Publications
Global Gaming Exposition - Las Vegas
September 17, 2003
Class-Action Lawsuit by Problem Gamblers
by Michael D. Lipton, Q.C.* Elkind, Lipton & Jacobs
- Since 1980’s, gaming industry in Canada has done an about
face of 180 degrees.
- Gambling is now ubiquitous in Canada:
o 76 permanent casinos across the country, and 12 more
soon to be added;
o approximately 40,000 slot machines;
o over 70 horseracing tracks; and
o nearly 40,000 video lottery terminals (“VLTs”).
- The province of Ontario has the largest number of casinos in Canada
(24), followed by the provinces of British Columbia (21), Alberta
(18), Saskatchewan (6), Quebec (3), and Manitoba (2) and Nova Scotia
(2).
- Across Canada, gross revenues topped $11 billion in 2002, of which
$6 billion was profit, according to Statistics Canada.
- Provincial governments own and operate casinos in the name of the
public. Laws barring gaming generally are set out in the Canadian
Criminal Code (the “Code”), but that gaming which is allowed
by the Code’s exemptions is regulated by provincial governments.
- The Ontario government is making four times more from gambling today
than it was a decade ago, with an anticipated profit of $2.4 billion
this year.
- The Ontario Lottery and Gaming Corporation (“OLGC”)
reported profits of $1.9 billion out of more than $4 billion in revenue
in the 2000-01 fiscal year, according to the annual report released
22 months after the fiscal year ended.
- The incredible expansion in gambling has both positive and negative
consequences for all communities throughout Canada. Problem and pathological
gambling have significant social and financial costs to individual
gamblers, their families and our society at large. Calculating the
financial and social costs of problem gambling is difficult.
- About 2,000 of the approximately 340,000 Ontarians who gamble sought
help in the past year. Nearly 4 per cent of all Ontarians who gamble
are classified as having a moderate or severe gambling problem.
- The Ontario government earns $1.5 million of net revenue per day
from VLTs. VLTs, dubbed “electronic crack cocaine,” have
been shown to be one of the most addictive and potentially the most
dangerous legal forms of gambling.
- For some time it has been speculated that, having introduced gaming
into Canadian society, the provincial governments have incurred a
“duty of care” towards problem gamblers and potential
problem gamblers. Failure to properly exercise this duty of care,
it is surmised, could give rise to civil liability in negligence.
- In Canada, there are a number of lawsuits extant that are testing
this theory in an attempt to obtain compensation for gambling addicts.
Brochu c. Societe des loteries du Québec
- In May 2002, a Quebec court authorized Canada’s first class-action
lawsuit over problem gambling. The Quebec Superior Court ruled that
a case against Loto-Québec, the provincial gaming corporation, may
proceed to trial as a class action. The case, Brochu c.
Societe des loteries du Québec, [2002] J.Q. No. 1062
(QL) is spearheaded by Jean Brochu, a disbarred lawyer, who claims
he lost tens of thousands of dollars playing VLTs and stole $50,000
to cover his debts. The Quebec Court conferred upon the applicant
Brochu, the status of representative to bring a class action on behalf
of a group of individuals described as:
“All persons who, since June 1993, have become pathological
gamblers through using video lottery machines supplied and maintained
by the respondent in bars, beer parlors and other public places.”
On behalf of these individuals, estimated to be 119,000 in number,
Brochu seeks $700 million in damages.
- The Court identified the following legal issues to be dealt with
collectively:
1. each member of the group is a pathological gambler and is thus
suffering from an illness;
2. each member of the group suffers from this illness as a result
of the respondent’s (Loto-Québec) fault;
3. each member of the group has the right to damages which must be
quantified;
4. as regards the civil liability of the respondent;
a. Does the respondent have the obligation to warn users of the risks
of VLT’s?
b. If so, has the respondent fulfilled this obligation?
- The defendant in the above-named action is Loto-Québec. It is seeking
to add 3 manufacturers of gaming equipment as intervenors in the case,
as Loto-Québec’s position is that it does not make the equipment
but merely houses it. It is seeking indemnification from the manufacturers
of the gaming equipment.
- The VLT game known as “Red Hot 7” has created this hotbed
of legal issues.
