IN THE SUPREME COURT OF NORTH CAROLINA
2021-NCSC-57
No. 345PA19
Filed 11 June 2021
CRAZIE OVERSTOCK PROMOTIONS, LLC
v. STATE OF NORTH CAROLINA; and MARK J. SENTER, in his official capacity as Branch Head of the Alcohol Law Enforcement Division
On discretionary review pursuant to N.C.G.S. § 7A-31 of a unanimous decision
of the Court of Appeals, 266 N.C. App. 1 (2019), affirming, in part, and reversing and
remanding, in part, an order entered on 7 August 2018 by Judge Vince M. Rozier, Jr.,
in the Superior Court, Alamance County. Heard in the Supreme Court on 23 March
2021.
Morningstar Law Group, by Keith P. Anthony and William J. Brian, Jr., for plaintiff-appellant.
Joshua H. Stein, Attorney General, by Olga E. Vysotskaya de Brito, Special Deputy Attorney General; Ryan Y. Park, Solicitor General; and James W. Doggett, Deputy Solicitor General, for the State-appellees.
Edmond W. Caldwell, Jr., and Matthew L. Boyatt for North Carolina Sheriffs’ Association; Fred P. Baggett for North Carolina Association of Chiefs of Police; and Jim O’Neill for North Carolina Conference of District Attorneys, amici curiae.
ERVIN, Justice.
¶1 This case arises from an enterprise developed and operated by plaintiff Crazie
Overstock, LLC, which has sought in this litigation to enjoin enforcement measures CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
Opinion of the Court
taken by the State and certain members of the State’s Alcohol and Law Enforcement
Division1 stemming from the belief that a Rewards Program encompassed within the
operation of Crazie Overstock’s enterprise violates various provisions contained in
Article 37 of Chapter 14 of the North Carolina General Statutes. For the reasons set
forth in more detail below, we modify and affirm the decision of the Court of Appeals.
¶2 Crazie Overstock sells discount goods, such as furniture, jewelry, kitchen
goods, movies, music, and electronics on its website and through licensed retail
establishments which are operated by independent owners. Although Crazie
Overstock’s customers have the ability to view the goods that are offered for sale, both
in these retail establishments and on Crazie Overstock’s website, the goods in
question may only be purchased through its website.
¶3 The retail establishments through which Crazie Overstock operates feature a
“showroom” in which samples of the goods that are available through Crazie
Overstock’s website are displayed. In addition, these retail establishments contain
computers, which Crazie Overstock refers to as “order stations,” that are connected
to the internet and through which customers have the ability to order products from
Crazie Overstock’s website. In addition, customers are also entitled to place orders
1 More specifically, Crazie Overstock has sought relief in this case against Mark J.,
Senter, individually and in his official capacity as Director of the Alcohol Law Enforcement Division, and Iris L. Redd, Kelly J. McMurray, Chris Poole, and Brian Doward, each of whom are agents of the Alcohol Law Enforcement Division; in their official and individual capacities. CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
through Crazie Overstock’s website from any location at which an internet connection
is available. Crazie Overstock’s customers have the ability to either order goods
through the website using a credit card or to purchase electronic gift certificates at
retail establishments which the customer can use to purchase goods through Crazie
Overstock’s website.
¶4 The customers who purchase gift certificates at the retail establishments
through which Crazie Overstock operates pay $1.00 for each $1.00 of credit that is
available in connection with a particular gift certificate. Each customer who
purchases a gift certificate receives a receipt bearing a number which can be
registered with and credited to the customer’s account, which, in turn, can be accessed
using an individual username and password at an order station or on any device that
is connected to the Crazie Overstock website through the internet. In view of the fact
that the value of any gift certificate that a customer may purchase is not
automatically loaded into the customer’s account, gift certificates may be freely
transferred from the customer to other persons. Although customers may utilize gift
certificates to purchase goods through the Crazie Overstock website, any such
purchases involve separately stated shipping and handling charges that the customer
must cover using a credit card.
¶5 The portion of Crazie Overstock’s enterprise that underlies this case is known
as the Rewards Program and revolves around the use of gift certificates to play two CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
electronic games. In order to play these games, a customer is required to obtain Game
Points by either (1) purchasing a gift certificate, with 100 Games Points being
provided to the customer for every $1.00 that the customer pays in order to purchase
that gift certificate; (2) “mailing a handwritten post card . . . contain[ing] the
[customer’s] name; address; city; state; zip code; age; date of the request for Game
Points; and the name and store address” at which the points are to be used; (3)
making an “in-store request from the cashier at a Retail Establishment’s point-of-sale
terminal”; or (4) “through the award of bonus Game Points by Retail Establishments
to customers who purchase certain amounts of gift certificates.” After obtaining the
required Game Points, the customer may use them to play the two electronic games.
