Revisiting the Duval Ruling - Case Closed

You might recall the Duval Ruling in which two cases (Larry Thompson v. MasterCard and Lawrence Bradley v. Visa) were consolidated from 21 similar cases alleging that I-gaming debts were not collectable because the credit card companies violated the Racketeer Influenced and Corrupt Organizations (RICO) Act.

IGN last visited the case in November 2002, when a U.S. Court of Appeals upheld Judge Stanwood R. Duval's District Court decision to dismiss the case because the plaintiffs failed to show that Visa and MasterCard's actions constituted a pattern of racketeering activity or the collection of an unlawful debt.

The case returned to the original District Court of Eastern Louisiana on May 27, 2003, when the plaintiffs filed for a motion for leave to amend the complaint, asking Duval for permission to add to their allegations that the defendants violated both the (1) National Bank Act and the (2) Truth in Lending Act. They also sought (3) injunctive relief under RICO and (4) declaratory relief that the debts constituted gambling debts and were therefore unenforceable under state law.

Duval on July 30, 2003 denied the plaintiffs' request to amend the compliant, agreeing with the defendants that the proposed amendments were futile because they reasserted legal conclusions that the courts had already rejected.

Duval's decision includes an analysis of the four proposed amendments and why each was deemed futile. The first amendment alleges that the defendants violated the National Banking Act's prohibition on usury by trying to collect debts that were accumulated through illegal activity. But according to Duval, the court had already decided that the defendants did not collect illegal debts because the plaintiffs purchased credits, not gambling services, with their credit cards. The National Bank Act states that a financial institution may not deal in lottery tickets or bets. Duval rejected claims that the defendants violated the act because I-gaming does not constitute a lottery and because their acts cannot be accurately described as "dealing in bets."

The plaintiffs tried to cite violations of the Truth and Lending Act by arguing that the defendants' credit card statements failed to provide sufficient information about the seller of the purchases in question. But Duval upheld the credit card companies' arguments that the purchases financed with credit cards took place before and were separate from the gambling services purchases. The companies did provide sufficient information about the sellers, which were e-commerce sites.

The RICO claim for injunctive relief was denied because the courts had already stated that the plaintiffs failed to plead a RICO enterprise. Declaratory judgment was also rejected because the "relevant credit card transactions occurred prior to any gambling and thus there is no possibility that plaintiffs can prevail on their claim that the defendants violated state law by "gambling over the Internet."

The rejection of the plaintiffs' motion for leave to amend the complaint essentially marks the death of the case. Duval inevitably honored Fidelity Bank's motion to dismiss with prejudice on Feb. 19, 2004, thus ending litigation.

To summarize, Duval ruled that credit card debts resulting from online gambling losses are valid and collectible. After all, the credit card companies do not do business with the gaming operators, instead they deal with e-commerce companies, which are legitimate and sanctioned in the United States.

One final note: The U.S. Court of Appeals for the 5th Circuit ruled that debts could not be deemed unenforceable on the grounds that accepting their online bets was a violation of the Federal Wire Act. The Appeals Court found that the Wire Act prohibited only sports gambling, and therefore casino gaming is not outlawed by the Wire Act.

The court stated: "Because the Wire Act does not prohibit non-sports Internet gambling, any debts incurred in connection with such gambling are no illegal. Hence, the defendants could not have fraudulently represented the plaintiffs' related debt as legal because it was, in fact, legal."

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