From rgtonline.com
This is probably the best source for gambling news.
U.S. Judge Backs Visa, MasterCard in Internet Gambling Ruling
by Fred Faust, RGTonline.com
Visa, MasterCard and several banks that issue the cards have won an important federal legal case involving credit card debts arising from Internet gambling. If a U.S. District Judge in New Orleans had ruled against them, the result could have been chaos in the already chilly relationship between online casinos and the credit card companies and U.S. banks that issue the cards.
More than 11 federal cases against the credit card companies and several of the issuing banks were consolidated and assigned to Judge Stanwood R. Duval Jr. in New Orleans. The plaintiffs were people who had lost money gambling online.
They argued that the banks and credit card companies were involved in “illegal gambling on the Internet.” In sending out monthly statements to the plaintiffs who had used the cards to gamble online, the plaintiffs alleged that the defendants committed mail and wire fraud in trying to collect “illegal” debts. The plaintiffs also charged that the financial institutions were “aiding and abetting” criminal enterprises.
If the casinos had not accepted credit cards, the plaintiffs argued, they wouldn’t have gambled online.
On Feb. 23, Duval dismissed the cases outright, before they even got to trial. That’s an unusually strong step for a judge, but Duval ruled that the plaintiffs had no grounds to bring these cases. Perhaps more significantly, he also ruled that Internet casinos do not violate federal law.
“Plaintiffs in these cases are not victims,” the judge stated in his ruling, “they are independent actors who made a knowing and voluntary choice to engage in a course of conduct. Litigation over their own actions arose only when the results of those actions became a debt that they did not wish to pay. At this point in time, Internet casino gambling is not a violation of federal law.”
Duval quoted with approval an Appeals Court ruling that stated, “. . . plaintiffs, i.e. the players, can avoid any injury simply by walking away from the alleged wrongdoers, the casinos, by not playing . . . in the casinos.”
In an opinion shared by many lawyers, Duval ruled that the 1961 federal Wire Act, under which telephone and Internet bookmaker Jay Cohen was convicted last year, applies only to sports betting and “does not prohibit Internet casino gambling.”
In addition to dismissing the allegations involving federal laws, Duval also ruled that the plaintiffs did not make valid claims that the defendants violated state laws.
These cases were filed after a California woman, Cynthia Haines, won a state case against Providian Bank, which had sued her for not paying her credit card bills. She had run up large debts while gambling online. She filed a counter-claim arguing that the bank and Visa and MasterCard should be prohibited from profiting from “illegal gambling on the Internet.”
MasterCard settled with Haines in July 1999, and Visa and Providian settled several months later. California has a tradition of refusing to enforce the collection of gambling debts, even those that are incurred at traditional casinos.
Joseph Kelly, a professor of business law at SUNY College at Buffalo, told RGT Online that the ruling by the New Orleans judge would have no effect on cases like those of Haines. Duval simply stated that no federal questions were involved in these cases. It’s up to state courts to decide if gambling debts are legally collectible, Kelly said.
In the federal cases that Duval handled, the plaintiffs – who had sought class action status – had sued under the RICO Act. That stands for Racketeering Influenced Corrupt Organizations Act. It was passed in 1970 as a weapon against organized crime, which sometimes takes over otherwise legitimate businesses or labor unions.
As Kelly and New York lawyer Paul Hugel stated in a paper last summer, the RICO Act has been used by lawyers in cases that Congress clearly didn’t have in mind when the act was passed. That’s because a successful RICO claim includes mandatory treble damages and automatic payment of attorneys’ fees.
“The twin siren song of treble damages and attorneys’ fees has proven to be an almost impossible lure for plaintiff’s attorneys to resist,” Kelly and Hugel wrote. They said the risk of losing a RICO case, with the treble damages, meant that defendants often felt pressure to settle.
They also predicted, accurately, that the plaintiffs in these credit card cases would have a hard time succeeding under the RICO rules.
In his ruling, Duval examined the requirements for bring a RICO case, and determined that the plaintiffs did not meet any of them. He stated, “This case is no different than Jubilirer.”
That was a reference to the case of Art Jubilirer, who lost $25 playing blackjack online and tried to bring a RICO claim against MasterCard and MBNA Bank. His suit was dismissed by a different federal court in September 1999.
The federal cases that Duval dismissed originated in different parts of the country. They were consolidated into two cases and assigned to Duval on March 1, 2000. Last Thursday, the plaintiffs’ lawyers filed a notice of appeal of Duval’s ruling.
The director of litigation for Visa International, Steve Zelinger, was quoted in a story about the ruling in today’s issue of The American Banker as saying: “It’s not our role to legislate people’s lives. We’re not a police organization, we’re a payment mechanism.”
That comment will be welcomed by online gaming operators. |