¶6 In the first of the two electronic games, which consists of a game of chance
called the Reward Game, the customer is entitled to utilize Game Points for the
purpose of attempting to win Reward Points. The Reward Game features eighteen
reel-spinning games which are played on an electronic machine during which various
icons appear when the reel is spun. The results derived from playing the Reward
Game are “drawn randomly for each of the [eighteen] different Reward Games . . .
from a finite pool of possible results,” with “some results [being] associated with
Reward Points while others are not.” A customer who is successful in playing the
Reward Game receives a number of Reward Points equal to a multiple of the number
of Game Points which the customer utilized in order to play the Reward Game. In CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
the event that the customer is unsuccessful during his or her attempts to play the
Reward Game, he or she is still awarded 100 Reward Points.
¶7 After playing the Reward Game, the customer is entitled to take the Reward
Points that he or she earned playing the Reward Game and utilize them to participate
in a game of skill called the Dexterity Test. The Dexterity Test involves the use of a
simulated stopwatch that counts from 0 to 1,000 and back at a rapid rate. During
the course of the Dexterity Test, the customer is allowed three attempts to stop the
stopwatch on a number as close to 1,000 as possible, with the customer being awarded
Dexterity Points based upon his or her best result. In the event that the customer
stops the simulated stopwatch at a point between 951 and 1,000, one-hundred percent
of the Reward Points that the customer used to play the Dexterity Test are converted
to Dexterity Points, which can be redeemed for a cash payment calculated at the rate
of $1.00 for every 100 Dexterity Points. In the event that the customer stops the
simulated stopwatch at a point between 901 and 950, ninety percent of the Reward
Points that the customer used to play the Dexterity Test are converted to Dexterity
Points. In the event that a customer stops the simulated stopwatch at a point
between 801 and 900, fifty percent of the Reward Points that the customer used to
play the Dexterity Test are converted to Dexterity Points. In the event that the
customer stops the simulated stopwatch at a point between 0 and 800, he or she does
not win any Dexterity Points. On the other hand, the Reward Points that any such CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
unsuccessful customer utilized to play the Dexterity Test are converted into Game
Points so as to allow the customer to play the Reward Game in the hope of winning
additional Reward Points.
¶8 The record reflects that ninety-five percent of the customers who play the
Dexterity Test successfully stop the simulated stopwatch at a point above 800 on at
least one of their three attempts so as to win some amount of money. As a result, a
customer who successfully plays the Reward Game and proceeds to play the Dexterity
Test will likely recoup some portion of the money that he or she utilized in purchasing
the gift certificate that allowed him or her to play the games. However, in the event
that the customer does not successfully play the Reward Game, the cash price that
he or she is able to win is limited to a maximum of $1.00. In addition, the customer
retains the full value of the gift certificate that he or she purchased and is entitled to
use it to purchase merchandise from Crazie Overstock’s website.
¶9 On 24 May 2016, Crazie Overstock filed a complaint against defendants in
which it sought (1) a declaratory judgment that the Rewards Program is lawful and
did not violate N.C.G.S. §§ 14-289 (prohibiting the advertisement of lotteries), 14-290
(prohibiting “[d]ealing in lotteries”), 14-292 (prohibiting gambling, defined as “any
game of chance or any person who plays at or bets on any game of chance at which
any money, property or other thing of value is bet, whether the same be in stake or
not”), 14-306 (defining slot machines), 14-306.1A (prohibiting the use of video gaming CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
machines, including a “video game not dependent on skill or dexterity that is played
while revealing a prize as the result of an entry into a sweepstakes”), 14-306.3
(prohibiting certain game promotions), 14-306.4 (prohibiting the operation of “an
electronic machine or device” to play a “video game not dependent on skill or dexterity
that is played while revealing a prize as the result of an entry into a sweepstakes,”
with a “prize” being “any gift, award, gratuity, good, service, credit, or anything else
of value”), or “any other applicable law of this State”; (2) permanent injunctive relief;
(3) a request for a declaratory judgment that Director Senter and Agents McMurray,
Poole, Doward, and Redd had deprived Crazie Overstock of its constitutional right to
procedural due process; (4) prospective injunctive relief against Director Senter and
Agents McMurray, Poole, Doward, and Redd based upon alleged violations of 42
U.S.C. § 1983; and (5) damages against Agents McMurray, Poole, Doward, and Redd,
in their individual capacities, jointly and severally, for violations of 42 U.S.C. § 1983.
