Cardroom International LLC v. Mark Scheinberg, et. al. (Ferguson, Chris)

LASC COURT RULING: In Favor of Demurring Defendant Ferguson et. al. moving defendants.

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Defendant Chris Ferguson's Demurrer to all 3 of Plaintiff Cardroom's purported causes of action sustained by Los Angeles Superior Court Judge Elizabeth White:

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Ferguson had argued in his demurrer that Plaintiff’s lawsuit was nothing more than a frivolous attempt to capitalize on an indictment and civil forfeiture action that is wholly unrelated to the claims alleged. In his moving papers he argued as follows:

"Plaintiff, Cardroom International LLC (“Plaintiff”), claims to be a Florida company that has created software for online poker and that maintains a free play online website. Plaintiff sued Pokerstars and Full Tilt Poker, two competitors in the online poker industry, and anyone that Plaintiff can tie to these two entities for antitrust and Civil RICO violations based on what Plaintiff claims is anticompetitive behavior.

Defendant Chris Ferguson (“Ferguson”) filed the instant Demurrer to Plaintiff’s operative First Amended Complaint (“FAC”) because the FAC fails to allege facts that constitute a cause of action. The FAC contains three causes of action: (1) Civil RICO; (2) antitrust violations under the Cartwright Act; and (3) antitrust violations under Florida law. The claims are all based on legal proceedings in the Southern District of New York relating to alleged online gambling and payment processing issues. However, neither the criminal indictment of certain individuals nor the civil proceedings have anything whatsoever to do with Plaintiff or with anticompetitive conduct.

Defendant Ferguson demurs to all three causes of action set forth in Plaintiff’s FAC. The Demurrer should be sustained as to the claim under Civil RICO because Plaintiff cannot set forth facts tying the alleged predicate acts to actionable harm. The alleged harm to Plaintiff’s ability to compete is far too attenuated for Plaintiff to present a viable claim. Second, the FAC is bereft of the sort of specific allegations required in a RICO claim, particularly with respect to the alleged predicate acts. Third, Plaintiff fails to plead a RICO enterprise.

Plaintiff’s antitrust claims (both of which are based on state laws that are modeled after the Sherman Act) are equally meritless. First, Plaintiff’s claim fails because it is based on alleged harm in a market that Plaintiff simultaneously alleges to be illegal. Plaintiff avers that the real money online poker market is illegal. Plaintiff cannot recover, however, for alleged antitrust violations because Plaintiff also could not profit from an illegal market.2 Second, Plaintiff fails to aver an antitrust injury; the FAC merely alleges that Plaintiff itself was harmed. But that is not enough. Plaintiff appears to be primarily engaged in the business of providing software for the free online poker market. (See FAC ¶ 1.) Third, to the extent that the claim concerns the free online poker market, that market is thriving. Indeed, a company referenced in the FAC, Zynga, is the world’s largest online poker company and continues to thrive. Fourth, it is nonsensical for Plaintiff to claim that alleged anticompetitive conduct in the real money online poker market somehow impacted its ability to compete in the free play poker market. Fifth, Plaintiff fails to allege an antitrust conspiracy. Not only is the FAC wholly conclusory, but the allegations of conspiracy fly in the face of common sense because Pokerstars and Full Tilt Poker are competitors. Fifth, Plaintiff fails to allege an actionable tying arrangement. Finally, Plaintiff also fails to allege facts specific to the individual Defendants."

The Los Angeles Superior Court agreed with Ferguson and sustained his demurrer to the defective FAC. Plaintiff now has 30 days leave to attempt to state at least one legally viable claim against Defendant Ferguson or this matter will be dismissed accordingly. Based upon the cogent analysis of the court, it will be extremely difficult for Plaintiff to plead a legally cognizable claim in the instant action.

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