Do Casinos Owe a Duty of Care to Compulsive Gamblers?
By Gary Ehrlich

A highly publicized case recently filed in federal court in New Jersey, Taveras v. Resorts International Hotel Inc., et al., presents the question whether casinos owe a duty of care to compulsive gamblers that can form the basis for a private lawsuit. 1 The question has been previously raised in other jurisdictions but not yet definitively resolved.

According to the complaint, the plaintiff, Arelia Taveras, is a New York attorney who had a successful and lucrative practice. 2 She began gambling large sums in Atlantic City in 2003, first at Resorts, where she developed a relationship with the casino staff and was furnished with limousines, hotel suites, food and entertainment, and other inducements to continue her gambling.

It is further alleged that, late in 2004, Taveras’ gambling went from recreational to compulsive. She began to gamble for hours or days at a time, exhibiting disorientation or erratic behavior. Resorts personnel became aware of Taveras’ problem, but did nothing to stop her gambling. In fact, Resorts sought to exploit her compulsive conduct for its own benefit. As a result of an invitation, Taveras also visited the MGM Grand in Las Vegas in 2005, while she continued with more frequent gambling binges at Resorts. She claims to have gambled for days at a time, living only on orange juice and candy bars, losing an average of $5,000 each hour. Eventually, Taveras’ losses approached $1 million.

Finally, in late 2005, Resorts allegedly requested that Taveras sign a waiver of liability if she wished to continue gambling there. When she refused, she was terminated from the casino. As a consequence of her compulsive gambling, Taveras "lost her license to practice law, her parents’ home (worth $850,000), her car, her apartment, her law office, [and] her reputation" and "[was] forced … to seek almost a year of treatment in a rehabilitation facility." The complaint seeks $20 million in damages.

The predicate for Taveras’ federal action is a count charging Resorts, and other casinos in Atlantic City and Las Vegas, with violation of the federal Racketeer Influenced and Corrupt Organizations Act (RICO) based on their use of mail to convey allegedly false and fraudulent information to Taveras. 3 The remaining counts of the complaint would all be considered pendent state tort claims: negligence, intentional and reckless disregard for plaintiff’s safety, breach of common law duty of care, strict liability, respondeat superior, breach of implied covenant of good faith and fair dealing, unjust enrichment, and intentional or negligent infliction of emotional distress.

Insofar as Taveras’ RICO claim is concerned, the United States Court of Appeals for the Seventh Circuit has ruled under virtually identical factual circumstances that marketing mailings received by a gambler from a casino operator cannot serve as predicate acts of mail fraud supporting a RICO claim. (Williams v. Aztar Indiana Gaming Corp., 351 F.3d 294 (7th Cir. 2003)) The court stated: "As for the promotional mailings, even if the statements in these communications could be considered ’false’ or ‘misrepresentations,’ it is clear that they are nothing more than sales puffery on which no person of ordinary prudence and comprehension would rely." (Id. at 299) In fact, the court held the RICO claim to be so baseless that its dismissal required dismissal of all pendent state claims as well. (Id. at 299-300)

Although Taveras’ complaint might suffer the same fate in federal court, the question remains whether, as a matter of state tort law, there is—or should be—a duty of care owed by casinos to compulsive gamblers and, more to the point, whether such a duty should be enforced by means of private actions for damages. On this issue, arguments and counterarguments abound.

In a nutshell, the argument for the duty, and liability for its breach, is that casinos are aware of the dangers posed by compulsive gambling, that they are in a position to identify compulsive gamblers by their gambling patterns, and that they should not be able to exploit their patrons’ known weaknesses to maximize their own profits. This argument is similar to one made previously with regard to whether patrons who have become intoxicated by the constant free drinks provided by casino personnel may recover their losses from a casino. That issue engendered a lively debate in the courts.

GNOC Corp. v. Aboud, 715 F. Supp. 644 (D.N.J. 1989), first held that patrons could recover as a matter of tort law. Tose v. Greate Bay Hotel and Casino Inc., 819 F. Supp. 1312 (D.N.J. 1993), aff’d, 34 F.3d 1227 (3d Cir. 1994), suggested that such actions should be treated as contract matters rather than as torts. Finally, Hakimoglu v. Trump Taj Mahal Associates, 876 F. Supp. 625 (D.N.J. 1994), aff’d, 70 F.3d 291 (3d Cir. 1995), refused to recognize a common law cause of action against a casino for permitting a patron to gamble while intoxicated, although the court did suggest the possibility of a viable intoxication defense by the patron to a debt collection action by the casino.

The argument against liability was summarized in a recent New Jersey decision addressing claims that casino employees had encouraged the plaintiff to drink to excess, gamble at high stakes games while intoxicated, and incur significant debt, thereby taking advantage of his addictions to alcohol and gambling, and violating "good faith lending practices." (Annitto v. Trump Marina Hotel Casino, 2005 WL 4344137 at 1 (App. Div. 2006) (unpublished per curiam)) As the court observed:

It is reasonable to suggest that plying a casino patron with free alcohol, when he is known to be a compulsive drinker and gambler, and then extending house credit or inducing that patron to borrow against his own bank card, is likely to cause the patron significant consequential damage. On the other hand, that foreseeability applies to the casino patron himself, since he clearly has a duty of self-care given his knowledge of his own proclivities. (Id. at 6 (emphasis added))

The court ultimately declined to either create or rule out a common law cause of action, finding that the plaintiff’s own failure to abide by any standard of care "would require any reasonable jury to apportion liability more than 50 percent against him." (Ibid)

The personal responsibility argument was also found persuasive in Merrill v. Trump Indiana Inc., 320 F.3d 729 (7th Cir. 2003), which anticipated that Indiana would not recognize a common law duty on casinos to prevent a compulsive gambler from gambling. Also drawing the analogy to alcohol, the court stated:

