Gamblers' Case against Visa, MasterCard Dismissed

13 March 2001
Judge Stanwood R. Duval Jr. of the U.S. District Court in New Orleans has dismissed two class action suits brought against MasterCard International and Visa International for debts incurred by players on Internet casino sites. The two cases are the first federal attempt to tackle the issue of whether credit card companies can collect payment for customers' gambling debts.

As many as 21separate cases from around the United States, each seeking class action status individually, were consolidated into two cases before the district court.

The plaintiffs' lawyers argued that credit card companies and banks have engaged in a pattern of criminal activity, and presented their case using the Racketeering Influenced Corrupt Organizations Act (RICO). It was their contention that the credit card companies had "alleged illegal involvement with the internet gambling industry."

In dismissing the case, Duval wrote that the "plaintiffs fail to plead several elements necessary to sustain a RICO claim as a matter of law. The defects in plaintiffs' complaints appear insurmountable." The case was dismissed February 23.

Attorney Ira Rothken, who represented Cynthia Haines in her seminal Internet gambling debt case against Mastercard and Visa, says that this attempt on the federal level was "not the correct remedy."

"The difference between our own case and the federal one is that we brought ours under purely California law, which makes it illegal to collect gambling debts, whether they are legal or illegal gambling activities. Our case was specific to California law," Rothken explained.

He added, "It would benefit all parties involved--online gambling sites, credit card companies, players--if there was one federal law."

As such, Rothken says that Congress needs to embrace some kind of legislation for Internet gambling.

Also pleased by the court's dismissal of the case was Eileen Simon, vice president and counsel to Mastercard. "We're extremely pleased by the judge's decision," Simon said. "It clearly signals judicial skepticism against these types of claims."

The company is reviewing similar state-level cases filed against it to see whether the federal decision would affect their outcomes.

Steve Zelinger, director of litigation for Visa International, was equally pleased. He told American Banker, "It's not our role to legislate people's lives. We're not a police organization, we're a payment mechanism."

Using a step-by-step approach, Judge Duval explained that the cases did not meet the necessary standards to be considered having breached RICO. Further, based upon the state law claims presented by the plaintiffs, Duval said that their case "failed, as a matter of law, to state a cause of action against any defendant for violation of state law."

In addition, the court found that the defendants had not violated the Federal Wire Act, despite arguments to the contrary. Duval wrote,

"Even a summary glance at the recent legislative history of internet gambling legislation reinforces the Court's determination that internet gambling on a game of chance is not prohibited under 18 U.S.C ยง 1084."

"Comparing the face of the Wire Act and the history surrounding its enactment with the recently proposed legislation, it becomes more certain that the Wire Act's prohibition of gambling activities is restricted to the types of events enumerated in the statue, sporting events or contests. Plaintiff's argument flies in the face of the clear wording of the Wire Act and is more appropriately directed to the legislative branch than this Court."

Despite the plaintiffs' claims that they would not have gambled online if they were unable to use their credit cards for payment, Duval was unsympathetic, calling them "independent actors who made a knowing and voluntary choice to engage in a course of conduct." He found that they sought legal action "only when the result of those actions became a debt that they did not wish to pay."

"Although plaintiffs cry out as victims in this case, they are in a precarious position because of their own voluntary acts of internet gambling," he added. "Plaintiffs' own acts of accessing the internet, locating the electronic casino games, entering their information, and playing the electronic casino games, are all intervening causes that break the chain of causation with respect to the defendants' alleged activities, even if they were illegal."

Finally, the decision read, "At this point in time, Internet casino gambling is not a violation of federal law."

Click here to view the MasterCard/Visa ruling.