In re Mastercard Intern. Inc., Internet Gamb., CIV. A. MDL1321.

Decision Date23 February 2001
Docket NumberNo. CIV. A. MDL1321.,No. CIV. A. MDL1322.,CIV. A. MDL1321.,CIV. A. MDL1322.
Citation132 F.Supp.2d 468
PartiesIn re MASTERCARD INTERNATIONAL INC., INTERNET GAMBLING LITIGATION, and Visa International Service Association Internet Gambling Litigation This Document Relates to All Actions
CourtU.S. District Court — Eastern District of Louisiana

Stephen B. Murray, New Orleans, LA, Barry Reed, Minneapolis, MN, W. Lewis Garrison, Birmingham, AL, James Johnson, New York, NY, William Weisberg, San Francisco, CA, for plaintiffs.

Daniel H. Bookin, San Francisco, CA and Barry W. Ashe, New Orleans, LA, for Visa.

Jay N. Fastow, New York, NY and Anthony Rolls, New Orleans, LA, for MasterCard.

Christopher R. Lipset, Washington DC and Frank E Massengale, New Orleans, LA, for Travelers.

R Patrick Vance, New Orleans, LA and Alan Kaplinsky for Fleet.

ORDER AND REASONS

DUVAL, District Judge.

This multidistrict litigation arises from allegations that MasterCard International, Visa International and several banks that issue MasterCard and Visa credit cards have interacted with a number of Internet casinos in a manner that violates United States law. Numerous putative class actions were filed in district courts in the Northern District of Illinois, the Middle District of Alabama, the Southern District of Alabama, the Southern District of New York, and the Northern District of California. The federal actions were transferred to the Eastern District of Louisiana by order of the Judicial Panel on Multidistrict Litigation on March 1, 2000, with this Court receiving the cases on March 20, 2000.1 By minute entry dated June 14 2000 (record document 12) this Court ordered that the parties in two "test" cases, one from MDL-1321 and one from MDL-1322, file, respond and reply to motions pursuant to Federal Rule of Civil Procedure 12 and Federal Rule of Civil Procedure 19 with respect to federal law claims only. See Minute Entry, June 14, 2000. In accordance with that order, plaintiffs selected Larry Thompson v. MasterCard International, Inc., Fleet Bank (Rhode Island), N.A. and Fleet Credit Card Services, L.P., C.A. No. 00-1986 as the MDL-1321 test case and Lawrence Bradley v. Visa International Service Assoc. and Travelers Bank USA Corp., C.A. 00-2002 as the MDL-1322 test case. All motions in all other cases that are part of this multidistrict litigation were ordered deferred until after the Court has ruled on the two motions described above. See Minute Entry, June 14, 2000. Also deferred pending resolution of the test case motions were plaintiffs' duties with respect to moving for class certification under Local Civil Rule 23.1 and all discovery. Id.

Presently before the Court are Rule 12(b)(6) motions to dismiss for failure to state a claim upon which relief can be granted and Rule 19 motions for joinder or dismissal for non-joinder filed by MasterCard International Inc. (record documents 19 & 20), Fleet Bank and Fleet Credit Card Services (record document 21), Visa International Services Association (record documents 17 & 18), and Travelers Bank (record document 16). These motions have been filed in accordance with the Court's multidistrict litigation management order entered June 14, 2000 and are limited to defendants' liability under federal law, namely the Racketeer Influenced and Corrupt Organizations Act ("RICO"), found at 18 U.S.C. § 1961 et seq. The Court heard oral argument on the motions on September 13, 2000 and has considered the pleadings, memoranda and relevant law and finds that the motions to dismiss shall be granted for the reasons that follow.

The Court will analyze the Rule 12(b)(6) motions as follows:

I. Background

II. Standard for Motion to Dismiss

III. The Racketeer Influenced and Corrupt Organizations Act ("RICO"), Generally

IV. Elements Common to All RICO claims

A. The Existence of a RICO Person

B. The Alleged Pattern of Racketeering Activity

1. Alleged Predicate Acts Under State Law

a. New Hampshire Law

b. Kansas Law

2. The Wire Act, 18 U.S.C. § 1084
3. Mail Fraud, 18 U.S.C. § 1341 and Wire Fraud, 18 U.S.C. § 1343
4. Other Federal Laws
5. Collection of Unlawful Debt

C. Enterprise

1. Generally
2. Existence Separate and Apart From the Pattern of Racketeering Activity
3. An Ongoing Organization with a Hierarchical or Consensual Decision Making Structure

V Additional Elements Discrete to 18 U.S.C. § 1962(c)

A. Conduct
B. Person/Enterprise Distinctness

VI. Aiding and Abetting Liability under 18 U.S.C. § 1962(c)

VII. Standing to Assert a Civil RICO Claim under 18 U.S.C. § 1964 for Violations of 18 U.S.C. § 1962(c)

The Rule 12(b)(6) Motions
I. Background

The factual and legal allegations by plaintiffs in each of the two actions before the Court are nearly identical; therefore, the Court will set out the factual background in the form of a single narrative and indicate where the factual allegations or legal theories diverge. For purposes of this motion, the following are taken as true.

