are unregulated, the games do not have payout requirements like slot machines at licensed facilities.

Mr. Svitko gave his opinion regarding the negative impact that skill games have had on the Lottery. Specifically, he testified that (1) skill games cause an annual loss of $138 million that otherwise would be spent on programs and services for senior citizens; (2) skill games are video gambling machines; (3) skill games often resemble Lottery machines and are placed near Lottery machines in establishments to give the impression that they are a sanctioned Lottery game; and (4) if skill games remain in competition with the Lottery, such competition could result in hundreds of millions of dollars in future lost Lottery revenue. Both Major Miller and Mr. Svitko testified that skill games are illegal in Pennsylvania.

On June 12, 2019, BLCE notified Teitelbaum and other liquor licensees that skill games are illegal and that their operation would result in citations against their liquor licenses. As of July 1, 2019, Lendell Vending had provided 211 "Pennsylvania Skill" games to 125 businesses in Pennsylvania. On February 27, 2020, the Board's Office of Enforcement Counsel (OEC) sent Lendell Gaming and Teitelbaum's counsel a Notice of Recommendation of Denial of Initial Application (Lendell Denial Notice) indicating that OEC would recommend to the Board that their license Applications be denied. In pertinent part, the Lendell Denial Notice advised as follows:

Please be advised that [OEC] is of the opinion that these [skill games] are unlicensed and unregulated video gaming terminals and/or slot machines, skilled slot machines, or hybrid slot machines that have not been approved by the Board for manufacturing or distribution in Pennsylvania. As a result of the unapproved distribution of these unlicensed and unregulated video gaming terminals and/or [s]lot [m]achines by [ ] Teitelbaum, through Lendell Vending, [OEC] is of the opinion that [ ] Teitelbaum and/or Lendell Gaming have failed to meet the character requirements pursuant to 4 Pa. C.S. § 3502(b) and (f) and/or the overall suitability requirements of a principal applicant and/or terminal operator applicant.

....

[OEC] is of the opinion that by providing, and continuing to provide, these unlicensed and unregulated video gaming terminals and/or [s]lot [m]achines, without Board authorization and proper licensure, [ ] Teitelbaum has violated the Video Gaming Act, the Gaming Act, and the Board's regulations. ...

....

[OEC] is also of the opinion that these violations of the Video Gaming Act, the Gaming Act, and the Board's regulations, along with the underlying facts[,] demonstrate that [ ] Teitelbaum does not possess the requisite good character, honesty, and integrity required by the Video Gaming Act, and is therefore not suitable for a [v]ideo [g]aming [t]erminal [p]rincipal [l]icense. [OEC] holds the position that unregulated, untested, and unapproved video gaming terminals and/or [s]lot [m]achines pose a threat to the public interest and the effective regulation and control of video gaming operations. Therefore, it is in the public interest to deny video gaming terminal applications in such cases. As such, [OEC] is OBJECTING to [ ] Teitelbaum's [A]pplication for a [v]ideo [g]aming [t]erminal [p]rincipal [l]icense and recommending that the Board DENY [ ] Teitelbaum's [A]pplication.

....

[OEC] is of the opinion that denial of [ ] Teitelbaum's application for a [v]ideo [g]aming [t]erminal [p]rincipal [l]icense and Lendell Gaming's application for a [v]ideo [g]aming [t]erminal [o]perator [l]icense is consistent with the requirements of the Video Gaming Act and the Board's regulations and is overall in the public interest. ...

(R.R. at 13a-18a) (emphasis in original).

B. Better Bets and the Brozzettis

Better Bets is a limited liability company based in Moscow, Pennsylvania. The Brozzettis each own a 50% interest in Better Bets. The Brozzettis also each own a 33.33% interest in another business, Hugo Amusements, LLC (Hugo). Their father, Frank Brozzetti, Sr., owns the remainder of Hugo. Since 2015, Hugo has been in the business of providing skill games to Pennsylvania businesses and, as of July 16, 2020, had provided 155 skill games to 86 businesses in the Commonwealth. Included among the skill games provided to businesses by Hugo are the "Diamond Choice Skill Game 1" and "Diamond Choice Skill Game 2" games (Diamond Choice Games). On March 23, 2017, the Luzerne County Court of Common Pleas held that the Diamond Choice Games were illegal gambling devices subject to forfeiture under Section 5513 of the Crimes Code, 18 Pa. C.S. § 5513 ( Luzerne County Case ). ⁶ (R.R. at 976a.)

On January 17, 2019, Better Bets submitted Applications for both a video...