The injunctive relief that Crazie Overstock sought in its complaint included enjoining
defendants from (1) warning or threatening any current or potential North Carolina
retail establishment that it might be subject to criminal or administrative sanctions
if it continued to display or sell Crazie Overstock gift certificates or operate
equipment associated with the Rewards Program; (2) citing any North Carolina retail
establishment for criminal or administrative offenses or violations based upon the
display or sale of Crazie Overstock gift certificates or products, or the operation of CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
any equipment associated with the Rewards Program; (3) compelling or attempting
to compel, coerce, or persuade any North Carolina retail establishment to remove
products and equipment associated with the Rewards Program or to refrain from
selling or operating any such items; (4) making or issuing any statement outside of
the proceedings in this case alleging or contending that any gift certificates, products,
or equipment associated with the Rewards Program constituted an illegal gambling
arrangement, lottery, game of chance, slot machine, or unlawful device; and (5) filing
any false or misleading affidavits or otherwise engaging in any similar deceptive or
unlawful conduct in connection with any investigation into the activities in which
Crazie Overstock or any retail establishment offering the Rewards Program has
engaged.
¶ 10 On 1 July 2016, defendants filed a motion to dismiss Crazie Overstock’s
complaint pursuant to N.C.G.S. §§ 1A-1, Rules 12(b)(1), (2), and (6), in which they
contended that Crazie Overstock’s claims were barred by the doctrines of sovereign
immunity, public official immunity, and qualified immunity and asserting that
Crazie Overstock’s request for a declaratory judgment that its Rewards Program did
not violate N.C.G.S. § 14-306.4 failed to state a claim upon which relief might be
granted. On 13 April 2017, the trial court entered an order denying defendants’
dismissal motion. CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
¶ 11 On 17 March 2017, Crazie Overstock filed a motion seeking the issuance of a
preliminary injunction that provided the same relief that it sought in that portion of
its complaint seeking the issuance of a permanent injunction. On 16 May 2017, the
trial court entered a temporary restraining order precluding defendants from taking
certain actions against Crazie Overstock and any retail establishments participating
in the Rewards Program pending a decision concerning Crazie Overstock’s request
for the issuance of a preliminary injunction. On 12 July 2017, defendants filed an
answer in which they denied the material allegations set out in Crazie Overstock’s
complaint and asserted a number of affirmative defenses, including public official
immunity, sovereign immunity, qualified immunity, and estoppel.
¶ 12 A hearing concerning the merits of Crazie Overstock’s motion for the issuance
of a preliminary injunction was held before the trial court on 29 September 2017, 5
and 6 October 2017, and 2 and 3 November 2017. On 13 December 2017, the trial
court entered an order denying Crazie Overstock’s motion for preliminary injunctive
relief. In making this determination, the trial court concluded that Crazie Overstock
had failed to demonstrate that it was likely to succeed on the merits given (1) that
“[t]he fact that Crazie Overstock’s games involve some level of skill and dexterity in
and of itself is not enough to show a likelihood of prevailing on the merits”; (2) that
“[t]he test for determining whether a game is prohibited under North Carolina law is
not whether the game contains an element of skill,” but is, “[i]nstead, . . . whether CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
chance is the dominating element that determines the result of the game,” citing
Sandhill Amusements, Inc. v. Miller, 236 N.C. App. 340, 368 (2014), rev’d per curiam
on the basis of the dissenting opinion, 368 N.C. 91 (2015); and (3) that “[t]he element
of chance predominates any amount of skill or dexterity that may be present in Crazie
Overstock’s games, and therefore the Crazie Overstock Rewards Program may violate
N.C.G.S. § 14-306.4 and other North Carolina gambling provisions.” In addition, the
trial court concluded that Crazie Overstock had failed to show that it was likely to
sustain an irreparable injury in the absence of the issuance of the requested
preliminary injunction given that (1) “Crazie Overstock’s ability to sell goods over the
internet will in no way be affected by law enforcement officials being allowed to
enforce what they believe to be violations of the gambling laws of North Carolina as
performed by retail establishments that are operating the Crazie Overstock Rewards
Program”; (2) “[Crazie Overstock] will still be able to use its website to sell goods over
the internet and may continue to license retail establishments to promote the sale of
their goods by displaying goods for sale and selling gift certificates”; and (3) “[t]he
only impact not entering an injunction will have is that the retail establishments,
that are not a party to this action, will not be able to continue to use the Crazie
Overstock Rewards Program until such time as a trial/hearing on the merits is
conducted and this Court rules on the pending declaratory judgment action.” CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
¶ 13 On 11 July 2018, defendants filed a motion seeking the entry of summary
judgment in their favor on the grounds that the record did not reveal the existence of
any genuine issues of material fact and that defendants were entitled to judgment as
a matter of law with respect to Crazie Overstock’s claims pursuant to N.C.G.S. §§ 14-
306.1A and 14-306.4. On 20 July 2018, Crazie Overstock voluntarily dismissed its
claims against Agents McMurray, Poole, Doward, and Redd, in both their individual
and official capacities, without prejudice and the claims that it had asserted against
Director Senter in his individual capacity. In addition, Crazie Overstock voluntarily
dismissed the claims that it had asserted pursuant to 42 U.S.C. § 1983 relating to
alleged violations of its procedural due process rights and its request for prospective
relief against Director Senter without prejudice, leaving the State and Director
Senter, acting in his official capacity, as the only remaining defendants.
