Kentucky Court Upends $870M PokerStars Judgment

(CN) - Throwing out an $870 million verdict against PokerStars, an appeals court ruled Friday that the state of Kentucky should not have been allowed to sue on behalf of players who lost money.

“Allowing a complaint, like the one put forth by the commonwealth, to move forward would lead to an absurd, unjust result,” Judge Glenn Acree wore for the 2-1 court in Frankfort. 

“It would mean that any private person with knowledge of the general nature of appellants’ electronic gaming format could allege an LRA claim in a wholly conclusory and generic fashion and walk away a billionaire without ever having identified a single gaming transaction with specificity,” the ruling continues, abbreviating the name of Kentucky’s Loss Recovery Act. “The LRA was never intended to be used in this fashion. It was intended to promote natural persons who had knowledge of specific instances of illegal gambling to file suit to assist the commonwealth in enforcing its anti-gambling regulations.”

Kentucky brought the suit here in March 2010, over a year before the online poker world was rocked in a government crackdown that came to be known as Black Friday.

Invoking the state’s Loss Recovery Act, Kentucky sought treble damages on behalf of the thousands of Kentuckians it said had lost more than $5 on PokerStars.

Eventually the Franklin Circuit Court entered an $870 million verdict against two PokerStars entities: Stars Interactive Holdings fka Amaya Group Holdings (IOM) Ltd., and Rational Entertainment Enterprises Ltd. (REEL).

The Kentucky Court of Appeals reversed Friday, however, after finding that the suit should have been dismissed for lack of standing.

While the state can undoubtedly be said to have an interest in “suppressing illegal and unregulated gambling,” Acree emphasized that the law it invoked is meant to protect people affected by someone else’s gambling problem.  

“The commonwealth is not bringing this action to collect the money and then return losses to the ‘losers,’” Acree wrote. “It is bringing this action to collect treble damages for its own benefit.”

Sheryl Snyder, an attorney in Louisville who represented the poker companies, referred comment to Stars Interactive Holdings Ltd., which could not be reached for comment. 

Representatives for John Tilley, secretary of Kentucky’s Justice and Safety Cabinet, also could not be reached for comment Friday afternoon. An operator indicated that most people had gone home early for Christmas.

To bring an LRA complaint as a third party, Judge Acree emphasized that the suit “must set forth basic facts such as the identity of the parties, date of the conduct, and nature of the gambling losses at issue.”

“This conclusion does not eviscerate or do violence to our liberal pleading requirements,” the ruling concludes. “To the contrary, it is in conformity with their purpose of supplying the defendant with a concise statement of the general nature of allegations at issue.” 

While Judge Allison Jones concurred in the judgment, Judge Robert Johnson dissented in part.

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