This opinion by Justice Hoffstadt has a ton going for it, and I really like the way he goes about it. I also think it's a fascinating topic, both on the particular issue it addresses as well as a matter of the overarching question of how the common law evolves in California.
It's a topic near and dear to the hearts of many people: gambling debts. Can you sue for them in California courts?
The defendant here, Kevin Long, took a large number of trips to Macau and spent -- and lost -- a ton of money in casinos. He took out $11 million in casino chips and only paid back $1.7 million. So he owes a massive amount of money, so plaintiff sues him in California, which is where he lives.
Will California courts hear that lawsuit?
The Court of Appeal says: No.
Traditionally, California courts didn't enforce gambling debts because gambling was illegal. Obviously, the latter is no longer the case, at least in a ton of areas. Moreover, the gambling at issue here was not illegal. Plaintiff accordingly argues that it makes no sense not to enforce gambling debts incurred in legal gambling, and so the traditional common law rule should change.
Justice Hoffstadt disagrees. He starts the opinion by noting that California generally follows the common law of England (Civil Code sect. 22.2), which has refused to enforce gambling debts since the Statute of Anne. So that's the default rule of decision. Moreover, he holds that there's no reason to change that rule now. Just because California has allowed some gambling doesn't mean we necessarily allow enforcement of gambling debts generally, so lawsuit dismissed.
As I said, there's a lot going for the opinion's analysis. I particularly liked -- and agree with -- the fact that the opinion distinguished between gambling, on the one hand, and gambling debts on the other. The two are not synonymous. It's entirely rational, in my view, to allow gambling, but nonetheless refuse to enforce gambling debts. It's one thing to say that a gambler who has the money to burn in front of him is allowed to gamble. It's quite another, in my view, to say that gambling no more pernicious when the gambler does not have the money and instead is taking out (often ever-increasing) loans to chase his losses. It doesn't take a rocket scientist to know that "gambler's ruin" -- and its effect on both individuals and society as a whole -- is substantially more likely when you're permitted to take out loan after loan after loan from the casino than when you're limited to the cash you brought with you. It makes eminent sense to me to legally distinguish between the two. The fact that we allow one does not necessarily equate to allowing the other. Similarly, the fact that we allow lotteries and the like hardly establishes that we'll enforce gambling debts writ large.
So all that I like, and I think today's opinion makes eminent sense on that front.
I do think, however, that there are a couple of areas in which the opinion could be a fair piece stronger.
First, I think that the argument raised in footnote five is perhaps stronger than Justice Hoffstadt gives it credit. Plaintiff notes, correctly, that California regulations currently allow legal card rooms to extend credit to their customers, with specific limitations. Justice Hoffstadt responds that that doesn't prove that the resulting debts are enforceable. But why allow an extension of credit -- and, even then, in only limited and particularized settings -- if the enforcement of any of those debts is impermissible? To me, that would make no sense. Why not either prohibit loans entirely (or, conversely, allow all of 'em) if none of them can be enforced anyway?
A similar problem exists in footnote six. California precedent currently allows California courts to enforce judgments of other tribunals (e.g., other states) even when those judgments enforce gambling debts. That's not, California courts have held, contrary to our public policy. But if we're going to enforce those debts, why aren't we willing to enforce the debts directly ourselves? Justice Hoffstadt responds that we have more deference (under the Full Faith and Credit Clause) to judgments, and that's true. But there's a public policy exception to that deference -- one that we don't apply with respect to gambling debts. If there's not a public policy reason not to enforce gambling debts in that context, why is there nonetheless a public policy reason to not enforce gambling debts in our own forum? That does not make facial sense: either gambling debts are sufficiently wrong to enforce or not. Justice Hoffsadt doesn't really give a reason, in my view, why direct enforcement in our own courts would be inferior to blanket enforcement by other courts; indeed, having those suits heard in our own courts would allow us to potentially weed out the abusive gambling debts from nonabusive ones, as opposed to simply rubber stamping whatever judgment was rendered by the other jurisdiction.
More fundamentally, what's the point of California's nonenforcement of gambling debts if all the plaintiff has to do is simply sue in a different court (e.g., in Macau, or Nevada, or what have you) and then bring the judgment here, at which point we enforce it? That seems to exalt form over substance.
One final thought. Justice Hoffstadt begins the opinion by stressing that he's following the English common law on this score, which is the default rule under the California Civil Code. Fair enough, and that common law has indeed prohibited enforcement of gambling debts for some time. He also notes on page six of the opinion that our incorporation of English common law includes incorporation of English statutes passed by Parliament. Fair enough. So California generally does what England does.
But here's the thing. Although none of the briefs of the parties seem to mention it, I believe that English law currently does enforce gambling debts, at least since the passage of the Gambling Act of 2005. Yes, before that, contracts related to gambling (including but not limited to debts arising therefrom) were not enforced. But Section 335 of the Act seems to fairly clearly repeal that law and allow their enforcement; moreover, the government of England expressly says that gambling debts can now be legally enforced in English courts.
Given the structure of today's opinion, and its reliance upon English law and California Civil Code 22.2, that seems like a pretty important fact, no? So I'd love to hear how Justice Hoffstadt would deal with it. (Sure, he can say that the parties waived that argument by not raising it, but that just means that the opinion's holding is "good for this case only" and doesn't really answer the broader question.)
Regardless, it's definitely an opinion worth reading, and one with which I have a ton of sympathy. I just still have some questions after reading it -- ones that make me wonder whether I'd be compelled to go the other way notwithstanding my strong personal preferences in this regard.