¶ 14 On 25 July 2018, defendants’ summary judgment came on for a hearing before
the trial court.2 On 7 August 2018, the trial court entered an order determining that
there were no genuine issues of material fact with respect to the claims that Crazie
2 At the hearing, Crazie Overstock objected to consideration of the expert reports submitted by defendants on behalf of Andrew Baran and Katrijn Gielens on the grounds that those reports had not been properly authenticated, that the reports had not been submitted in a timely manner, that the report prepared by Ms. Gielens contained new opinions that had not been previously disclosed in discovery, and that Mr. Baran’s report invaded the province of the trial court by offering opinions concerning the ultimate issue of whether Crazie Overstock’s Reward Program violated N.C.G.S. §§ 14-306.1A and 14-306.4. As a result, the trial court “excluded this information from consideration in its evaluation of the motion for summary judgment.” CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
Overstock had advanced pursuant to N.C.G.S. §§ 14-306.1A and 14-306.4 and that
defendants were entitled to judgment with respect to those claims as a matter of law.3
As a result, the trial court allowed defendants’ motion for summary judgment,
resulting in the dismissal of each of Crazie Overstock’s remaining claims and the
entry of final judgment in favor of defendants. Crazie Overstock noted an appeal to
the Court of Appeals from the trial court’s order.
¶ 15 In seeking relief from the trial court’s order before the Court of Appeals, Crazie
Overstock argued that the trial court had erred by concluding that the Rewards
Program violated N.C.G.S. §§ 14-306.1A and 14-306.4. As an initial matter, the Court
of Appeals noted that N.C.G.S. § 14-306.1A “prohibits one from placing into operation
a video gaming machine which allows a patron to make a wager for the opportunity
to win money or another thing of value through a game of chance” and that N.C.G.S.
§ 14-306.4 “prohibits one from placing into operation an electronic machine which
allows a patron, with or without the payment of consideration, the opportunity to win
a prize in a game or promotion, the determination of which is based on chance.”
Crazie Overstock Promotions, LLC v. State, 266 N.C. App. 1, 5 (2019). According to
the Court of Appeals, “[o]ne difference between [N.C.G.S. § 14-306.4] and [N.C.G.S. §]
3 In light of this determination, the trial court declined to rule upon the claims that
Crazie Overstock had advanced pursuant to N.C.G.S. §§ 14-289, 14-290, 14-292, 14-306, and 14-306.3. CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
14-306.1A is that a violation of [N.C.G.S. § 14-306.4] can occur even if the patron is
not required to wager anything for the opportunity to win a prize.” Id.
¶ 16 After noting that N.C.G.S. §§ 14-306.1A and 14-306.4 “only proscribe machines
where prizes can be won through a game of chance” rather than by winning a “game
of skill,” the Court of Appeals distinguished these two types of games on the basis
that:
The phrase, “game of chance,” is not one long known in the law and having therein a settled signification, but was introduced into our statute book by the act of 1835. . . . [This term] must be understood [ ] as descriptive of a certain kind of games of chance in contra-distinction to a certain other kind, commonly known as games of skill. [We hold that] “a game of chance” is such a game, as is determined entirely or in part by lot or mere luck, and in which judgment, practice, skill, or adroitness have honestly no office at all, or are thwarted by chance.
