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In 2010, German gambler Konstantin Zoggolis had taken out credit from the Wynn casino in Las Vegas to the tune of about $1.3 million. Wynn said it was time to pay up; Zoggolis couldn't pay. I know you're thinking: "Why would Zoggolis sue Wynn? These were his debts! Of course he should have to pay them!" But there's more going on here.
The Nevada Gaming Commission allows a gambling patron to "self limit his access to the issuance of credit." Basically, a compulsive gambler can tell the casino, "No matter how much I ask, don't lend me any more money." Wynn and Zoggolis had an agreement that Wynn couldn't loan him any more than $250,000, but in spite of this agreement, the casino loaned him $1.05 million more in September and October 2010.
There'll Be Time Enough for Lawsuits When the Administrative Remedies Are Done
Zoggolis sued Wynn on breach of contract because it had loaned him more than the amount they agreed on. (Of course, that didn't stop him from spending all that extra money, but he claimed he was under no duty to pay the extra back.) At district court, Wynn moved to dismiss the claim because Zoggolis had failed to exhaust state administrative remedies as required by Nevada law. The district court agreed, and Zoggolis appealed to the Ninth Circuit.
Hang On -- Not a Bust Yet
The Ninth Circuit wasn't so ready to fold. The question was whether Zoggolis' debt was the kind that had to be exhausted under Nevada law.
Nevada provides that "gaming debts not evidenced by a credit instrument are void and unenforceable and do not give rise to any administrative or civil cause of action." This is because, at common law, gambling debts weren't legally enforceable -- but when a gambling debt is part of a loan, the court is enforcing the loan, not a gambling debt, regardless of what the loan is used to buy.
There's another wrinkle, though: The Nevada Gaming Control Board is where a creditor goes to collect on a gambling debt "not evidenced by a credit instrument." Wynn issued "markers" to Zoggolis, which are kind of like checks that could be drawn on a person's bank account if he didn't pay his loan back. If these markers were credit instruments, then Zoggolis didn't have to exhaust his remedies with the Control Board. The court said that the markers were credit instruments because they provide a way for the casino to recover the amount of the marker outstanding from the gambler's bank. (There is also a long line of cases characterizing markers as credit instruments.)
Wynn further claimed that only a "licensee" -- i.e., a casino -- can challenge gambling debts. The court agreed that only a licensee could "enforce a debt premised on a credit instrument," but disagreed that " only licensees may litigate a gaming debt in court." It remains unclear why Wynn loaned Zoggolis an amount well in excess of their agreed-upon maximum.
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