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Sunday, June 16, 2013
Lawsuit: Hawaii Gambling Machine Contract Guaranteed ‘No problem from Vice-Squad’
By Andrew Walden @ 2:41 AM :: 8164 Views :: Gambling, Law Enforcement

by Andrew Walden

On September 27, 2012 Honolulu Police raided six Oahu “Winner’s Zone” arcades seizing 77 machines they deemed to be illegal gambling devices.  Hawaii County Police had raided three Hilo arcades in July, 2012 taking 33 machines.  Shortly after the Hilo raids, Oahu “Tilt” arcades owned and operated by Texas-based “Nickels and Dimes” removed a game known as “Island Fruit” from its stores. 

At the time observers felt the machine removals were tied to the raids, but the text of an April 23, 2013 court ruling by Judge Susan Oki Mollway tells a different story.  For the two years leading up to the raids, a company known as Prim, which has some kind of connection to locally owned Fun Factory, had been duking it out in court with Georgia-based gaming machine manufacturer Pace-o-Matic.

On its website, Pace-O-Matic explains:

Michael Pace sees a bright future for the gaming industry and Pace-O-Matic. When asked what sets Pace-O-Matic apart from the other gaming companies he said, “First and foremost we will always maintain our focus on complying with the gaming laws of each state and will continue to maintain our leadership role in developing new, exciting technologies for the gaming marketplace.”

The juicy details come out in the text of Judge Mollway’s April 23, 2013 ruling:

Count V alleges that Pace breached an express warranty to Prim and Fun Factory that its Island Fruit games were legal under Hawaii law....

Prim says that Pace “assured” Prim “that this game is skill based, and there shouldn’t be a problem with this game, at all, from the Vice squad.”  Despite this assurance, the record also reveals that the parties also made jokes about being “locked up” because of these games....

On November 7, 2008, Pace and Prim entered into an agreement regarding an exclusive distributorship arrangement for certain “amusement devices.”  While the agreement was in effect, Prim purchased electronic “Island Fruit” games and “fills” from Pace.

On October 18, 2010, Pace sent Prim a letter alleging that Prim was in default and terminating the exclusivity portion of the agreement between Pace and Prim. 

On October 22, 2010, Prim filed (this) lawsuit.

On October 26, 2010, the court expressed concern that “Island Fruit,” one of the “amusement machines” that Pace sold to Prim, might qualify as an illegal gambling machine under Hawaii Revised Statutes.  Pace sent Prim a letter saying that, “given the concerns that Judge Susan Mollway expressed about the legality of the Island Fruit game,” Pace “is withdrawing the sale of its skill-based amusement products from the State of Hawaii.” 

Pace continued: “To the extent Prim disagrees with Pace’s conclusion and wants to continue operating the Island Fruit game in Hawaii at its own risk, Pace is willing to provide Prim with an unlimited fill for its existing games in Hawaii, at cost.”

On August 30, 2011, Prim filed its Second Amended Complaint....The breach of express warranty claim (Count V) alleges that Pace expressly warranted that the Island Fruit games were legal.

Before the Agreement Letter between Pace and Prim was executed, Nickels & Dimes had been purchasing amusement games and fills directly from Pace.  In 2009, Pace informed Nickels & Dimes that Fun Factory, an entity related to Prim, would be the new supplier of fills for Island Fruit. 

In October 2009, a Nickels & Dimes competitor reportedly operated an amusement machine similar to Island Fruit with a “Max Play Cost” higher than the “Max Play Cost” on Nickels & Dimes’ Island Fruit machines. 

In response, Nickels & Dimes set its “Max Play Cost” at $4.  Nickels & Dimes also alleges that a Fun Factory employee subsequently lowered the “Max Play Cost” for Nickels & Dimes’ Island Fruit games and refused to raise that amount back to $4. Nickels & Dimes further alleges that the lower “Max Play Cost” increased the price Nickels & Dimes had to pay for fills.   Nickels & Dimes also alleges that Fun Factory required the “Max Play Cost” to be set at $1 for new purchases of fills at another Nickels & Dimes location.

The higher the ‘Max Play Cost’ the fewer ‘fills’ the vendor must buy per dollar of revenue generated.  As explained in a December 2012 Court Ruling:

“Fills” are electronic codes that “permit a certain number of plays” on an Island Fruit game “before an owner needs to input a fill to permit the game to continue operating.”

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