Id. at 5–6 (alterations in original) (quoting State v. Gupton, 30 N.C. 271, 273–74
(1848)). In addition, the Court of Appeals noted that, more recently, this Court has
adopted a dissenting opinion reasoning that “the essential difference between a game
of skill and a game of chance for purposes of our gambling statutes . . . is whether
skill or chance determines the final outcome and whether chance can override or
thwart the exercise of skill.” Id. at 6 (quoting Sandhill Amusements, 236 N.C. App.
at 369). As a result, the Court of Appeals determined that, even though “there are
elements of ‘chance’ in many ‘games of skill’ ” and that “there are sometimes elements
of skill present in games of chance,” id. (first citing Gupton, 30 N.C. at 274, then CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
Collins Coin Music Co. of N.C., Inc., v. N.C. Alcoholic Beverage Control Comm’n, 117
N.C. App. 405, 409 (1994)), “[u]ltimately, whether a game is one of chance or one of
skill is dependent on which element ‘is the dominating element that determines the
result of the game,’ ” id. (quoting State v. Eisen, 16 N.C. App. 532, 535 (1972)
(recognizing that blackjack contains elements of both skill and chance)).
¶ 17 Although the Court of Appeals determined that the Dexterity Test, considered
in isolation, is a game of skill given that “the outcome of the game is dependent
primarily on the patrons’ ability to react in a timely fashion,” it went on to conclude
that the Reward Game “is a separate game in which patrons have the opportunity to
win something of value,” consisting of “the opportunity to play an easy game of skill
for money,” and that “this opportunity to win money, itself,” constitutes “a thing of
value” and, therefore, a prize pursuant to the definition set forth in the statute. Id.
at 6–7. As a result, the Court of Appeals held that, even though the Dexterity Test
did not, standing alone, violate either N.C.G.S. §§ 14-306.1A or 14-306.4, the Reward
Game violated N.C.G.S. § 14-306.4 as a matter of law. Id. at 8–9. On the other hand,
given that “there [was] at least an issue of fact as to whether the Reward Game
violates [N.C.G.S. §] 14-306.1A” arising from the fact that “[o]ne does not violate this
Section unless the game of chance requires the patron to wager something of value”
and the Court of Appeals’ determination that it is “unclear whether, here, patrons
are required to wager anything of value,” the Court of Appeals affirmed the trial CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
court’s decision to grant summary judgment in defendants’ favor with respect to the
issue of whether the Rewards Program violated N.C.G.S. § 14-306.4 while reversing
the trial court’s decision to grant summary judgment in defendants’ favor with
respect to the issue of whether the Rewards Program violated N.C.G.S. § 14-306.1A
and remanding this case to the Superior Court, Alamance County, for any necessary
proceedings. Id. at 9
¶ 18 In a separate concurring opinion, Judge Hampson stated that, “at least in [his]
view, [the Court of Appeals’] reversal of summary judgment on the question of
whether Crazie Overstock’s business model violates [N.C.G.S.] § 14-306.1A should
not be construed as an indication that Crazie Overstock’s business model does not
violate [N.C.G.S.] § 14-306.1A” and should, instead, be understood as a recognition
that “Crazie Overstock has generated a triable issue of fact as to whether the sale of
gift certificates, in fact, constitutes the sale of a legitimate product offered in the free
marketplace by a business regularly engaged in the sale of such goods or services or
whether the sales of these gift certificates constitutes a mere subterfuge for illegal
gaming.” Id (citing American Treasures, Inc. v. State, 173 N.C. App. 170, 177 (2005)).
In light of the conflicting evidence concerning “the actual value received from [Crazie
Overstock’s] gift [certificates],” Judge Hampson wrote that “the question sub judice
is,” at least in part, “whether ‘the price paid for and the value received’ from the gift
certificates ‘is sufficiently commensurate to support the determination that the sale CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
of [gift certificates] is not a mere subterfuge to engage in [illegal gaming], whereby
consideration is paid merely to engage in a game of chance.’ ” Id. at 10 (quoting
American Treasures, 173 N.C. at 178–79). This Court granted requests for further
review of the Court of Appeals’ decision filed by both Crazie Overstock and
defendants.
