The owners of two groups operating many of the video
gambling establishments in strip malls and other locations across Illinois have
sued the Illinois Gaming Board, arguing one board policy and two provisions of
the state’s 2009 Video Gaming Act are unconstitutionally depriving them of the
chance to negotiate better business deals for a larger share of the revenue
Illinois Café & Services Company LLC, which runs the Dotty’s
Café chain, filed a complaint April 4 in Cook County Circuit Court along with
co-plaintiff, Laredo Hospitality Ventures LLC, which operates the Stella’s and
Shelby’s branded establishments. They say they own hundreds of small gaming
cafes, among more than 5,800 Illinois establishments licensed to host video
The complaint says the state law forces establishments that
want to offer video gaming to contract with “terminal operators” — companies
that install the actual game machines — and mandates “they split the profits of
video gaming without taking into account their relative investments, expenses
and efforts; and then forbids them from freely negotiating the terms of their
legislatively imposed joint venture.”
According to the complaint, the state law has two flaws
— a prohibition on locations with gaming licenses from serving as their
own terminal operator and a stipulation that post-tax profits be split 50-50
between licensees and terminal operators.
The board’s Feb. 1 advertising and promotions policy, the
complaint contends, was “issued without following proper procedure and
untethered to any actual legislative grant of authority (and) arbitrarily
restricts the parties’ ability to share or negotiate business-essential costs.”
They say the policy dictates how terminal operators and licensees can pay for
“certain essential operating expenses” like free food and drinks for patrons,
as well as advertising.
Further, they say the policy favors terminal operators by
eliminating many types of business deals under which the parties used to share
A press release the companies issued cited a revenue
analysis indicating the law, which they argue violates due process and equal
protections clauses of the state and federal constitutions, costs businesses as
much as $150 million annually, about $25,000 a year for an average gaming bar
Unlike establishment owners and gaming licensees, terminal
operators, the complaint states, don’t have a role in monitoring or ensuring
the integrity of video gaming. Further, the state law “imposes no special or
heightened licensing review on them” and the operators aren’t authorized to do
repair work or maintenance on a terminal’s interior components without a Gaming
Board representative present. So if a machine breaks, the establishment owner
can’t fix it, losing potential revenue.
“I can think of no other industry where, by law, a business is
forced to give up 50 percent of their profits and is strictly prohibited from
even trying to negotiate better terms,” said attorney Dan K. Webb, of Winston
& Strawn, whose firm filed the complaint, in the press release. “This law
is not only unconstitutional, it provides a gravy train of unearned cash for
big gaming businesses that make little investment in Illinois.”
The companies want the court to declare the dual licensure and
profit diversion facets of the state law to be declared unconstitutional and to
enact preliminary or permanent injunction on their enforcement. They also want
the court to invalidate the advertising and promotions policy, both on the
ground the board didn’t comply with the Illinois Administrative Procedure Act
in installing the policy, as well as on the ground it exceeds the scope of the
Video Gaming Act because the board lacks the statutory authority to enact such
Also at issue under that policy is allocation of revenue
from automated teller machines that double as gaming winning redemption
machines, a decision the businesses say was “arbitrary and capricious.”
The Dotty’s, Stella’s and Shelby’s branded gaming café-style
establishments have sprung up rapidly throughout Illinois in recent years,
beginning in Chicago’s suburbs about four years ago.
The business model, which sets video gambling terminals amid
a café-like setting, allows patrons to wager on the terminal games while
eating a light meal, or drinking coffee, soda, beer or wine.
According to published reports, the concept mirrors one
established in other states, such as in Oregon, where the Dotty’s brand was
cultivated by CEO Daniel Fischer under the corporate name of Oregon Restaurant
In Illinois, Fischer has run his Dotty’s-branded
establishments under the corporate identity of Illinois Café & Service.
According to state records, that company has enlisted the help of Michael Best
Strategies, a lobbying firm associated with the Michael Best and Friedrich law firm, to lobby Illinois governmental officials.
According to Michael Best Strategies’ website, its Chicago office
is led by Chip Englander, who served as campaign manager for Gov. Bruce Rauner.
Others in the Michael Best Chicago office include David Ramirez, who also
served in a leadership post on Rauner’s campaign, and Stephanie Vojas, who has
worked for the Illinois Trial Lawyers Association and for Illinois Senate
President John Cullerton.
As Dotty’s has expanded, so, too, have the Stella’s and
Shelby’s brands under Des Plaines-based Laredo Hospitality Ventures.
That company is operated by CEO Gary Leff, who also founded
and operates the Stir Crazy Fresh Asian Grill restaurant chain.
According to published reports, Leff received investments
for the Laredo venture from at least two of his former college roommates,
including Andrew Bluhm, son of billionaire Neil Bluhm, who operates Rivers
Casino in Des Plaines along with other properties through his company, Rush
Street Gaming, and Greg Carlin, Rush Street Gaming’s CEO.
When the investments were disclosed in 2015 by Unite Here, a
labor union seeking to organize workers at Rush Street’s properties, Carlin
told the Chicago Tribune the investments in Laredo represented a “personal and
passive” transaction involving college roommates, even as they remained “totally committed to protecting Rivers Casino and… the industry and the
Illinois Casino Gaming Association's work to curtail the expansion of casino
cafes in Illinois."