One count in a class action lawsuit against PokerStars seeking to recover gambling losses has been dismissed in federal court.
In his ruling, U.S. District Court Judge David R. Herndon said that PokerStars is “more akin to a third party service provider that provides a forum for others to play the game and does not have a stake in how the game is decided.”
The count was dismissed Friday in the U.S. District Court for the Southern District of Illinois.
“This is a major victory for PokerStars and instructive for other online gaming providers facing similar attacks from plaintiffs seeking unjust windfalls,” said Jeff Ifrah, the founder of Ifrah Law, in a press release. “In our very first pleading, we clearly proved that the plaintiff’s case lacked any merit.”
The lawsuit was originally filed on Aug. 24, 2012 in St. Clair County Circuit Court and was removed to federal court on April 9. Count V of the complaint alleged violation of state gambling laws.
In June, the chairman of PokerStars, Mark Scheinberg, agreed to pay $50 million to federal prosecutors connected to a 2011 money laundering lawsuit. PokerStars also agreed to pay $731 million to settle the lawsuit brought on by the U.S. Department of Justice.
Congress passed legislation in 2006 that banned online gambling, but was largely unenforced until April 15, 2011, when federal prosecutors arrested executives and investors of several Internet poker sites.
Oldford Group Ltd., Isai Scheinberg, Paul Tate, Nelson Burtnick, Rational Entertainment Enterprises Ltd., PYR Software Ltd., Stelekram Ltd. and Sphene International Ltd., known collectively as PokerStars, were all named as defendants in the suit.
Kelly Sonnenberg claimed Illinois residents were targeted by the defendants, navigated to the PokerStars website, opened accounts and deposited their own funds into those accounts. Sonnenberg claimed her son incurred a loss.
Sonnenberg sought to recover gambling losses of PokerStars’ Illinois players under the Illinois Loss Recovery Act, which allows individuals to collect losses on behalf of third parties, provided those third parties fail to make their own claim within six months of losing the wager.
However, Illinois courts have held that the winner, and not the “keeper of the house,” is liable to the loser, unless the keeper of the house also risks money in the gambling activity (Holmes v. Brickey), according to an Ifrah Law press release.
“PokerStars Group acted as a conduit for transmission of the prize money to the winner and it did not risk any of its money in producing the prize money to the winner… Based on the allegations contained in the first amended complaint, plaintiff has not pled that [Rational Entertainment] is a ‘winner,’” the judge stated in his ruling.
Herndon also found that Sonnenberg had not sufficiently detailed a “loser” or a “loss.”
“While Sonnenberg’s affidavit in response to the motion to dismiss states that she is seeking recovery based on her son’s losses; the first amended complaint is devoid of allegations stated the ‘who’ ‘what’ and ‘when’ of the losses she seeks to recover,” Herdnon said. “However, the court finds that Sonnenberg has sufficiently alleged that the losses occurred in Illinois through the illegal gambling Internet site.”
Herndon found that the parties have not “adequately developed/addressed REEL’s argument that the forfeiture of the PokerStars group of companies’ profits by the United States precludes this cause of action and because of that, the court is not in a position to rule on that issue at this time.”
“This was an incredibly high-stakes case,” said Ifrah Law attorney Rachel Hirsch. “As the Illinois Loss Recovery Act permits an award of triple the amount of losses, millions of dollars were at stake. This win will protect other online gaming providers from similar meritless actions.”
The court is allowing Sonnenberg until April 12 to file an amended complaint that agrees with the memorandum and order.
In addition to Ifrah and Hirsch, Rational was represented by David B. Deitch of Ifrah PLLC and Laura E. Craft-Schrick and William J. Niehoff of Mathis Marifian & Richter Ltd.
The plaintiff was represented by Lloyd M. Cueto of the Law Office of Lloyd M. Cueto PC; and Christopher F. Cueto and Michael J. Gras of the Law Office of Christopher Cueto Ltd.