¶ 19 In seeking to persuade us to overturn the Court of Appeals’ decision with
respect to the issue of whether the Rewards Program violates N.C.G.S. § 14-306.4,
Crazie Overstock begins by arguing that the Court of Appeals “fail[ed] to apply the
correct legal standard” in evaluating the lawfulness of the Rewards Program
pursuant to N.C.G.S. § 14-306.4 and, instead, utilized a broader legal standard
applicable under other gambling-related statutory provisions, thereby “ignor[ing]”
the relevant statutory language, which provides that prohibited games are those
which are “not dependent on skill or dexterity,” see N.C.G.S. § 14-306.4(a)(3), so as to
“render [the relevant statutory] language meaningless.” Secondly, Crazie Overstock
argues that the Rewards Program does not violate N.C.G.S. § 14-306.4 given that
“[w]hether a participant obtains a prize is determined solely by the participant’s
performance on the Dexterity Test,” making the “final outcome [ ] dependent on skill
and dexterity.” According to Crazie Overstock, “the fact that chance determines the
value of the potential prize that can be realized through the Dexterity Test (by
determining the amount of Reward Points awarded in the Reward Game) is not CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
relevant to the analysis of the final outcome of the [ ] Rewards Program” given that
“the test under [N.C.G.S. § 14-306.4] is limited to the analysis of the role of skill and
chance in the final outcome only.” Thirdly, Crazie Overstock asserts that, “even if
the standard under the gambling statutes is applied, genuine issues of material fact
preclude[ ] the entry of summary judgment for [defendants]” given the existence of
“substantial evidence from which a reasonable trier of fact can conclude that skill and
dexterity predominate over chance.” Finally, Crazie Overstock argues that the Court
of Appeals erred by holding that the Reward Game, “viewed in isolation,” violates
N.C.G.S. § 14-306.4 on the theory that Reward Points constitute a “prize” for purposes
of the relevant statutory provision. In Crazie Overstock’s view, the Court of Appeals’
determination that Reward Points constitute a prize amounts to a “suggest[ion] that
the unrealized opportunity to play the Dexterity Test has value independent of the
value of playing the game” even though “[t]he two are inextricably linked” and the
“Reward Points have no inherent value.”
¶ 20 In response, defendants argue, based upon this Court’s decision to adopt the
dissenting opinion in Sandhill Amusements, that the reference to skill and dexterity
contained in N.C.G.S. § 14-306.4 incorporates “the traditional distinction between a
game of skill and a game of chance pursuant to state law” so as to “prohibit[ ]
sweepstakes that are conducted through video games” in which “chance predominates
over skill.” In view of the fact that “luck controls the symbols that appear in the reel- CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
spinning Reward Games, which in turn control whether a customer can win anything
more than $1 in cash by playing the Dexterity Test,” defendants argue that “pure
chance is responsible for whether players ever receive anything more than $1 by
playing its games,” causing considerations of “chance [to] predominate[ ] in Crazie
Overstock’s games.” In addition, defendants contend that the Court’s decision to
adopt the dissenting opinion in Sandhill Amusements establishes that the Court of
Appeals correctly applied the “traditional” predominant factor test rather than the
“new test” suggested by Crazie Overstock. In defendants’ view, Sandhill Amusements
makes clear “that chance is the predominate factor when it controls the maximum
prizes that players receive” and “can thwart skill by preventing players from winning
the best prizes.” Finally, defendants claim that predominance is “a mixed question
of law and fact that may be resolved on summary judgment where, as here, there is
no dispute about how a game is played,” citing Best v. Duke Univ., 337 N.C. 742, 750
(1994), on the theory that “mixed questions like [the issues presented in this case] do
not turn on assessments of credibility, but instead require ‘the application of legal
principles’ to settled facts,” quoting State v. Sparks, 362 N.C. 181, 185 (2008), and
citing Sandhill Amusements, 236 N.C. App. at 370.
¶ 21 According to well-established North Carolina law, summary judgment “shall
be rendered forthwith if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
issue as to any material fact and that any party is entitled to judgment as a matter
of law.” N.C.G.S. § 1A-1, Rule 56(c). An appellate court reviews a trial court’s
decision to grant or deny a motion for summary judgment de novo. See Meinck v. City
of Gastonia, 371 N.C. 497, 502 (2018).