In Indiana, a tavern proprietor serving alcohol can be held liable, under certain conditions, if an intoxicated person injures another patron or a third party. … But a patron who drives while intoxicated, causing his own injuries, cannot recover from the tavern that served him alcohol. … Indiana law does not protect a drunk driver from the effects of his own conduct, and we assume that the Indiana Supreme Court would take a similar approach with compulsive gamblers. (Id. at 733)

Courts have also expressed a reluctance to create new common law causes of action in the casino gambling area, because casinos are already pervasively regulated, (see Hakimoglu, supra, 876 F. Supp. at 633) and because a balancing of the public policy considerations is a matter best left to the legislature rather than to the courts (see Stulajter v. Harrah’s Indiana Corp., 808 N.E.2d 746 (Ind. Ct. App. 2004)). Like other states, New Jersey has statutorily established a self-exclusion list for problem gamblers (N.J.S.A. 5:12-71.2). But that same statute provides that a casino is not liable for any monetary or other harm as a result of failing to exclude or otherwise permitting a self-excluded person to gamble. In fact, N.J.S.A. 5:12-71.3 goes on to state that no self-excluded person may collect any winnings or recover any losses as a result of gaming activity. 4

The import of these statutes is clear. Self-exclusion is a means to assist problem gamblers in helping themselves, but it is the problem gambler—not the casino—that is primarily responsible for his or her own welfare. It is arguable that creating a cause of action by which compulsive gamblers could recover large sums of money from casinos could actually encourage problem gambling by rendering a "no-lose" proposition (i.e., if the compulsive gambler wins, he or she wins, and if the compulsive gambler loses, he or she can recover losses as well as collect damages). 5

Of course, the counter to the "leave it to the legislature" argument is that state legislatures, always hungry for casino tax revenues, are unlikely to create remedies that would render their casinos less profitable. As expressed in the appellant’s reply brief in Williams, supra: "[O]ne of the paramount reasons for this court to speak again to this issue is that the issue is unlikely to get fair treatment in the legislatures. One can safely assume that there will always be paid proponents for the casinos to bend the ears of the legislators. But who will speak for the addicted gamblers, if not the courts?" (2003 WL 22721568 at 7) The predictable response was stated in the appellee’s brief:

Williams argues that since government cannot or will not solve the problem, private business is responsible to solve the problem. The implication[s] of Williams’ public policy argument extend beyond the issue of gambling. If the state doesn’t have the funding to fully address alcoholism, it then becomes the duty of those providing alcohol, i.e., manufacturers and sellers, to implement procedures, measures and policies to identify and not sell alcohol to alcoholics. … Likewise, the food service industry would have a duty to fund procedures, measures and policies to identify and limit food sales to obese people. The implication of Williams’ public policy argument fails to give effect to a fundamental concept of the rule of law, i.e., personal responsibility. (2003 WL 22721567 at 17)

For all the reasons outlined, it appears that the Taveras complaint has some significant legal vulnerability. Should it actually go to trial, it may have some practical vulnerability as well. Taveras’ story was presented on ABC’s "Good Morning America" program, which then invited viewers to comment on ABC’s website. There were a few sympathetic responses, like this one:

A gambler who vows and intends that their disastrous trip to the casino will be their last, will in a few days be bombarded in the mail by offers from that casino of comps, free hotel stays and more, that are just too tempting for a compulsive gambler to refuse. The casino industry does not want a compulsive gambler to quit any more than the tobacco companies genuinely want smokers to quit, or beer and alcohol manufacturers want alcoholics to quit. It is all about their getting rich on your weaknesses.

But overwhelmingly, the comments were more like this:

[T]he message I hear loud and clear is this: I shouldn’t be responsible for my own poor choices or bad behavior. … If you think casinos are so dangerous, then lobby to change the law, or be a guest speaker at schools warning people of this danger. DON’T give the message to our children/families that every time they screw up, they can blame someone else and get rewarded with a cash bonus.

Based on those kinds of sentiments, the Taveras complaint, and the legal theories on which it is based, appears—in gambling terms—to be a long shot.

Gary Ehrlich is an attorney and Vice President of Catania Consulting Group Inc.

1 See, e.g., Jamie Nettleton & Kylie Matheson, Are problem gamblers owed a duty of care under Australian law? (Addisons Commercial Lawyers 2007)(link on IMGL website); Jasminka Kalajdzic, Cameron’s Rejection of a Duty of Care to Problem Gamblers: A Problematic Defense of Ontario’s Gaming Industry, 12 Gaming Law Review 55 (2008); Jamie Cameron, Problem Gamblers and the Duty of Care: A Response to Sasso and Kalajdzic, 11 Gaming Law Review 554 (2007); William Sasso & Jasminka Kalajdzic, Do Ontario and its Gaming Venues Owe a Duty of Care to Problem Gamblers?, 10 Gaming Law Review 552 (2006).
2 More information on Taveras and her lawsuit can be found on Taveras’ website, www.mycasinolawsuit.com.
3 Another count charges Resorts with failing to file Currency Transaction Reports (CTRs) as required by federal law, but it is so unlikely that a private cause of action would be recognized for CTR violations that this allegation will not be further addressed here.
4 Since a self-excluded person in New Jersey cannot recover from a casino as a result of gambling, it would be anomalous if Taveras, who did not avail herself of the self-help mechanism, could be in a better legal position.
5 For a discussion of the public policies inherent in such situations, see Frank Catania and Gary Ehrlich, When Crime Pays: A Gaming Regulatory Perspective on What to Do When a Minor or Other Prohibited Person Wins or Loses Money in a Casino, 3 Gaming Law Review 129 (1999).