J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

In a recent Memorandum Opinion, U.S. Bankruptcy Judge David R. Jones ruled that Caesar's Palace and another establishment known as Cosmopolitan of Las Vegas, have valid gambling debts that they can enforce in Texas. Nevada Property 1 LLC, et al. v. D'Amico, Adv. No. 13-03041, U.S. Bankruptcy Court, S.D. Texas 2013.

The gambling houses brought suit in U.S. Bankruptcy Court in Houston, seeking to have their gambling debts declared not discharged in bankruptcy, in the personal bankruptcy filing of one of their former customers. They were trying to recover over $1,125,000 in "markers" or credit that they had extended to the gambling patron during what was apparently a very unlucky gambling soiree in 2012.

The Court ruled that Nevada law applied, and that the gambling establishments could enforce their debts in Texas, saying:

Texas law and the underlying public policies focus on transactions within the borders of Texas. Castilleja v. Camero, 414 S.W.2d 424, 427 (Tex. 1967). When the laws and policies of another sovereign are involved, a federal court sitting in Texas may enforce transactions governed by the law of that sovereign even though Texas law prohibits such transactions. Id. Accordingly, this Court may enforce a debt governed by Nevada law without offending Texas public policy. Applying the above, the Court finds that the impact on Nevada of the nonenforcement of gambling debts incurred within its borders is far more severe that the enforcement of a gambling debt against a Texas citizen that purposely availed himself of the opportunity to engage in gambling within Nevada’s borders. The Court therefore concludes that the claims asserted by the Cosmopolitan and Caesars are valid and enforceable under the facts presented.

However, Judge Jones ruled that the companies did not make out a case for "willful and malicious injury" under 11 U.S.C. Sec. 523(a)(6), such that the debts would not be discharged.

The Court also ruled that Cosmopolitan and Caesars failed to meet their burden of proof that the debtor defrauded them under 11 U.S.C. Sec. 523(a)(2)(A), holding:

Cosmopolitan and Caesars both failed to establish that their respective losses were incurred as a result of any false or misleading representation. The Court therefore must find that both Cosmopolitan and Caesars failed to meet their burden of proof under 11 U.S.C. §523(a)(2)(A). The Court will enter judgment in favor of the Debtor on the claims asserted under 11 U.S.C. § 523(a)(2)(A).

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