¶ 22 N.C.G.S. § 14-306.4 prohibits the operation of an electronic machine which
allows a user, with or without the payment of consideration, an opportunity to win a
prize in a game or promotion in the event that the patron’s ability to succeed “[i]s not
dependent on the skill or dexterity [of the patron]. N.C.G.S. § 14-306.4(a)(3)(i). In
Sandhill Amusements, we adopted the dissenting opinion at the Court of Appeals,
which evaluated, in pertinent part, whether an enterprise involved an illegal video
sweepstakes machines in violation of N.C.G.S. § 14-306.4, Sandhill Amusements, 236
N.C. App. at 343, before noting that the critical analytical issue revolves around
whether the relevant game was “dependent on skill or dexterity.” Id. at 365. In spite
of the fact that “the term ‘skill or dexterity’ as used in [N.C.G.S.] § 14-306.4 ha[d] not
been statutorily defined,” the dissent in Sandhill Amusements opined that a
reviewing court should look for guidance from the Court of Appeals’ prior decision in
Collins Coin, in which the Court of Appeals held that “[a] game of chance is such a
game as is determined entirely or in part by lot or mere luck, and in which judgment,
practice, skill or adroitness have honestly no office at all, or are thwarted by chance”;
that “[a] game of skill, on the other hand, is one in which nothing is left to chance, CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
but superior knowledge and attention, or superior strength, agility and practice gain
the victory”; and that “[i]t would seem that the test of the character of any kind of a
game . . . as to whether it is a game of chance or a game of skill is not whether it
contains an element of chance or an element of skill, but which of these is the
dominating element that determines the result of the game, to be found from the facts
of each particular kind of game” or, “to speak alternatively, whether or not the
element of chance is present in such a manner as to thwart the exercise of skill or
judgment.” Sandhill Amusements, 236 N.C. App. at 368 (quoting Collins Coin, 117
N.C. App. at 408) (citations and quotations omitted)). In light of the numerous
“inherent limitations on a player’s ability to win [the game at issue in that case] based
upon a display of skill and dexterity,” including the fact that the machines and
equipment at issue “only permitted a predetermined number of winners,” would
necessarily “result in the playing of certain games in which the player [would] be
unable to win anything of value regardless of the skill or dexterity that he or she
displays” and the fact that the opportunity to employ skill or dexterity was “purely
chance-based,” the dissent in Sandhill Amusements noted that it was “unable to see
how [an] isolated opportunity [to employ skill or dexterity] to affect the outcome
overrides the impact of the other features which, according to the undisputed
evidence, affect and significantly limit the impact of the player’s skill and dexterity
on the outcome.” Id. at 369. As a result, given these “inherent limitations on a CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
player’s ability to win based upon a display of skill and dexterity,” the dissent in
Sandhill Amusements stated that “an individual playing the machines and utilizing
the equipment at issue simply does not appear to be able to ‘determine or influence
the result over the long haul’ ” and concluded that “ ‘the element of chance
dominate[d] the element of skill in the operation’ ” of the machines at issue in that
case. Id. at 369–70 (quoting Collins Coin, 117 N.C. at 409).
¶ 23 The dissenting opinion in Sandhill Amusements that we later adopted suggests
that N.C.G.S. § 14-306.4 should be interpreted to prohibit the operation of electronic
gaming equipment in which skill or chance “dominat[e]” over a player’s exercise of
skill and dexterity or “thwart the exercise of skill or judgment,” id. at 368 (quoting
Collins Coin, 117 N.C. at 408). This construction of the relevant statutory language
does not, contrary to Crazie Overstock’s contentions, render the words “dependent on
skill or dexterity” as found in N.C.G.S. § 14-306.4(a)(3) superfluous. Instead, the
approach that we believe to be appropriate simply focuses upon whether skill or
dexterity actually give the player the ability to control the extent to which he or she
receives a prize and the value of the prize that he or she wins rather than merely
reflecting whether the player bests the odds of winning in a game of chance. 4 Thus,
4 Assuming that all of the other requirements set forth in the statute are met, nothing
in this opinion or the dissenting opinion which we adopted in Sandhill Amusements should be interpreted as an indication that a gaming enterprise in which skill or dexterity actually predominate in resolving the issue of whether the player receives a prize and the value of CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
the relevant test for use in determining whether the operation of an electronic gaming
device does or does not violate N.C.G.S. § 14-306.4(a) is whether, viewed in its
entirety, the results produced by that equipment in terms of whether the player wins
or loses and the relative amount of the player’s winnings or losses varies primarily
with the vagaries of chance or the extent of the player’s skill and dexterity.
¶ 24 After applying the appropriate legal standard to the facts presented to us in
this case, we are satisfied that the Court of Appeals correctly concluded that the
Crazie Overstock’s gaming enterprise violated N.C.G.S. § 14-306.4. As an initial
matter, given that the number of Reward Points increases the dollar value of the
prizes that a player is entitled to win in the course of the Dexterity Test, the increased
potential return available to such players during the Dexterity Test compels the
conclusion that Reward Points constitute a “[ ]thing . . . of value” pursuant to N.C.G.S.
§ 14-306.4(a)(4). For that reason, the Reward Game, even when considered in
isolation, violates N.C.G.S. § 14-306.4.
