Judge Dismisses Class Action Complaint Against PokerStars in Illinois Loss Recovery Case

PokerStars Victory
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Lawyers for PokerStars are celebrating a victory in litigation against PokerStars entity Rational Entertainment Enterprises, Ltd. (REEL) today after Chief Judge David R. Herndon of the United States District Court for the Southern District of Illinois granted REEL’s motion to dismiss a class action complaint filed against it by Kelly Sonnenberg.

In the complaint, Sonnenberg claimed to represent a class of “hundreds of thousands – possibly millions – of Illinois poker players” who lost money playing online poker, and sought to recover damages under Illinois’s Loss Recovery Act (LRA), which permits an award of triple the amount lost at illegal gambling to be recovered from the winner.

The Court’s dismissal of the action likely ends Sonnenberg’s efforts to do so. Read the decision here.

Rake distinct from winnings

In dismissing the action, the Court focused, among other things, on the fact that the LRA authorizes recovery only from a “winner” of gambling losses.

In its motion to dismiss, REEL argued that it was not a “winner” because of it collected a “rake” from each hand, but did not otherwise participate in or benefit from the outcome of the hand. Sonnenberg argued in response that the rake was enough to make REEL a “winner” under the statute.

The Court found that PokerStars – alleged to be “the operator of an online card room” – was “more akin to a third party service provider that provides a forum for others to play the game and [did] not have a stake in how the game is decided.”

The judge also observed that there was no assertion that any of the PokerStars defendants made or won any bets or wagers, or participated in the games themselves. Without those allegations, the Court ruled, REEL could not be considered a “winner” under the LRA.

While the judge granted Sonnenberg leave to amend her complaint, lawyers David Deitch and Rachel Hirsch of Ifrah Law (who represent PokerStars) believe it is virtually impossible for Sonnenberg to make any kind of allegation that will meet the standard the judge has set.

“Chief Judge Herndon has stated unequivocally that an online poker room operator who does not participate in the games is not a ‘winner’ under the LRA,” Hirsch noted.  “We think this ruling pretty much spells the end of this lawsuit.”

Dismissal may have ramifications in states with similar laws

Deitch expressed the hope “that judges in Kentucky and other states with similar loss recovery statutes will recognize the simple but important principle that a ‘rake’ does not make a company a ‘winner’.”

While illegal online poker rooms are largely things of the past in the United States, this case may also be precedent with respect to the growing online fantasy sports industry.

Chief Judge Herndon’s opinion included a nod to the reasoning of District Judge Thomas R. Durkin of the Northern District of Illinois, who dismissed an LRA case against fantasy sports provider FanDuel last October.

As Deitch notes, “This is another case that will protect responsible and lawful online providers from unscrupulous plaintiffs looking for windfalls from deep pockets.”

Read the full decision here.

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