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United States v. PokerStars

United States District Court, S.D. New York

April 27, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
POKERSTARS, et al., Defendants, ALL THE RIGHTS, TITLE AND INTEREST IN THE ASSETS OF POKERSTARS, et al., Defendants-in-rem.

          OPINION AND ORDER

          KIMBA M. WOOD, UNITED STATES DISTRICT JUDGE

         In April 2011, the Government commenced this in rem forfeiture action against the three leading internet poker companies doing business in the United States-PokerStars, Full Tilt Poker, and Absolute Poker/Ultimate Bet-and certain of their officers. The Complaint sought forfeiture of all right, title, and interest in the assets of these companies, pursuant to 18 U.S.C. §§ 1955(d) and 981(a)(1)(A) and (C).

         In September 2011, Cardroom International, LLC ("Cardroom"), a Florida corporation that offers online poker gaming, filed a claim asserting an interest in up to $30 million of the assets seized in the forfeiture action. (Cardroom Claim, [Doc. No. 62]). The Government subsequently moved to strike Cardroom's claim, (Mot. to Strike, [Doc. No. 205]), and in response, Cardroom sought leave to amend, (Opp n to Mot. to Strike, [Doc. No. 253]), which the Court denied, finding undue delay and bad faith. On August 19, 2016, this Court granted the Government's motion to strike Cardroom's claim. (August 19th Opinion & Order, [Doc. No. 334]). Judgment was entered on August 25, 2016. [Doc. No. 336]. Cardroom now files both a motion for a "new trial" and a motion to alter the judgment. [Doc. Nos. 339, 340]. For the reasons discussed below, the Court DENIES Cardroom's motion for a "new trial, " and DENIES its motion to alter the judgment.

         I. BACKGROUND

         A. The Origins of the Civil Forfeiture Action

         The Government forfeiture action at issue stems from a criminal prosecution of the three leading online poker companies doing business in the United States: PokerStars, Full Tilt Poker ("Full Tilt") and Absolute Poker/Ultimate Bet (collectively, the "Poker Companies"). In March of 2011, the Government filed a criminal indictment charging certain officers of the Poker Companies with violations of the Unlawful Internet Gambling Enforcement Act, ("UIGEA"), 31 U.S.C. § 5363, and other laws.[1] In conjunction with the criminal prosecution, the Government also filed an in rem forfeiture action and a civil money laundering complaint, seeking forfeiture of all right, title, and interest in the assets of the Poker Companies (collectively, the "Defendant Property"). Id. at 4.[2]

         B. Cardroom's Claim to the Defendant Property

         In September of 2011, Cardroom filed a claim asserting an interest in an unspecified $30 million of Defendant Property. (Cardroom Claim at 1 [Doc. No. 62]). Cardroom's claim was based on its expectation of an "inevitable judgment" in its favor in a case filed on the same day in California state court against PokerStars and Full Tilt (the "California Action").[3] Cardroom alleged damages of at least $30 million in the California Action, and sought to have those damages satisfied out of the proceeds of the Government's in rem forfeiture action. Id.

         However, Cardroom later conceded that its claim to the Defendant property was "contingent" and was "not at this time enforceable." (Cardroom Answer ¶ 3, [Doc. No. 79]). The Government subsequently moved to strike Cardroom's claim on the basis that it was premised on a hypothetical future judgment, rather than an interest in any specific res that was part of the Defendant Property. (Mot. To Strike, 1-2 [Doc. No. 203]). In August 2012, Cardroom responded to the Government's motion to strike. (Opp'n to Mot. to Strike, [Doc. No. 253]). In its response, Cardroom made no effort to address the arguments raised in the Government's moving papers, or to defend the merit of its original claim premised on the California Action. See Id. Instead, Cardroom advanced an entirely new theory as to why it was entitled to $30 million of Defendant Property, and sought leave to amend its claim. See Id. It argued that the Government's violation of a 2003 contractual transfer restriction (the "Transfer Restriction") between Cardroom's predecessor-in-interest and Full Tilt's predecessor-in-interest rendered Cardroom a valid claimant to the $30 million. Id.

         C. Opinion and Order Granting Motion to Strike

         On August 19, 2016, this Court granted the Government's motion to strike. It held that Cardroom lacked standing to claim the funds, both under the applicable statutes and under Article III of the United States Constitution. This Court held that Cardroom's original claim, based on its expectation of securing a judgment against Full Tilt and PokerStars in the California Action, was "plainly insufficient to establish Cardroom's standing as a Plaintiff." (O & O at 7). Furthermore, the Court held that, in the unlikely event that Cardroom did obtain a judgment in that Action, such a judgment did not establish an interest in a particular, specific asset that was required in order to assert a valid claim to Defendant property. Id. Even in the event of a judgment, Cardroom would be, at best, a general unsecured creditor with no standing in the instant in rem forfeiture action. Id.

         The Court then addressed Cardroom's new contractual claim, for which it sought leave to amend. Cardroom asserted a right to Defendant Property based on the Government's purported violation of a 2003 Transfer Restriction agreement between Cardroom's predecessor-in-interest and Full Tilt's predecessor-in-interest, which prohibited the parties from transferring their interest in certain copyrighted software. Id. at 4. Cardroom claimed that the Government violated the Transfer Restriction when it transferred Full Tilt's forfeited assets-including its joint interest in the software-to PokerStars as part of a comprehensive settlement agreement, without requiring PokerStars to agree in writing to abide by the written terms of the Transfer Restriction. Id. To find such a violation, the Court would be required to read the Transfer Restriction to apply in perpetuity, as Cardroom argued it did. Id. at 8. However, the Court held that the Transfer Restriction was "much more logically read" to have expired years earlier, and to have no application to the Government's transfer of the $30 million Cardroom claimed. Id. at 8-9. The Court also held that Cardroom would have no claim to the Defendant property even if the Court did employ Cardroom's interpretation of the Transfer Agreement; Cardroom would, at most, "be limited to a suit for breach of contract." Id. at 9.

         The Court denied Cardroom's request for leave to amend on the additional grounds of undue delay and bad faith. The Court found that Cardroom had no plausible excuse for its failure to address the Government's alleged breach of Transfer Agreement in its first filing. Id.

         D. Motion ...


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