¶ 25 Any decision to consider the Reward Game and the Dexterity Test in
conjunction with each other produces the same result, Crazie Overstock’s argument
to the contrary notwithstanding. In spite of the fact that the Dexterity Test, viewed
in isolation, involves skill or dexterity, the extent to which a customer is able to win
that prize would violate N.C.G.S. § 14-306.4, ensuring that the relevant language does not constitute mere surplusage. CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
more than a minimal amount of money is controlled by the outcome of the Reward
Game regardless of the level of skill and dexterity that the player displays while
participating in the Dexterity Test. For instance, a person who is wholly unsuccessful
in playing the Reward Game cannot win more than $1.00 in the event of success in
the Dexterity Test regardless of how well he or she performs while playing that game,
a fact that establishes that the amount of a player’s winnings is primarily dependent
upon chance rather than skill or dexterity as required by N.C.G.S. § 14-306.4. Cf.
Joker Club, LLC v. Hardin, 183 N.C. App. 92, 98 (2007) (stating that “the only factor
separating the players” in a game of poker is the “relative skill levels” of the players).
In other words, a customer cannot win more cash playing the Dexterity Test than the
amount established by the chance-driven Reward Game, although a customer may be
able to reduce the amount of cash that he or she eventually obtains by poor
performance during that phase of the process, a fact that compels the conclusion that
“the instrumentality for victory [is not] entirely in the player’s hand.” Joker Club,
183 N.C. App. at 99. As a result, we hold that luck is so “inherent in the nature of
[Crazie Overstock’s] games” that chance necessarily predominates over the exercise
of skill or dexterity, Gupton, 30 N.C. at 274, so that Crazie Overstock’s Rewards
Program should be classified as a game of chance rather than a game of dexterity or
skill. See Sandhill Amusements, 236 N.C. App. at 368. CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
¶ 26 The result that we reach in this case is completely consistent with the General
Assembly’s intent in enacting N.C.G.S. § 14-306.4. As we recognized in Hest Techs.,
Inc. v. State ex rel. Perdue, 366 N.C. 289 (2012), the General Assembly “noted that
‘companies have developed electronic machines and devices to gamble through
pretextual sweepstakes relationships with Internet service, telephone cards, and
office supplies, among other products,’ and that ‘such electronic sweepstakes systems
utilizing video poker machines and other similar simulated game play create the
same encouragement of vice and dissipation as other forms of gambling . . . by
encouraging repeated play, even when allegedly used as a marketing technique.” Id.
at 294 (quoting An Act to Ban the Use of Electronic Machines and Devices for
Sweepstakes Purposes, S.L. 2010-103, 2010 NC. Sess. Laws 408, 408). As we
understand the record, this statement of intent clearly describes the manner in which
Crazie Overstock’s Rewards Program operates. Thus, we have no hesitation in
holding that Crazie Overstock’s Rewards Program represents the type of gaming
enterprise that the General Assembly intended to prohibit by enacting N.C.G.S. § 14-
306.4.5 In light of our determination that Crazie Overstock’s Rewards Program
5 In addition to responding to Crazie Overstock’s challenge to the Court of Appeals’
decision, the State argued that Crazie Overstock’s enterprise (1) violated the State’s ban on video gaming machines as set forth in N.C.G.S. § 14-306.1A, which defines a prohibited “video gaming machine” to include any “video game not dependent on skill or dexterity that is played while revealing a prize as the result of an entry into a sweepstakes,” see N.C.G.S. § 14- 306.1A(b)(9); and (2) constituted an illegal gambling enterprise pursuant to N.C.G.S. §§ 14- 292 and 14-301 on the grounds that “participants [in the Rewards Program] are not really CRAZIE OVERSTOCK V. STATE OF NORTH CAROLINA
constitutes an unlawful sweepstakes in violation of N.C.G.S. § 14-306.4 and the fact
that this determination appears to us to preclude the award of any relief in Crazie
Overstock’s favor, we conclude that there is no need for the Court to decide either of
the other issues addressed in the parties’ briefs and modify the Court of Appeals’
decision by obviating any necessity for a remand to the Superior Court, Alamance
County, for further proceedings in this case. As a result, since the Court of Appeals
correctly determined that the trial court did not err by determining that Crazie
Overstock’s gaming enterprise constitutes an unlawful sweepstakes in violation of
N.C.G.S. § 14-306.4, we modify and affirm the Court of Appeals’ decision.
MODIFIED AND AFFIRMED.
Justice BERGER did not participate in the consideration of or decision in this
case.
buying the promoted products,” with “the purchase of the products” being, instead, nothing more than “a pretext to place bets,” citing Hest, 366 N.C. at 294.