Analysis of PokerStars’ Application for Interlocutory Appeal

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The saga of PokerStars’ attempt to break into the regulated United States gaming market took another twist this week as PokerStars continued to pursue its attempt to purchase the financially troubled Atlantic Club Casino.

That deal had appeared doomed following a recent New Jersey state trial court ruling denying PokerStars’ request for a temporary restraining order (TRO) blocking the Atlantic Club from terminating the parties’ Purchase Agreement and pursuing other potential buyers.

PokerStars responds with application for interlocutory appeal

Thursday, PokerStars filed a motion for leave to appeal the trial court’s ruling denying the TRO. Because the trial court’s ruling was only preliminary, PokerStars does not have any right to appeal at this point in the proceedings.

Instead, PokerStars has requested permission to file what is known as an interlocutory appeal. The appellate court has broad discretion to grant or deny leave to file an interlocutory appeal.

Generally, appellate courts will only grant leave to file an interlocutory appeal where a party can demonstrate substantial prejudice will result if they are forced to wait to appeal until after the underlying lawsuit reaches a final disposition. Much like the grant of a TRO itself, interlocutory appeals are an extraordinary remedy permitted only in unusual situations.

Analyzing PokerStars’ position

Along with its motion for leave to appeal, PokerStars filed a supporting brief which sets out in detail the legal reasons why the appellate court should permit interlocutory appeal. Although the brief addresses the merits of the arguments for entry of a TRO, the purpose of the brief is to persuade the appellate court that the trial court’s TRO ruling should be reviewed immediately.

PokerStars raises four main points in its brief:

1. The Court should allow for interlocutory appeal

First, PokerStars argues that interlocutory appeal should be permitted because:

“[T]his case is one of great public importance. There are 1,800 casino industry jobs at risk and $32 million in potentially unfunded pensions. There has been extensive media coverage. … Further, this case involves a transaction in a highly regulated industry with critical economic impact in this State.”

This argument falls flat, however, because PokerStars is requesting a TRO to prevent the sale of the Atlantic Club to another purchaser, one which would presumably also fund the casino’s operations and pensions. If the Atlantic Club were truly facing a choice between selling to PokerStars and bankruptcy, presumably they would sell to PokerStars.

Similarly, the mere fact a case is high-profile or connected to a major industry is seldom sufficient basis for permitting a party to bypass the usual requirement of proceeding to a final disposition prior to seeking appellate review.

2. There were problems with trial court’s TRO decision

PokerStars’ second point is that the trial court improperly interpreted New Jersey gaming laws and deprived the Division of Gaming Enforcement (DGE) of its statutorily-mandated 121-day review period for interim casino authority (ICA) applications. This argument is essentially a rehash of PokerStars’ trial court argument that the Atlantic Club could not terminate the Purchase Agreement pursuant to an “Outside Date” clause when that Outside Date was less than 121 days after the DGE deemed PokerStars’ ICA application complete. Previously, PokerStars argued that the Outside Date is either the contractual “Closing Date” or is “inextricably linked” to the Closing Date; neither of these arguments were persuasive to the trial court.

In an interesting rhetorical move, however, PokerStars has subtly reformulated its Outside Date argument. In its latest brief, PokerStars now asserts that the Outside Date as interpreted by the Atlantic Club and the trial court “operates as a closing date” and thereby improperly interferes with the DGE’s ability to investigate PokerStars’ ICA application.

In particular, PokerStars asserts that the DGE is prejudiced by the Outside Date provision because the DGE has invested significant time and resources into investigating PokerStars’ ICA application, resources which are now wasted if the Purchase Agreement has been terminated.

PokerStars’ belated concern for the DGE is somewhat perplexing considering PokerStars agreed to the Outside Date provision. Further, the DGE resource argument is overblown considering New Jersey gaming regulations (N.J. Admin. Code § 13:69A-9.4) already assess all costs of investigating ICA applications—including DGE personnel expenses—to the applicant.

3. The trial court arbitrarily reversed itself on the TRO

PokerStars’ third point is that “the trial court arbitrarily reversed itself and disturbed the status quo.” Here, PokerStars complains that the trial court initially granted a TRO based on a finding of irreparable harm to PokerStars if the Atlantic Club were to sell to another buyer, but then later lifted the TRO exposing PokerStars to that very harm.

Although PokerStars cites to the trial court’s comments from an initial hearing the day after the TRO was put in place, PokerStars fails to note that the trial court also stated that he had put the TRO in place solely based on his “initial sense” of the legal arguments based on PokerStars’ filings, and without benefit of the Atlantic Club’s filings. The trial court explicitly stated he wanted to wait for the main hearing on the TRO to reach a final determination as to whether to keep the TRO in place. After that full hearing, the trial court concluded PokerStars was unlikely to prevail on the merits of its argument, so a TRO was inappropriate regardless of whether PokerStars might be harmed by a sale of the Atlantic Club to another buyer.

4. Collection of misc. complaints

PokerStars’ final point is a hodgepodge of miscellaneous complaints about the evidence relied upon by the trial court at the hearing on the TRO. PokerStars primarily attacks three affidavits from former NJ gaming commissioners as being improper evidence, including attacking one of the affidavits because the commissioner was also a retired judge who PokerStars asserts is ethically barred from serving as an expert witness.

PokerStars also complains that one of the Atlantic Club’s attorneys improperly gave factual testimony during the course of the hearing. These types of attacks are collateral to the merits of the underlying legal arguments which turn solely on the Purchase Agreement and the New Jersey gaming statute. Appellate court judges generally take a dim view of these types of complaints; at best, they only serve to distract the appellate court from the real legal issues.

The next step for PokerStars & the Atlantic Club Casino

At this point, the Atlantic Club will likely file a resistance to PokerStars’ application for interlocutory appeal. The appellate court may deny PokerStars’ application without waiting for a resistance, though doing so is uncommon.

Even if the application is granted, the parties would then file additional briefs on the merits of the arguments for and against a TRO. Briefing usually takes several weeks to complete, even on an expedited schedule (and appellate courts rarely move quickly).

A decision on appeal might well not be issued until after the August 9, 2013 deadline for the DGE to rule on PokerStars’ ICA application; if PokerStars does not get an ICA, then the appeal (and the underlying lawsuit) would be moot. PokerStars could request the appellate court to enter its own TRO pending resolution of the appeal, but such relief is rather unlikely where the trial court has already determined PokerStars is unlikely to prevail.

With late June deadlines looming for the initial round of New Jersey online gaming permits, PokerStars’ decision to pursue an interlocutory appeal seems to indicate that salvaging the Atlantic Club deal is PokerStars’ best, and possibly only, option for breaking into the New Jersey online gaming market. We should know in a few weeks whether PokerStars still has a shot at buying the Atlantic Club.

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- Grange95 is the pseudonym for an attorney and recreational poker player who blogs about poker and other topics at crAAKKer. Grange95 graduated with honors from Drake University Law School where he also served as editor-in-chief of the Drake Law Review. Grange95 worked in private practice for over 15 years as a civil litigator, with extensive experience in insurance, commercial, administrative, and appellate litigation. Grange95 currently serves as in-house legal counsel for a financial services company where his duties include supervising major litigation throughout the United States.
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