In two class action suits consolidated at oral argument before the Supreme Judicial Court, DeCosmo v. Blue Tarp Redevelopment, LLC and Schuster v. Wynn Resorts Holdings, LLC, blackjack players took on the MGM Springfield casino (MGM) and the Encore Boston Harbor Casino (Encore) in a losing gamble. The plaintiffs argued that the casinos used an improper payout for their blackjack games. In DeCosmo, a Superior Court judge granted MGM’s motion to dismiss; the plaintiff appealed, and MGM sought direct appellate review. In Schuster, the Federal District Court judge denied Encore’s motion to dismiss and certified a question of law to the Supreme Judicial Court. Thus, the SJC was called upon to interpret the Massachusetts Gaming Commission’s table game rules and, in doing so, dealt the players a loss by affording deference to the Commission’s interpretation of its rules.
The decision is worth reading for its excellent primer on the rules of blackjack alone. Have you wondered what is meant by “standard blackjack” and its 6:5 variation? Justice Kafker explains: Standard blackjack uses 6 to 8 decks dealt from a shoe while the 6:5 variation uses 1 to 2 decks dealt from the dealer’s hand. The decision also explains what blackjack is in the context of a hand (as opposed to just referring to the name of the game) and when dealers must hold or “stand” or when they must hit (i.e., draw another card).
Winning payouts at standard blackjack are typically at odds of 3:2, while the 6:5 variation pays, unsurprisingly, at odds of 6:5. The 3:2 payouts are usually reserved for the high roller tables. For the more mathematically challenged (who should probably not be playing blackjack in any event), that means that, if you bet $10 and win, the 3:2 payout will be $15, while the 6:5 payout is only $12. Clearly the better ratio is 3:2. The plaintiff gamblers, who were decidedly not high rollers, claimed that under the Gaming Commission’s rules, they were entitled to the 3:2 payout ratio. It can get confusing; the 6:5 payout can be offered even if the 6:5 variation of play is not.
This is where the decision turns to a discussion that brings smiles to the face of all administrative procedure nerds: Two regulatory schemes were at play: the blackjack rules posted on the Commission’s website, and the Commission’s Uniform Standards of Rules of the Games regulations, 205 CMR 147.00. The plaintiffs contended that the regulations carried more legal weight than the rules and urged the Court to resolve any conflict between the two in favor of the regulations. The Court disagreed. The Court concluded that the rules are not limited to internal Commission policy considerations, regulate licensees’ activity, and were adopted by a process similarly rigorous to what is used for issuing regulations. Both the rules and regulations, therefore, were considered by the Court as having equal weight and interpreted as it would interpret a statute.
The interplay between the regulations and the rules was decidedly unclear, even contradictory. While the regulations and most of the rules state that the 6:5 payout was available only with the 6:5 variation, Rule 7(d) indicated that the 6:5 payout was available on standard blackjack if players were put on notice. The blackjack game offered at MGM and Encore is standard blackjack but with a payout at odds of 6:5 for a winning hand. In accordance with the Commission’s rules, both casinos posted notice of the 6:5 payout on their blackjack tables. In a sardonic understatement, Justice Kasper wrote: “Complete harmonization of these conflicting provisions is thus difficult to achieve.”
Given this ambiguity, the SJC invoked the federal doctrine of Auer deference, named for the U.S. Supreme Court decision in Auer v, Robbins, 519 U.S. 452 (1997). That decision, which has been followed in Massachusetts courts (DeCosmo, 487 Mass. 690, 698-699 (2021), states the Courts will defer to an agency’s reasonable interpretation of its own regulations. The Court was persuaded that the Commission’s “official” position, to which it would give substantial deference, was represented in the Commission’s amicus brief, which supported the interpretation that the casinos could pay out at the 6:5 ratio if notice was given to gamblers. The Court concluded that this interpretation was reasonable, came closest to harmonizing the various rules and regulations, and represented the Commission’s “fair and considered judgment.” In sum, the Court deferred to the Commission’s interpretation. The plaintiffs knew the type of game they were playing and the payout. As such, the casinos won the day.
The Auer doctrine is important to keep in mind in a wide range of regulatory matters that Cities and Towns become involved with—including environmental permitting (See the Town of Sudbury decision, discussed on our blog), Open Meeting Law determinations and more. The doctrine underscores that, when an Agency interprets its own regulations, attempting to challenge that interpretation in court is like drawing to an inside straight.