Marina Dist. Dev. Co. v. Ivey

• Decision Date: 12 March 2015
• Docket Number: Civil No. 14–2283NLH/AMD.
• Citation: 93 F.Supp.3d 327
• Court: U.S. District Court — District of New Jersey
• Parties: MARINA DISTRICT DEVELOPMENT CO., LLC doing business as Borgata Hotel Casino & Spa, Plaintiff, v. Phillip D. IVEY, Jr., Gemaco Inc., and Cheng Yin Sun, Defendants.

93 F.Supp.3d 327

MARINA DISTRICT DEVELOPMENT CO., LLC doing business as Borgata Hotel Casino & Spa, Plaintiff

v.Phillip D. IVEY, Jr., Gemaco Inc., and Cheng Yin Sun, Defendants.

Civil No. 14–2283NLH/AMD.

United States District Court, D. New Jersey.

Signed March 12, 2015.

Filed March 13, 2015.

Jeremy M. Klausner, Agostino & Associates, PC, Hackensack, NJ., for plaintiff.

Jeffrey W. Mazzola, Law Offices of William E. Staehle, Morristown, NJ., for defendant Gemaco, Inc.

Edwin Joseph Jacobs, Jr., Michael F. Myers, Louis M. Barbone, Eric H. Lubin, Jacobs & Barbone, Atlantic City, NJ., for defendants Phillip D. Ivey and Cheng Yin Sun.

OPINION

HILLMAN, District Judge.

This matter concerns the claims of plaintiff, Marina District Development Co., LLC, which does business as Borgata Hotel Casino & Spa in Atlantic City, New Jersey, against “high-stakes” professional gamblers, defendants Phillip D. Ivey and Cheng Yin Sun, as well as playing card manufacturer, Gemaco, Inc. The claims arise out of Ivey and Sun's alleged deceptive “edge sorting” scheme to manipulate the odds of the casino game Baccarat in their favor. Presently before the Court is Ivey and Sun's motion to dismiss Borgata's claims against them. For the reasons expressed below, defendants' motion will be denied.

BACKGROUND

Borgata's detailed complaint sets forth the following background information and alleged facts. In April 2012, Ivey contacted Borgata to arrange a visit to play high-stakes Baccarat.¹ Ivey made five requests:

(1) a private area or “pit” in which to play; (2) a casino dealer who spoke Mandarin Chinese; (3) a guest (Ms. Sun) to sit with him at the table while he played; (4) one 8–deck shoe of purple Gemaco Borgata playing cards to be used for the entirety of each session of play; and (5) an automatic card shuffling device to be used to shuffle the cards after each shoe was dealt. Borgata agreed to Ivey's requests. In return, Ivey agreed to wire a “front money” deposit of $1 million to Borgata, and that the maximum bet would be $50,000 per hand.

Under these parameters, Ivey played 16 hours on April 11, 2012 and won $2,416,000, with his average bet of $25,000. With the same terms, Ivey returned to Borgata in May 2012, and over the course of 56 hours of Baccarat play, Ivey won $1,597,400, with his average bet of $36,000.

In July 2012, Ivey again returned to Borgata to play Baccarat with his same five requests, but this time he had prearranged to raise his front money to $3 million, and raise his maximum bet to $100,000 per hand. Over the course of 17 hours of Baccarat play, Ivey won $4,787,700, with his average bet of $89,000. Under these same terms, Ivey came back to Borgata in October 2012, and over the course of 18 hours, Ivey won $824,900 (after being up almost $3.5 million) with an average bet of $93,800.² After each visit to Borgata, Ivey requested that his front money and winnings be wired to a bank account in Mexico. Ivey's total winnings for his four visits to Borgata was $9,626,000.

During his last visit to Borgata on October 7, 2012, Borgata learned through a media report that a casino in London, Crockfords, was withholding £7.3 million won by Ivey playing Punto Banco, which is essentially the same game as Baccarat. After Ivey left Borgata on October 8, 2012, Borgata learned more about the Crockfords matter, and discovered that Ivey had made the same five requests to Crockfords as he did to Borgata. Borgata also discovered that Ivey and Sun committed what it considers to be an “edge sorting scam.”

According to Borgata, as well as Ivey's own representations in his suit against Crockfords to recover his winnings as described in Borgata's complaint in this case, the mechanics of “edge sorting” are as follows:

126. The backs of casino playing cards generally contain a repeating diamond or geometrical pattern as seen in Exhibit A.

127. If the cards are not cut symmetrically during the manufacturing process, the two long edges of the cards will not be identical. In other words, one edge will have more of the geometrical pattern than the other. See Exhibit B.

