The Feasibility of Serving Court Documents Electronically

Almost one week after the 9th U.S. Circuit Court of Appeals handed down a ruling that allows legal documents to be served via e-mail, gaming lawyers are expressing differing opinions about whether the judgment will result in an explosion of lawsuits against offshore I-gaming companies.

The appeals court said on Wednesday that Rio Properties, which owns the Rio hotel and casino in Las Vegas, can e-mail lawsuit papers to Rio International Interlink, an offshore company with no physical address. Rio Properties alleges that the offshore company infringed on its trademarks by operating gambling sites at www.riosports.com and www.betrio.com.

The Rio initiated the lawsuit in 1998, when it discovered an advertisement for Rio International Interlink in the Football Betting Guide '98 Preview. The hotel company complained, and Rio International Interlink took the www.riosports.com down, only to replace it with www.betrio.com. Rio Properties tried to sue the Costa Rican casino site operator, but could not find an address for the company.

The Rio tried serving the I-gaming company's Miami address, but the address turned out to be the home of the defendant's international courier, IEC, which was not authorized to accept the documents. When a lawyer, John Carpenter of Los Angeles, called the Rio to inquire about the case and said he had been consulted by the Costa Rican company about the suit, the hotel company attempted to serve him with the papers. Carpenter declined to accept them.

The 9th Circuit Court affirmed the U.S. Nevada District Court's ruling that the Rio could serve Rio International Interlink via e-mail. The court wrote: "Electronic communication via satellite can and does provide instantaneous transmission of notice and information. No longer must process be mailed to a defendant's door when he can receive complete notice at an electronic terminal inside his very office, even when the door is steel and bolted shut."

Ken Hense, a gaming lawyer with McGlynn, Reed, Hense, Pecora and Irwin, said the Internet company could appeal the verdict and ask for an "en banc" hearing from the 9th Circuit Court, meaning a hearing of all the court's judges. If that was denied, the next and final level for appeal would be the Supreme Court. Hense is skeptical about the verdict's practical application.

"I think they're going to have a problem with due process," he said. "The purpose of a lawsuit under U.S. law has always been that the defendant has to have due process--in other words, you do everything enabling him to be aware of the suit. Well, if you served it on the Internet, how do you know if he received it? It's not like sending a letter where they sign for it on registered or return receipt requested."

The judgment serves as a precedent only for the jurisdiction of the 9th Circuit, which is the largest of the 13 circuit courts in the United States. It encompasses all federal courts in California, Oregon, Washington, Arizona, Montana, Idaho, Nevada, Alaska, Hawaii, Guam and the Northern Mariana Islands. Should the issue arise in another circuit, the 9th Circuit's decision would be taken into consideration, but would not be binding.

Cory Aronovitz points out that the issue has not been taken up by any other appellate court or circuit court. Aronovitz, a lawyer with the Casino Group and an adjunct professor of gaming law at the John Marshall Law School in Chicago, represents online gaming companies based in the Caribbean. He said that while the verdict puts offshore companies at a substantially higher risk of being sued, he doesn't expect to see a tidal wave of lawsuits against offshore Internet gambling operators as a result. Instead, he said, Internet gamblers could use the decision as a bargaining chip if they are disgruntled with a particular site.

"If you lost money at a site, you can say, 'Now under the 9th Circuit I can find you and sue you. I want my money back.' You avoid litigation simply by using that as a tool. It just makes it easier for people to initiate litigation. Whether they will take advantage of it and actually use it as a tool to recover losses is another thing," he said.

The verdict makes it easier for a person to sue an offshore corporation, and correspondingly difficult for the same corporation to avoid civil lawsuits, said Ian Gershengorn, a lawyer in the Washington, D.C., firm Jenner and Block. Gershengorn is the lead lawyer in Jay Cohen's petition to appeal his Internet gambling conviction before the Supreme Court.

Gershengorn points out that while the decision may facilitate the initiation of a lawsuit, it does not affect the limitations restricting people's ability to sue foreign corporations in United States courts. A person cannot sue a foreign company in the United States unless it has intentionally done business there, he said.

"A foreign corporation that just advertises on the Internet doesn't by doing that subject themselves to suit anywhere in the United States," he said. "It's only when you do a substantial commercial business in an area can you sue in that area."

For example, he said, a person in Massachusetts who reads the Web page of a foreign corporation cannot sue it. Only if the company has advertised in the Boston Globe newspaper, and someone alleges that they are harmed in some way by the company while in Boston, can the foreign group be sued there.

"The long and short of it is that it removes an obstacle to suits against offshore companies," Gershengorn said. "But it doesn't remove all of the obstacles and in many ways it doesn't remove the most important obstacles. The court says it's OK to send an email to start the lawsuit, but that doesn't mean the lawsuit will necessarily be allowed to continue."

Click here to read the 9th U.S. Circuit Court of Appeals' decision.