Cardroom Int'l, LLC v. Scheinberg
| Decision Date | 21 February 2017 |
| Docket Number | B251313 |
| Parties | CARDROOM INTERNATIONAL, LLC, Plaintiff and Appellant, v. MARK SCHEINBERG et al., Defendants and Respondents. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. SC114330)
APPEAL from an order of the Superior Court of Los Angeles County, Elizabeth Allen White, Judge. Affirmed in part and reversed in part with directions.
Sanais and Cyrus M. Sanai for Plaintiff and Appellant.
Payne & Fears and Sean A. O'Brien for Defendants and Respondents Mark Scheinberg and Oldford Group, Ltd.
Cozen O'Connor, Erik L. Jackson, Nathan Dooley; Cozen O'Connor and Ronald F. Wick for Defendants and Respondents
Tiltware, LLC, Chris Ferguson, Pocket Kings, Ltd., Erik Seidel and Andy Bloch.
Gibson, Dunn & Crutcher, Maurice Suh, Jay Srinivasan and Elizabeth M. Burnside for Defendant and Respondent Philip S. Gordon.
Chesnoff & Schonfeld and Richard A. Schonfeld for Defendant and Respondent Phil Ivey.
Dykema Gossett, Craig N. Hentschel and Vivian I. Kim for Defendant and Respondent Perry Friedman.
Law Offices of Neil M. Sunkin and Neil M. Sunkin for Defendant and Respondent John Juanda.
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Plaintiff Cardroom International, LLC (Cardroom) appeals from an order sustaining without leave to amend the demurrer of defendant Tiltware, LLC (Tiltware) to Cardroom's second amended complaint and dismissing the action in its entirety. The order also resolved specially appearing defendant Phil Ivey's (Ivey) joinder in Tiltware's demurrer, motion to quash and demurrer; defendant Philip S. Gordon's (Gordon) demurrer; defendant Chris Ferguson's (Ferguson) joinder in the demurrers filed by Tiltware, Ivey and Gordon; and motions to quash service of summons and complaint by specially appearing defendants Pocket Kings, Ltd. (Pocket Kings), Erik Seidel (Seidel), Andy Bloch (Bloch) and Perry Friedman (Friedman).
Cardroom sued the above defendants and others for violations of the Racketeer Influenced and Corrupt OrganizationsAct (RICO; 18 U.S.C. § 1961 et seq.), the Florida Antitrust Act of 1980 (Fla. Stats., § 542.15 et seq.), and the Cartwright Act (Bus. & Prof. Code, § 16700 et seq.) in connection with their operation of Internet poker sites and provision of software and services for operating poker games to other entities. The gravamen of Cardroom's second amended complaint was that due to defendants' illegal activities, Cardroom was placed at a competitive disadvantage and lost business and business opportunities.
On appeal, Cardroom challenges the trial court's determination that it could not state a cause of action. Cardroom also challenges rulings with respect to defendants who filed joinders in Tiltware's demurrer and defendants who specially appeared and challenged the court's jurisdiction over them. We affirm.
Cardroom is a Florida limited liability company operating in both Florida and California. It "owns a fully developed, mature and proven software system" for playing poker on the Internet, either for real money or for points.2
Defendant Pokerstars Group (Pokerstars) was founded by Isai Scheinberg in 2001 and is headquartered on the Isle of Man. Pokerstars included defendants Oldford Group, Ltd., Rational Entertainment Enterprises Ltd., Pyr Software Ltd., Stelekram Ltd. and Sphene International Ltd. Isai Scheinberg is president and his son, Mark Scheinberg, is an executive of Pokerstars. Pokerstars operated a website, pokerstars.com, through which itoffered "real-money peer-to-peer poker games to United States and foreign customers until April 15, 2011."3 Thereafter, Pokerstars continued to offer real money Internet poker games to foreign customers and play money Internet poker games to customers in the United States.
