D2 ENTERPRISES, INC., Plaintiff-Appellant, vs. STATE OF IOWA DEPARTMENT OF INSPECTIONS AND APPEALS, Defendant-Appellee.
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IN THE COURT OF APPEALS OF IOWA
No. 7-942 / 06-2086
Filed February 13, 2008
D2 ENTERPRISES, INC.,
Plaintiff-Appellant,
vs.
STATE OF IOWA DEPARTMENT OF
INSPECTIONS AND APPEALS,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, William H, Joy,
Judge.
D2 Enterprises, Inc. appeals from the district court order on judicial review.
AFFIRMED.
Blake Parker of Blake Parker Law Office, Fort Dodge, for appellant.
Thomas J. Miller, Attorney General, and John Lundquist, Assistant
Attorney General, for appellee.
Heard by Eisenhauer, P.J., and Baker, J., and Nelson, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2007).
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EISENHAUER, J.
The sole issue presented for our review in this case is whether the
Department of Inspections and Appeals correctly determined the Speed Master
is an electrical amusement device subject to the registration requirements of
Iowa Code section 99B.10(4) (2003).
Because we find it did, we affirm the
district court’s order on judicial review.
I. Background Facts and Proceedings. D2 Enterprises, Inc. (D2) is a
business that sells and leases electronic games to distributors. Its Speed Master
device allows a player to win the “prize” of credits that can be applied for the
purchase of merchandise. Credits are won when a player aligns three symbols
in a line on a randomly generated screen. Credit is deducted each screen played
and added in varying amounts based on the value of the symbols aligned when a
player wins a screen.
Prior to introducing the Speed Master in Iowa, D2 filed a petition for
declaratory order with the Iowa Department of Inspections and Appeals seeking
a determination that the Speed Master game is not an electrical amusement
device requiring registration with the department. D2 submitted a forensic report
and a meeting between a representative of the department and D2 was held on
January 16, 2006. The department denied the request on April 11, 2006. The
department’s order refers to additional information made available to the
department by D2, however it is unclear what additional information was
submitted. The record on appeal consists of the pleadings, the forensic report,
and four photographs of the machine. The district court affirmed the department
on judicial review.
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II. Scope and Standard of Review. Iowa Code chapter 17A (2005)
governs judicial review of agency action. When the district court exercises its
judicial review power it acts in an appellate capacity to correct errors of law on
the part of the agency. Grundmeyer v. Weyerhaeuser Co, 649 N.W.2d 744, 748
(Iowa 2002). Our review of the district court’s decision requires application of the
standards of Iowa Code section 17A.19(10) to determine whether our
conclusions are the same as those of the district court. P.D.S.I. v. Peterson, 685
N.W.2d 627, 632 (Iowa 2004). If they are the same, we affirm; if not, we reverse.
Id. A party challenging agency action bears the burden of demonstrating the
action’s invalidity and resulting prejudice. Iowa Code § 17A.19(8)(a). This can
be shown in a number of ways, including proof the action was ultra vires; legally
erroneous; unsupported by substantial evidence in the record when that record is
viewed as a whole; or otherwise unreasonable, arbitrary, capricious, or an abuse
of discretion. See id. § 17A.19(10).
III.
Analysis.
“Each electrical and mechanical amusement device in
operation or distributed in this state that awards a prize, . . . where the outcome
is not primarily determined by the skill or knowledge of the operator,” must be
registered by the Department of Inspections and Appeals.
99B.10(1)(f)(1) (emphasis added).
Iowa Code §
The department determined that the
legislature’s use of the word “primarily” is “the litmus test for determining whether
the device must be registered.” It found this language “suggests that if chance
plays an equal or greater role than the players’ skill of knowledge in determining
the outcome of the game, then the device needs to be registered.” D2 does not
dispute this portion of the ruling. Instead, it disputes there is evidence to support
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the department’s finding that player skill or knowledge is not the principal factor in
determining the results of the Speed Master game.
We conclude the department’s determination that the Speed Master is not
a device where the outcome is primarily determined by skill is not arbitrary and
capricious as urged by D2.
The department had before it a forensic report
presented by D2 and it conducted a meeting where the device was demonstrated
and discussed. Randomly assigned screens are presented to the player. These
screens have different values assigned to them.
A player’s skill does not
influence the appearance of high value screens. The number of credits won
correlates more closely to the presence of high value screens than the skill of the
player. This finding is supported by the expert witness evidence presented by
D2, which found:
In regard to the “game won” all players showed a typical
“learning curve” – each has started with some low score. The
score shows the tendency of increasing with time and by the end of
the test or sooner did approach “terminal level” of skill which is
different for different players. For example the player which started
with 57% “game won” reached a “terminal level” of approximately
91% . . . . Another player, playing under the same settings, started
with a “game won” of 85% and reached own “terminal level” of 99%
. . . . All 7 players have reached own ‘terminal level’ ranging from
90% to 100%.
The “credit won,” on the other hand, does not show ‘learning
curve’ or correlation with the “game won.” In fact the scores were
quite erratic and random.
For example 94% “game won”
(supposedly good skill) got only 20% “credit won” . . . , or 57%
“game won” (poor skill) got 101% “credit won” . . . or 75% “game
won” (fair skill) got 158% “credit won” . . . .
(Emphasis added.)
Because no error was committed, we affirm.
AFFIRMED.
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