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IGT Continues Fighting Judgment

by Liz Benston

LAS VEGAS -- Slot maker International Game Technology has filed a motion to void a court judgment against it for $15 million stemming from a competitor's successful lawsuit against the company in South Carolina.

The motion, filed in U.S. District Court in Reno, is the latest installment in a nine-year legal battle against IGT by Collins Music Co., a South Carolina maker and distributor of pinball machines, juke boxes, video games and other entertainment devices.

Collins had signed a contract with IGT in 1991 to distribute IGT slot machines to customers in South Carolina. Collins sued the Reno-based slot maker in 1994, alleging that IGT had knowingly delivered faulty machines that didn't limit payouts to $125 per person in a 24-hour period -- a legislative requirement that became effective in July 1993 before IGT received its purchase order from Collins.

Collins claimed that IGT breached its agreement as part of a scheme to take over Collins' accounts and customers and assume the South Carolina distributorship area for itself. The machines also were delivered late and weren't the latest technology on the market, Collins said.

"(IGT) breached its agreement with a fraudulent act, that is, (IGT) withheld from (Collins) the opportunity to purchase the latest in video gaming technology and sent (Collins) defective machines immediately prior to the renewal period" for the distribution contract, the suit said.

IGT filed a counterclaim against Collins seeking payment for unpaid invoices for machines delivered to Collins, for violations of the South Carolina Unfair Trade Practices Act and for breach of its distribution agreement with Collins "accompanied by fraudulent acts." The company denied the other allegations by Collins.

In August 2001, a jury found against IGT on both counts against the company, including breach of contract with Collins and breach of contract "accompanied by a fraudulent act."

IGT already has accounted for the judgment in its earnings. In the company's fiscal fourth-quarter 2002 earnings release in November, IGT said it had reserved

$20.2 million in litigation costs for the fourth quarter ended Sept. 27, primarily because of the Collins suit.

In explaining last month's court motion in Washoe County Court in Reno, IGT's Reno-based attorney Shawn Elicegui said a decision by the South Carolina Court of Appeals "altered South Carolina law and prevented our case from being heard on its merits."

"That decision was inconsistent with federal guarantee of due process," he said.

Separately, IGT received a letter from a Georgia bank claiming that it owned the judgment instead of Collins Music -- leaving open the question of who is actually entitled to the judgment, IGT attorney Dan Reaser said.

"We don't want to pay that (judgment) twice," he said.

James Gilreath, a South Carolina-based attorney for Collins Music, said the claim that South Carolina courts changed the rules midstream isn't accurate and that IGT is trying everything in its power to keep from paying the judgment entitled to Collins.

"They have never won one argument, but they're still arguing," Gilreath said. "They are sitting on a judgment now approaching $20 million with interest over $5,000 per day -- or about $250 per hour -- and they are thumbing their nose at us."

The suit may not be settled until March at the earliest, IGT attorneys said. Collins Music has until Jan. 28 to respond to the motion and then IGT will have an opportunity to reply to Collins. District Court Judge Brent Adams may listen to oral arguments before he ultimately decides whether to allow Collins to enforce the judgment in Nevada, they said.

A separate decision is pending before the South Carolina Court of Appeals over whether a 14 percent interest rate applies to the IGT judgment, they said.

At issue is whether a 2001 decision by the South Carolina Legislature to increase the interest rate on court judgments to 14 percent from 12 percent applies to the Collins judgment.

"It calls into question whether to apply the new interest rate, old interest rate or no interest rate," Reaser said.

The issue of competition among slot distributors in South Carolina is now moot because video poker machines were outlawed there in 2000. But as in other states, there are proposals from time to time to expand gambling in the state.

Copyright © Las Vegas Sun. Inc. Republished with permission.

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