Gamblers', Finance Companies' Fate Rests with Federal Judge

13 September 2000
A gambler's fate often rests with a turn of a card or a roll of the dice. But a group of online gamblers-and the credit card companies they're suing to avoid paying off their losses-await the tap of a judge's gavel to decide their destinies.

A federal judge in New Orleans heard oral arguments Wednesday on motions to dismiss lawsuits filed by unsuccessful gamblers from around the country who want the court to void debts to credit card companies they incurred while betting at online casinos.

Gamblers contend that, under a long-standing legal view, gambling debt is not legally enforceable. But the credit card companies--faced with a demand to forgive the debts as well as be tainted as criminal enterprises for processing the online transactions--want no part of that. They argue, in essence, that the debt is not a "gambling debt," but simply a credit card debt, regardless of how it was incurred.

Attorneys for the plaintiffs', however, are using the federal racketeering and wire transfer laws to extend the gambling debt argument to the credit card companies and their issuing banks. The key argument attorneys expected to hash out Wednesday revolves around the use of Racketeering Influenced Corrupt Organizations Act (RICO) to contend that credit card companies and banks have engaged in a pattern of criminal activity.

U.S. District Judge Stanwood Duvall Jr. is hearing the complex case. As many as 21 separate lawsuits-each seeking certification as a class action--have been consolidated into the case now pending in New Orleans.

W. Lewis Garrison, a Birmingham, Alabama, attorney representing some plaintiffs, said the hearing would determine "whether MasterCard, Visa and the issuing banks' motion to dismiss our RICO claims will be upheld or overruled."

Garrison conceded that prevailing on the RICO motion was only part but "a very important part" of his clients' suit.

Paul Hugel, a New York attorney who has followed the case, believes the gamblers' legal arguments are weak and won't pass muster. "I think the credit card companies have the stronger arguments going for them," he said.

A ruling upholding the dismissal the RICO motion would be a blow to plaintiffs overall case, probably resulting in the entire case collapsing, some experts believe.

"It could result in the entire case being dismissed when the judge rules on that motion," Hugel said. "It's a fairly safe bet that if the defendants prevail, the case will likely be over."

If the judge overrules the motion, Garrison said: "We'll press on."

Both sides hope for a speedy ruling in the case. "I expect we'll hear from Judge Duvall probably within a month," Garrison said.

Duvall was assigned the case, after another judge recused earlier this year himself because he owned stock in BankOne, one of the defendants, and wanted to avoid the appearance of a conflict of interest. A spokesman said the judge would have no comment on the case. Attorneys for MasterCard and Visa could not be reached.

According to "The Internet, Gaming, RICO and Credit Cards - A Legal Analysis," a paper Hugel and business scholar Joseph Kelly presented at International Conference on Gambling and Risk-Taking in June, the gamblers have a tough case to prove banks and credit card companies violated RICO.

"[T]he RICO claims asserted by the plaintiffs in the Internet Gambling Litigation raise a number of thorny issues, any one of which could result in the dismissal of all of plaintiffs' RICO claims," Hugel and Kelly wrote. "If plaintiffs are to have any hope of prevailing in these cases, they will have to hope for substantially more luck than they displayed when visiting the online casinos."

To win their RICO claim, the gamblers must prove that the credit card companies used a "pattern of racketeering activity" to infiltrate and conduct the business affairs an interstate enterprise that injured the plaintiffs. In other words, they must prove the credit card companies were integrally involved in the business of running offshore casinos, not simply incidental financial go-betweens.