128. During play, Ivey and Sun used the accommodations they requested from Borgata to “turn” strategically important cards so that they could be distinguished from all other cards in the deck.

129. The dealer would first lift the card so that Sun could see its value before it was flipped over all the way and placed on the table. If Sun told the dealer “Hao” (pronounced “how”), which translates to English as “good card,” he was instructed to continue to flip the card over so that the orientation of the long edges of the card would stay on the same side when flipped. In other words, the right edge of the card as seen by Sun before the card was turned all the way over would still be the right edge of the card as she looked at when it was laid face up on the table.

130. If Sun told the dealer “Buhao” (pronounced “boohow”), which translates into English as “bad card,” he was instructed to flip the card side to side, so that the long edges would be reversed when flipped. In other words, the right edge of the card as seen by Sun before the card was turned all the way over would now be the left edge of the card as she looked at it when it was laid face up on the table.

131. By telling the dealer “good card” or “bad card” in Mandarin, the dealer would place the cards on the table so that when the cards were cleared and put in the used card holder, the leading edges of the strategically important cards could be distinguished from the leading edges of the other cards in the deck.

132. Upon information and belief Ivey and Sun “turned” the cards with values of 6, 7, 8, and 9, so that they could be distinguished from all other cards in the deck.

133. The process of “edge sorting” all the cards in the decks took more than one shoe.

134. Ivey and Sun knew that if an automatic card shuffler was used, the edges of the cards would remain facing in the same direction after they were shuffled.

135. Conversely, Ivey and Sun knew that if the cards were shuffled by hand, the dealer would turn part of the deck, rendering their attempts to “turn” the strategically important cards useless.

136. Keeping the edges of the cards facing the same direction is the reason Ivey requested the use of an automatic card shuffler.

137. Ivey also knew that if the same cards were not reused for each shoe, there would be no benefit to “edge sorting.”

138. That is why Ivey requested that the same cards be reused for each shoe.

139. The leading edge of the first card in the shoe is visible before the cards are dealt.

140. Once the “edge sorting” was completed, Ivey and Sun were able to see the leading edge of the first card in the shoe before it was dealt, giving them “first card knowledge.”

141. If the first card in the shoe was turned, that meant a strategically important card was being dealt to the “player” hand, and Ivey would bet accordingly.

142. If the first card in the shoe was not “turned,” that meant that a less advantageous card was being dealt to the “player” hand, and Ivey would again bet accordingly.

143. This “first card knowledge” changed the overall odds of the game from an approximate 1.06% house advantage to an approximately 6.765% advantage for Ivey.

144. Ivey began each playing session with bets well below the maximum bet.

145. Ivey bet below the maximum bet until he and Sun had completed “edge sorting” all the cards in the shoe.

146. Once all the cards in the shoe were “edge sorted,” Ivey “flatlined” at the maximum bet; i.e. he bet the maximum amount on every hand.

147. A review of Ivey's betting pattern shows that once the cards were “edge sorted,” when he bet on “player,” the first card dealt was significantly more likely to be a strategically important card.

148. Conversely, once the cards were “edge sorted,” when Ivey bet on “banker,” the first card dealt was significantly more likely to be a strategically unimportant card.

(Amend. Compl., Docket No. 5 at ¶¶ 126–148.)

By way of this alleged “edge sorting scam,” Borgata claims that “Ivey's true motive, intention, and purpose in negotiating these playing arrangements was to create a situation in which he could surreptitiously manipulate what he knew to be a defect in the playing cards in order to gain an unfair advantage over Borgata.” (Amend. Compl. Docket No. 5 at ¶ 42.) As a result, Borgata has filed a complaint against Ivey and Sun for breach of contract, fraud, conspiracy, and RICO violations, among other related claims.³

Ivey and Sun have moved to dismiss all of Borgata's claims against them. Borgata has opposed their motion.

DISCUSSION

A. Subject Matter Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000. Borgata is a limited liability company. The members of Borgata are Boyd Atlantic City, Inc. and MAC Corp., both corporations organized and existing pursuant to the laws of the State of New Jersey, with their principal places of business in New Jersey. Defendants Ivey and Sun are citizens of the State of Nevada, and defendant Gemaco is a corporation organized and existing pursuant to the laws of the State of Missouri, with its principal place of business in Blue Springs, Missouri.

B. Standard for Motion to Dismiss

When considering a motion to dismiss a complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), a court must accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the plaintiff. Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir.2005). It is well settled that a pleading is sufficient if it contains “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Under the liberal federal pleading rules, it is not necessary to plead evidence, and it is not necessary to...