Defendant Full Tilt Poker (Full Tilt) is comprised of a number of individuals and companies. The individuals include defendants Ferguson and Rafe Furst (Furst), residents of Los Angeles County; Raymond Bitar (Bitar), who is under house arrest in Los Angeles County following his indictment in federal district court in New York; John Juanda (Juanda), a resident of Los Angeles County who fled to Japan; Erick Lindgren (Lindgren), a resident of San Diego County; Friedman, Seidel, Howard Lederer (Lederer), Michael Matusow and Allen Cunningham, residents of Nevada; Gordon, a resident of Washington; Gus Hansen, a citizen of Denmark; and Patrik Antonius, a citizen of Finland. The companies associated with Full Tilt include defendants Tiltware, a California company; Pocket Kings, a company based in the Republic of Ireland and owned by Tiltware; Pocket Kings Consulting Ltd., an Irish company; Kolyma Corporation A.V.V., a Curacao company; Filco Ltd.; Vantage Ltd.; Ranston Ltd.; Oxalic Ltd.; Orinic Ltd.; and Mail Media Ltd.
Some of the Full Tilt individuals were originally part of a software development company which developed software foronline poker play. In 2003 they obtained a licensing agreement allowing them to use and transfer the software. They founded Tiltware in Los Angeles in 2003, and the other Full Tilt companies were established between 2004 and 2010. Full Tilt operated a website, fulltiltpoker.com, which "provided real-money Internet peer-to-peer poker games to United States . . . customers until April 15, 2011."
Cardroom alleges the Full Tilt companies operated what was in essence "a 'poker Ponzi scheme,'" siphoning off money from the Internet poker players to the various Full Tilt companies, then laundering it and transferring it to the various Full Tilt Owners. Full Tilt "collaps[ed] after the United States indicted . . . Bitar and took possession of [Full Tilt's] United States . . . website, and the Alderney Gaming Commission revoked its licenses [due to] fraud." In 2012, Pokerstars acquired the operating assets of the Full Tilt companies and thereafter operated the fulltiltpoker website.
Defendant Nelson Burtnick (Burtnick) was employed first by Pokerstars and then by Full Tilt. "He served as the linchpin and coordinator between" the two groups of companies. He pled guilty to assisting fraud by Full Tilt and is awaiting sentencing in New York.
In traditional casinos, the players play poker and other card games against one another. The owner has no stake in the outcome of the card game but instead charges a fee to play each hand. To play poker for real money at online poker rooms, such as pokerstars.com and fulltiltpoker.com, a player signed up for an account online and sent money to a bank account, online paymentsystem or credit card processor. After a deduction for transfer fees, the money would be received by the online poker room operator. The player appeared to other players in the online poker room as an "avatar" with a screen name chosen by the player.
Cardroom alleges the fulltiltpoker.com website, as operated by Full Tilt, was not a legitimate real money Internet peer-to-peer poker room because the owners participated in the outcome of the game. They did this in two ways: First, some of the owners were well-known professional poker players who played on the website themselves. Second, they used robots—avatars controlled by computer programs—to fill tables and earn money from less skilled players. That the professionals played on the website was heavily publicized and a marketing strategy; that they were also owners of the website and played using Full Tilt money was not known by other players on the website.
In 2003, the Department of Justice advised the National Association of Broadcasters that interstate advertising of illegal Internet gambling was a criminal act. It subsequently confiscated funds received for advertising an online poker website.
Cardroom alleges Pokerstars in response created a new website, pokerstars.net, offering play money, or "fantasy," Internet poker games. It functioned as a promotional tool, interesting players in Internet poker, identifying people who might be interested in playing real money Internet poker, and promoting the Pokerstars brand in the United States with media companies afraid of accepting advertising from real money Internet poker businesses. Through advertisements for pokerstars.net, Pokerstars created, packaged and sponsoredtelevision programs featuring professional poker players on Fox, ESPN and other networks. Pokerstars represented that its website, pokerstars.net, provided only legal fantasy play. However, while the programs featured the Pokerstars brand, identification of the pokerstars.net website was inconspicuous or nonexistent. This made it likely someone searching for the Pokerstars website would use the more common .com suffix and end up at the pokerstars.com real money website. If a player did go to the pokerstars.net play money website, the play would be subject to constant solicitations to play on the pokerstars.com website. From 2007 to 2011, pokerstars.com was the largest and most successful real money Internet poker website in the world, having over 50 percent of the market and earning $1.4 billion per year.
Full Tilt similarly created a fulltiltpoker.net website and put money into advertising on cable television programs. The fulltiltpoker.com website was the second largest and second most successful real money Internet poker website in the world, with 25 percent of the market and $700 million in revenue each year.
In 2008, Cardroom obtained an Internet peer-to-peer system through a bankruptcy...
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