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Kevin Smith

Oregon Case is a Hard Blow to I-Gaming Industry

12 April 2001

IGN reported April 10 on another lawsuit filed by an online casino player who claims she doesn’t owe the over $350,000 in debt she racked up online. The complaint, which was filed in Oregon Circuit Court, claims that online casino operators, software companies and billing companies created a racketeering empire in violation of that state's laws. The suit also claims that credit card companies should take some of the blame.

Legal experts specializing in online gaming law are beginning to weigh in with their opinions on the case, and many feel this could start a trend in the United States that could cripple the industry.

Steve Fein, executive vice president of Signature Card Services and a legal expert in the area of credit cards and e-commerce, said it is not uncommon for online casino operators to get sued, but the Oregon case is different.

"It is a different slant," he said. "They are naming names. I don't know where it is going, but it is funny they didn't name MasterCard or Visa."

The attorney for the plaintiff, James L. Buchal, said the two leading credit card issuing companies weren't named, but they are key players in the case. "They are not defendants, but they are, in substance, agents for the banks, and their knowledge and conduct may be attributed to the banks," he said.

Both lawyers agree that a federal precedent was set last month in a New Orleans federal court room with a similar case, but that doesn't mean much in Oregon.

"From a credit card company's point of view, all New Orleans did was say that these matters had to be decided at the state level," Fein said. "All they established is that this isn't a federal issue. The banks are state charters. The federal government is not in the consumer finance business."

Buchal said a key ingredient for both cases is racketeering codes, but Oregon's statutes are stiffer than federal guidelines.

"The New Orleans case addressed federal RICO claims; this is a state ORICO case," he said. "The state courts are not bound to follow the New Orleans precedent, but may do so."

The Oregon case has four separate groups of defendants: the online casino operators, the billing companies, the software companies and the banks issuing credit cards. Fein found it odd that one group of banks was left out, but he admits there is still time.

"What is interesting is that they didn't name any of the acquiring banks," he said. "They have named processors but not the banks that the processors do business with. I am sure if they go through any kind of a discovery phase they will add those banks to it."

"A lot of times the issuing banks will making the acquiring banks a party to the suit," Fein added.

One of the operators named in the case is Lasseters Online Casino. Peter Bridge, chief executive for the Australian-based e-casino operator, said the company is exploring options of aligning itself with other defendants for the case.

"I would be very interested in hearing what other casinos are doing and may be interested in joining some sort of joint defense in Oregon," he said.

Bridge feels Lasseters is in a little different situation that the other defendants listed. One of the main arguments in the Oregon suit is that many of the billing companies and casino operators created companies that were hard to contact, and the owners were mysterious people or companies.

"It appears Lasseters is in a different position than the other casinos as we clearly state who we are," he said. "I have my photo on the website for goodness sake. We handle our own gaming and credit card transactions. The claim that Lasseters is not revealing who the company is and who is behind Lasseters is clearly false based on the content of the website."

Fein says cases such as Buchal’s--his wife is the plaintiff in the case--are more prevalent than many realize.

"For every one of these you hear about, there are 10 more that you don't hear about," he said. "This could open the flood gates for similar suits. Every time these things get out of the box like this it is just another nail in the coffin."

Adding to the intrigue of the Oregon case is that among the list of defendants named in the case are a handful of companies located outside of the United States.

"Now they are going cross-border with this stuff," Fein said. "They are naming companies outside of the United States. The terms "racketeering" and "conspiracy" become more prevalent here."

Buchal knows it will be challenging taking on companies based outside of the United States.

"There are always jurisdictional questions when a state attempts to assert jurisdiction over entities outside its boundaries," he said.

Fein said the increasing number of cases similar to the Oregon one has caused credit card companies and banks to take notice.

"This is the kind if stuff that is driving the problems and why the banks are starting to block the transactions," he said.

Buchal said he has no idea whether or not the defendants will try and settle the case, but Fein is guessing they will try to reach an agreement.

"They may have set a very big precedent," Fein said. "I would hope that all the parties involved go for a settlement here. I am sure that is what the banks want."

Moves in Nevada to regulate online gaming would help curb lawsuits against the gaming industry, at least to a certain extent.

"It is almost like a race to the finish line," he said. "What is going to happen first? Is Nevada going to legalize or are the credit card companies going to cut off the industry?"

Fein feels that as long as users who rack up large gambling debts have a way out of paying them, the lawsuits won't stop.

"These lawsuits are just awful for the industry," he said. "It is just a way for the card holders to get out of this. The operators have got to figure out a way to stop it. It is easier to pay a lawyer $10,000 to file a lawsuit than it is to pay $150,000 in debt.

Click here to view the Oregon Racketeer Influenced and Corrupt Organization Act (ORICO).

Oregon Case is a Hard Blow to I-Gaming Industry is republished from
Kevin Smith
Kevin Smith