Larry Thompson ("Thompson") and Lawrence Bradley ("Bradley") (together referred to as "plaintiffs") filed class action complaints on behalf of themselves and others similarly situated against certain credit card companies and issuing banks for those entities alleged illegal involvement with the internet gambling industry. Named as defendants by Thompson are MasterCard International, Inc. ("MasterCard"), Fleet Bank and Fleet Credit Card Services ("Fleet"). Those named as defendants by Bradley are Visa International Service Association ("Visa") and Travelers Bank USA Corp ("Travelers").2

Plaintiffs' class action complaints allege that defendants have violated several federal and state laws with respect to defendants' involvement with internet casinos. Plaintiffs argue that defendants' actions constitute a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act, found at 18 U.S.C. §§ 1961-1968.

As the internet breaks down the geographic and temporal walls that once restricted the flow of information and commerce, plaintiffs argue that several illegitimate businesses have used the medium to further their illegal industries. Plaintiffs allege that "numerous sites have been created to offer the opportunity to engage in illegal gambling on the internet." Bradley Complaint at ¶ 22, Thompson Complaint at ¶ 22. "Many of these sites operate from outside the borders of the United States, but through use of the Internet and interstate telephone lines they can be accessed easily from any computer in the United States with Internet access." Id. Those gambling sites "allow persons with credit card accounts to gamble using their credit cards." Bradley Complaint at ¶ 23, Thompson Complaint at ¶ 23. The credit cards are used to purchase credits which the bettor may then use, or not use, as he pleases. According to the complaints, the process entails one of two methods. An individual may "call and verbally authorize a deposit from his or her credit card whereby chips or gambling credit are made available for gambling, or the individual may download his credit card information to the site or may be required to access a web-site embedded in the gambling site which allows the electronic deposit of credit card funds for "chips" or gambling credit." Id. It is the plaintiffs' contention that "[w]hether the gambling is characterized as chips, credits, points, or in other ways, the end result is the same: a charge for gambling losses is submitted on the credit card, and the player is gambling with real money electronically withdrawn from the credit card and paid to the casino to be billed later by the issuer of the credit card." Id.

Each respective credit card company, Visa and MasterCard, "is responsible for the operation and upgrading of its computer payment system. This consumer financial transaction processing system provides authorization, transaction processing, and settlement services for approximately [millions] of merchants worldwide." See Bradley Complaint at ¶ 41, Thompson Complaint at ¶ 37. Each credit card company processes every charge submitted by the millions of merchants, including Internet casinos, and is aware of the allegedly illegal nature of the gambling debt. Id.

Bradley states that he "placed internet gambling wagers" on approximately nineteen different days using seven different internet casino websites. Bradley Complaint at ¶¶ 24-31. Although he pleads that he wagered a total of $16,445, he was charged $7,048 by Visa and Travelers.3 Bradley Complaint at ¶ 34. On the billing statements, the various transactions were characterized as purchases as opposed to cash advances. Bradley Complaint at ¶ 31. As Bradley accessed each of the seven different casino websites he was instructed to enter his billing information, including his street address, billing state and country and for each dollar he deposited he received a "gambling credit" whose only purpose was to act as gambling tender. Bradley Complaint at ¶¶ 25-33. The Visa logo was visible on each website as a means of encouraging plaintiff to use his Visa card to place bets. Bradley Complaint at ¶ 25.

Thompson "placed wagers" through two different web sites on approximately 13 different days. Thompson Complaint at ¶¶ 24-27. Thompson pleads that he wagered a total of $1520 and was charged $1510 by MasterCard and Fleet. Thompson Complaint at ¶ 30. As with Bradley, the various transactions were characterized as purchases rather than cash advances on the billing statements. Thompson Complaint at ¶ 28. Thompson also states that as he accessed each website he was instructed to enter his billing information, including his billing state and country and that for each dollar he deposited he received a "gambling credit" whose only purpose was to act as gambling tender. Thompson Complaint at ¶¶ 25-29. In his case, the MasterCard logo was visible on each website as a means of encouraging plaintiff to use...

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