The skill game company Queen of Virginia has filed nearly 150 breach-of-contract lawsuits against convenience store owners who have installed the company’s video games, according to a Virginia Mercury review of state court records. Small business owners get a share of the profits from the games.
The Mercury reviewed dozens of nearly identical lawsuits filed by Queen of Virginia claiming a store owes tens of thousands in damages for removing Queen machines and/or replacing them with similar games from a competitor. According to court records, Queen of Virginia contracts include a broad non-competition clause that grants it exclusive rights to have its games at a particular store.
Michael Barley, a spokesman for Georgia-based Pace-O-Matic, Queen of Virginia’s parent company, said, “Like most companies, we vigorously defend our contractual terms. Our contracts have been ruled time and time again to be valid.”
Attorney Steve Heretick, representing several convenience store owners, said Queen of Virginia is acting like a “bully” by trying to “corner the marketplace.” He said, “It’s an extremely aggressive tactic. Most of the smaller owners, especially convenience stores that have been working with us, they really don’t understand the legal nuances of the situation. All they know is they’re being threatened.”
Part of the problem is Virginia has not established nor enforced a clear policy on skill games. Queen of Virginia claims the machines are games of skill, not chance. The Virginia Alcoholic Beverage Control Authority seemed to agree in an unofficial determination in 2017. But at least one Virginia prosecutor disagreed and stated the machines violated the state’s laws on illegal gambling; he subsequently was sued by Queen of Virginia. The Virginia Lottery also has said the machines’ proliferation was taking away revenue from education.
In 2020, lawmakers considered banning the machines but instead gave them a 1-year reprieve to raise money for Covid-19 relief. The ban took effect in July 2021 but a truck-stop owner challenged the ban, resulting in a judge temporarily suspending its enforcement. Attorneys for the plaintiff said the ban is unlawful discrimination against a type of arcade-style game people play to win something of value. The case will be heard November 2 in Greensville Circuit Court.
The Virginia General Assembly attempted to strengthen the ban this year but the pending lawsuit has created uncertainty. As a result, skill machines are in legal limbo, with no regulation from lawmakers and the continued spread of illegal machines due to the lack of oversight. Covering all its bases, Pace-O-Matic has donated more than $820,000 to both the Republican and Democratic parties, including six-figure donations to Governor Glenn Youngkin and former Governor Terry McAuliffe.
In court filings, Heretick and other attorneys representing store owners have argued the deals businesses signed with Queen of Virginia were voided when the state banned the machines. Therefore, the contracts can’t be enforced now because they require store owners to break the law. Heretick said a Richmond judge recently ruled the contracts were unenforceable.
Business owners point to a letter sent by Queen of Virginia General Manager Jeanna Bouzek in June 2021, instructing them to unplug all Queen machines in accordance with the approaching ban. Attorneys for the store owners have argued the letter was a “farewell,” that reasonably could be interpreted as the end of its dealings with Virginia businesses. The letter stated, “We appreciate the business we have enjoyed with you and take pride in knowing we assisted small businesses to survive during the pandemic.” The letter also warned store owners they could be fined if they don’t follow the ban.
An attorney for some convenience store owners said, “My defense is that once that letter went out the contract was over. And Queen of Virginia is now trying to revive it.”
Heretick, who said he supports some form of state-sanctioned skill gaming in Virginia, said Queen of Virginia is the party that’s “behaving badly” by pressuring store owners to keep running machines the legislature has determined are illegal gambling devices. “It’s my standard advice to my clients that this is illegal, Queen’s threats notwithstanding, it is illegal.”
