-Tuesday, August 10, 2004

Precedent, Case Law Favor Casino City According to Legal Experts

by Kevin Smith
Republished courtesy of iGamingNews.com.

A day after it was announced that Casino City was seeking a declaratory judgment against the U.S. Department of Justice on the whether or not online casinos and sports books could be advertised, I-gaming legal experts weighed in with their thoughts on the case.

Most agree that it is still too early to determine exactly what will come from the case, which was filed yesterday in the Eastern District of Louisiana, but early indications are that Casino City could be in line to get a favorable ruling in the case.

Lawrence Walters, a longtime attorney specializing in Internet and gambling law, pointed to precedent in the Eastern District of Louisiana as one of the biggest reasons for there to be hope for Casino City.

"The Eastern District of Louisiana is one of the best places, if not the best place, to hear this case," he said.

Walters said a U.S. Supreme Court ruling in 1999 from a case that originated out of the district court said that the state of Texas couldn't prohibit licensed and legal casinos in Louisiana from advertising in Texas, where state law prohibited casinos.

In Greater New Orleans Broadcasting Association Inc., vs. United States, the Supreme Court reversed a lower court ruling that prevented casino operators in New Orleans from advertising their casinos on Texas radio stations.

The court ruled that the advertisements were protected under the First Amendment of the Constitution. Casino gambling is legal in Louisiana and illegal in Texas, but the court ruled that Texas couldn't prevent a licensed and legal operator in Louisiana from advertising in Texas.

Martin Owens, a California-based attorney who represents several gaming clients, said the basis of the ruling could be extended to online gaming.

But even more important than the precedent form the Greater New Orleans Broadcasting Association case could be another Supreme Court ruling that came down in 1975.

In the U.S. v. Baumgarten ruling, the court said that individuals must have "an interest in the criminal venture" in order for there to be aiding and abetting violations.

"The case law doesn't say what the DOJ wishes it did," Owens said. "Case law says that you purposely have to participate in the deed to be an accomplice."

The Department of Justice started a Grand Jury Investigation nearly a year ago that subpoenaed hundreds of media outlets that were carrying advertising from online casinos and sports books. As part of the subpoenas the DOJ sent letters informing outlets that they could be brought up on aiding and abetting charges if they didn't stop carrying the advertisement for the gambling operations.

Owens said the leap from advertiser to accomplice in a criminal activity is one the DOJ shouldn't be taking.

"What is the difference between that and a taxi driver who gives someone a lift after they just got done committing a crime?" he said. "The cabby doesn't know what his rider just did, nor should he be held accountable for his actions."

Adding to the murky water is the fact that the U.S. government has never come out and specifically said that online gambling is illegal.

"In order to be charged as a principal to a crime, it is not enough merely that you know the law may be broken," Owens said. "Internet gambling may or may not be breaking the law, as we have seen, even in the U.S. You must have purposefully participated in the deed, in an active way, with an eye to making it succeed. So, does carrying advertisements for Internet gambling rise to that level of participation?"

Another case that could have favorable precedent for Casino City that came out of the Eastern District of Louisiana was the Duval case, which was dismissed for good in February of this year.

The Duval ruling was a unique situation in which two cases (Larry Thompson v. MasterCard and Lawrence Bradley v. Visa) were consolidated from 21 similar cases alleging that I-gaming debts were not collectable because the credit card companies violated the Racketeer Influenced and Corrupt Organizations (RICO) Act.

Duval ruled that credit card debts resulting from online gambling losses are valid and collectible. The ruling can go a long way in arguing that online gambling is not an illegal activity in the U.S.

Having the Eastern District of Louisiana as a friendly jurisdiction is no secret to those in the I-gaming industry. One lawyer even speculated that Casino City may have recently incorporated in the area for the sole purpose of filing the case.

"There is nothing legally to stop them from doing that, and if I was their lawyer I probably would have told them the same thing, if indeed that is what happened," the attorney said.

According to its Web site Casino City has its headquarters just outside of Boston but its corporate base is listed in Louisiana.

Walters said it is too early what will be the next step in the case, or how long it could take to be settled.

"A lot of that will depend on what the DOJ does next," he said. "We won't really know more until we see the governments response and who the judge is going to be."

Owens is confident that the industry could see a positive ruling from the case.

"Casino City has a very good case," he said. "The government is really over reaching on this issue and it goes against case law."