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People v. Grewal

California Court of Appeal, Fifth District

March 7, 2014

The PEOPLE, Plaintiff and Respondent,
Kirnpal GREWAL et al., Defendants and Appellants.


APPEAL from a judgment of the Superior Court of Kern County. William D. Palmer, Judge. (Super.Ct.Nos. CV-276959, CV-276958, CV-276961).

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Weston, Garrou & Mooney, John H. Weston, G. Randall Garrou and Jerome H. Mooney for Defendants and Appellants Kirnpal Grewal and Phillip Ernest Walker.

William H. Slocumb, Bakersfield, and Christopher T. Reid for Defendant and Appellant John C. Stidman.

Lisa S. Green, District Attorney, Gregory A. Pulskamp and John T. Mitchell, Deputy District Attorneys, for Plaintiff and Respondent.

Downey Brand, Stephen J. Meyer, Tory E. Griffin and Kelly L. Pope, Sacramento, for Net Connection Hayward as Amici Curiae on behalf of Defendants and Appellants.


Kane, J.

In these three consolidated cases,[1] the People of the State of California by and through the Kern County District Attorney (the People)

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filed civil actions under the unfair competition law (Bus. & Prof.Code, § 17200 et seq.), seeking to enjoin several Internet café [2] businesses from continuing to engage in practices that allegedly violated the gambling prohibitions set forth at Penal Code sections 319 (unlawful lottery) and 330a, 330b and 330.1 (unlawful slot machines or devices).[3] When the People requested preliminary injunctions, the owners and operators of the Internet café businesses in question (i.e., Kirnpal Grewal, Phillip Ernest Walker & John C. Stidman; collectively defendants) opposed such relief on the ground that their businesses did not conduct lotteries but merely offered lawful sweepstakes that promoted the sale of their products. Additionally, while acknowledging that customers could reveal sweepstakes results by playing (on terminals provided on premises) a computer game program that simulated the look and feel of a slot machine or other game of chance, defendants maintained that the required statutory elements of an unlawful slot machine or gambling device were not present. The trial court disagreed with that assessment and granted the preliminary injunctions as requested by the People. Defendants have appealed from the orders granting such preliminary injunctions, raising the same arguments they made in the trial court.[4] Because we conclude the People will likely prevail on the claims that defendants violated prohibitions against slot machines or gambling devices under section 330b, we shall affirm the relief granted below.


Since our opinion concerns three distinct Internet café businesses, we begin by summarizing the factual background of each of the underlying cases. [5]

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Defendant Stidman's I Zone Internet Café

Defendant Stidman owns and operates a business known as the I Zone Internet Café (I Zone) in Bakersfield, California. I Zone sells Internet time to the public at a price of $20 per hour, which time may be used on a system of computer terminals located on the I Zone premises. In addition, I Zone sells copying services, packaging services and refreshments. To promote the sale of Internet time and other products, I Zone offers a sweepstakes to customers whenever they make a purchase. According to the sweepstakes rules, noncustomers may also enter the sweepstakes; that is, no purchase is necessary to enter.[6] The sweepstakes is effectuated through a computer software system provided by a company known as Capital Bingo.

Under the sweepstakes as operated by the software system, a person who purchases Internet time or other products at I Zone receives sweepstakes points for each dollar spent. A customer is also given sweepstakes points for his first purchase of the day as well as for being a new customer. For example, a new customer who buys $20 of Internet time receives a total of 3,000 sweepstakes points, consisting of 2,000 sweepstakes points for the purchase of Internet time, 500 sweepstakes points for the first $20 of Internet time purchased for that day, and 500 sweepstakes points for being a new customer. Additional sweepstakes points may be received if the customer buys refreshments. A white plastic card with a magnetic strip is provided to the customer, which card is activated by an I Zone employee at the register. When the customer swipes the card at an open computer terminal, he is given the option of using the Internet function or playing sweepstakes computer games. If he chooses the latter, the time spent playing sweepstakes computer games does not reduce the amount of Internet time available.[7] Both options are touch-screen activated and do not require a keyboard or mouse.

In playing the sweepstakes computer games, I Zone customers use their sweepstakes points in selected increments (simulating bets) on games with names such as " Buck Lucky," " Tropical Treasures" or " Baby Bucks." According to the I Zone sweepstakes rules, each increment level available for

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play " represents a separate sweepstakes." [8] As shown by photographic evidence, gambling-themed games resembling slot machines are prominently displayed on the I Zone terminals. According to the observations of Detective Checklenis, " [i]t appeared the subjects were playing casino style slot machine games on the computers.... The audible sounds were that of casino style slot machines." On a later inspection of I Zone, he surveyed the room and noted that no one was on the Internet, but rather " all the people using the computer terminals were playing the sweepstakes games." [9] Participants in the I Zone sweepstakes have a chance to win cash prizes in various amounts ranging from small sums to a top prize of $3,000.

In opposing the motion for preliminary injunction, Stidman presented evidence and argument regarding how the sweepstakes functioned. His position was essentially that the computer sweepstakes games played on the I Zone terminals were merely an entertaining way for customers to reveal a sweepstakes result. A customer could also reveal a sweepstakes result by other means, such as by using a special function on the computer terminal or by asking an I Zone employee at the register to print out a result on paper. As described in Stidman's opposition, " [e]ach time a customer reveals the results of a sweepstakes entry, [regardless of the means used], the next available sweepstakes entry in the ‘ stack’ is revealed," in sequence, from a prearranged stack of entries. The " next available sweepstakes entry" contains a predetermined result that would be the same regardless of which method was used to reveal it. Thus, when the customer engages the sweepstakes computer games, the outcome is determined by the particular sweepstakes entry that is being revealed at that time, not by the workings of the game itself. That is, the game simply reveals the predetermined result of the next sequential sweepstakes entry.

Stidman provided a further operational description of how the software system used by I Zone conducted the sweepstakes. The descriptive information was primarily based on declarations from Stidman's expert, Nick Farley, and an attorney opinion letter provided to Stidman (purportedly from Capital Bingo's attorney) disclosing the Capital Bingo operational " model." Allegedly, there were three distinct servers, referred to as (1) the Management Terminal, (2) the Point of Sale Terminal, and (3) the Internet Terminal. As summarized in the trial court by Stidman's counsel: " It is at the Management Terminal where all sweepstakes entries are produced and arranged. Each batch of sweepstakes entries has a finite number of entries and a

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finite number of winners and losers. Once a batch of sweepstakes entries is produced at the Management Terminal, it is ‘ stacked’ ... and then transferred to the Point of Sale Terminal in exactly the same order as when it left the Management Terminal. Each time a customer reveals the results of a sweepstakes entry, either at the Internet Terminal or at the Point of Sale, the next available sweepstakes entry in the ‘ stack’ is revealed. In other words, the Internet Terminal simply acts as a reader and displays the results of the next sequential sweepstakes entry in the stack as it was originally arranged and transferred from the Management Terminal— it is never the object of play. In fact, exactly the same results [are displayed] for a specified sweepstakes entry whether the customer chooses to have the results displayed in paper format at the Point of Sale Terminal or in electronic format at an Internet Terminal." Additionally, Farley's declaration asserted that neither the Point of ...

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