- Some very interesting questions stem from this lawsuit: What responsibility
does the government have? Does the government have a prima facie duty
of care towards users of its own service? (the customer or participant
is undeniably a gambler). The government here is the sole legal provider
of this service or activity, and it enforces its own enacted laws
making it illegal for others to be providers. (The government even
advertises the exclusive availability of its various forms of gambling
to the general public).
- Are there any valid policy reasons or considerations which justify
a denial of liability? An important factor to consider in this context
is that there are no other legal safeguards in place which address
the problem of compulsive gambling.
- The Brochu lawsuit will likely prompt similar cases
in other provinces.
- Before the Brochu lawsuit was commenced, problem
gambling had received significant attention in Canada. Treatment and
prevention programs were firmly in place in many provinces. As early
as 1999, the provinces, combined, spent over $28 million on problem
gambling treatment programs, clearly not disclaiming responsibility
toward problem gamblers.
- This year, with some of its profits, the Ontario government funds
fifty professional-treatment agencies for gamblers. The OLGC, out
of an expected profit this year of $2.4 billion, is spending $22 million
on research, treatment, education and prevention programs. Accordingly,
there is little doubt that the Ontario government has in a very significant
way, recognized the problem of compulsive gambling, and has made a
very substantial commitment to alleviate the problem.
- Various provinces offer problem gamblers voluntary “self exclusion
policies”. A problem gambler voluntarily reports to a casino
that he has a problem. His photo is taken and distributed to security
personnel at other casinos. He is barred for 6 months, and can face
trespassing charges if he returns. Having offered such a program,
the casino needs to make sure it actually works. Otherwise, it is
holding out a cruelly false promise. If its program proves to be a
sham, it has deceived people who are extremely vulnerable.
- These self-exclusion programs are at the heart of three lawsuits
commenced recently in Ontario: Lisa Dickert recently filed a $1 million
lawsuit against the OLGC for not enforcing the self-exclusion order;
Markham businessman Constantin Digalakis has filed a similar, $7 million
claim; and Gabe Macaluso, a Hamilton businessman, filed a $3 million
claim. It should be noted that the self-exclusion forms clearly state
that the gaming facility assumes no liability.
- Macaluso alleges that Casino Niagara barred him from the premises,
and sent the suicide squad of the Hamilton police to his house, after
he allegedly said “What's the sense of living?" after a
big loss at the baccarat tables in May 2001. The casino, Macaluso
alleges, then invited him back two months later.
- We have to see what unfolds. Casinos should not have the collective
responsibility of facilitating the self-exclusion of customers from
all casinos. Responsibility for excessive gambling is that of the
gambler alone. At the same time, no one should ever be required or
encouraged to advise a self-excluded gambler that it is now safe for
him or her to gamble.
- In a recent newspaper article, Professor Alan Young of Osgoode Hall
Law School in Toronto had occasion to comment on these “problem
gaming” lawsuits. Professor Young acknowledges that “it
is morally irresponsible to promote an expensive recreational activity
without constructing meaningful safety nets to catch the inevitable
few who blur use and abuse,” and that “…in a government-sponsored
[gaming] market, we expect…some efforts to protect the addictive
consumer from the ravages of his/her foolish choice.”
- That said, Professor Young comes down generally against such lawsuits,
stating that unless casino operators “…made no meaningful
efforts to monitor and control the activities of known problem gamblers,”
he remains “skeptical about the merits of suing for compensation
because you gambled away your life savings at the roulette wheel.”
He describes these lawsuits as a manifestation of the unfortunate
legal maxim: “Monkey see, Monkey do, Monkey sue,” and
concludes: “As long as you are capable of understanding the
risks involved in your choices, I think you have to live with the
dream gone bad.”
September 2003
Michael D. Lipton, Q.C. is senior partner with Elkind,
Lipton & Jacobs LLP, a Toronto, Canada law firm. His areas of
specialty are litigation, gaming and tourism and travel law. He is
a member of the International Association of Gaming Attorneys and
the International Masters of Gaming Law. He can be reached at (416)
367-0871 or by e-mail at mdliptonqc@aol.com
Laura A. Ward is an associate at Elkind, Lipton &
Jacobs LLP.
Kevin J. Weber is an associate at Elkind, Lipton &
Jacobs LLP, specializing in litigation and gaming law.
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