Stars Interactive Holdings (Iom) Ltd. v. Commonwealth
| Decision Date | 21 December 2018 |
| Docket Number | NO. 2016-CA-000221-MR,2016-CA-000221-MR |
| Parties | STARS INTERACTIVE HOLDINGS (IOM) LTD., F/K/A AMAYA GROUP HOLDINGS (IOM) LTD.; AND RATIONAL ENTERTAINMENT ENTERPRISES LTD. APPELLANTS v. COMMONWEALTH OF KENTUCKY EX REL. JOHN TILLEY, SECRETARY, JUSTICE AND PUBLIC SAFETY CABINET APPELLEE |
| Court | Kentucky Court of Appeals |
TO BE PUBLISHED
APPEAL FROM FRANKLIN CIRCUIT COURT
The procedural history of this case is long and somewhat complicated. Accordingly, we recite only the facts and procedural history relevant to the parties to this appeal.
In March of 2010, the Commonwealth filed a complaint against Pocket Kings, Ltd. and "Unknown Defendants" seeking recovery for the Commonwealth under the LRA. The provisions of the LRA relied on by the Commonwealth state as follows:
If any person loses to another at one (1) time, or within twenty-four (24) hours, five dollars ($5) or more, or anything of that value, and pays, transfers, or delivers it, the loser or any of his creditors may recover it, or its value, from the winner, or any transferee of the winner, having notice of the consideration, by action brought within five (5) years after the payment, transfer or delivery. . . .
If the loser or his creditor does not, within six (6) months after its payment or delivery to the winner, sue for the money or thing lost, and prosecute the suit to recovery with due diligence, any other person may sue the winner, and recover treble the value of the money or thing lost, if suit is brought within five (5) years from the delivery or payment.
Thereafter, the Commonwealth filed a number of amended complaints, each of which added various online poker playing forums and casinos, as well as some individuals, as party defendants. On November 2, 2011, the Commonwealth filed a third amended complaint adding, among others, PYR Software Ltd. ("PYR"), Oldford Group Ltd. ("Oldford"), and REEL (collectively referred to as the "PokerStars Defendants"). The third amended complaint alleged that the PokerStars Defendants were three of several entities used to conduct business for PokerStars, an Internet poker company that provided real-money gambling on Internet poker games to Kentucky residents. The Commonwealth alleged that when PokerStars hosted these online poker games, the PokerStarsDefendants took a percentage of the amount bet, won, or lost as the "rake" or "commission" for hosting the poker games. The Commonwealth contended that thousands of Kentucky residents had lost five dollars or more, either at one time or within 24 hours, while playing on the PokerStars websites. Therefore, those residents were considered "losers" under KRS 372.020. Additionally, the Commonwealth contended that receiving a "rake" from the games played qualified the PokerStars Defendants as "winners" under the statute. As the Commonwealth believed none of the Kentucky "losers" had brought a claim under KRS 372.020, it contended that it was entitled to collect trebled damages from the PokerStars Defendants pursuant to KRS 372.040. Like the prior complaints, the Commonwealth's third amended complaint was generic insomuch as it did not identify the specific transactions at issue, the names of any affected Kentucky residents, the specific locations the gambling took place within this Commonwealth, the amounts bet, or any specific information of the like.
On January 11, 2013, REEL filed a motion to dismiss the third amended complaint or in the alternative, a motion for a more definite statement.3 In its memorandum accompanying the motion, REEL argued that the Secretary, acting as relator for the Commonwealth, lacked standing to pursue a claim againstREEL under the LRA and that the third-amended complaint failed to satisfy the notice pleading requirements of CR4 8.01. On January 22, 2013, PYR filed a motion to dismiss the third amended complaint or, in the alternative, for a more definite statement. PYR's motion adopted and incorporated by reference the motion to dismiss filed by REEL.
In its response to the motions to dismiss, the Commonwealth noted that other defendants in the case had previously asserted standing and insufficiency of pleading arguments, which the circuit court had rejected. Accordingly, the Commonwealth incorporated by reference its earlier memoranda to the court. In those memoranda, the Commonwealth maintained that the allegations in its complaint were sufficient under CR 8.01, as KRS Chapter 372 does not require a heightened pleading standard, and that the Commonwealth had standing to bring the claims as "any other person" under KRS 372.040. Following a hearing, the circuit court denied both motions to dismiss by order entered April 17, 2013, and ordered the parties to proceed with discovery.5
The Commonwealth obtained service on Oldford on March 17, 2014. Thereafter, Oldford filed a notice of removal to federal district court. As grounds for removal, Oldford contended that the Secretary, in his individual capacity, was the actual real party in interest in this case, not the Commonwealth. Accordingly, Oldford alleged that diversity of citizenship existed, giving the federal court jurisdiction under 28 U.S.C.6 § 1332(a)(2). Once the case had been removed to federal court, REEL filed a motion to stay discovery, the Commonwealth filed a motion to remand to state court and a motion to stay the proceedings, and Oldford filed a motion to dismiss the third-amended complaint. By opinion and order dated March 31, 2015, the federal district court remanded the case to state court. Commonwealth v. Pocket Kings, Ltd., No. 14-27-GFVT, 2015 WL 1480311 (E.D. Ky. Mar. 31, 2015). In its opinion, the federal district court noted the question of who was the proper real party in interest was "difficult"; however, it ultimately concluded that the proper party was the Commonwealth, thereby divesting the federal district court of jurisdiction. Id. The pending motions were therefore dismissed as moot. Id. During the pendency of the case's removal to federal court, all PokerStars Defendants were sold to Amaya.
On May 14, 2015, the Commonwealth moved for partial summary judgment against REEL and Oldford. The Commonwealth stated that in Oldford'sobjections and answers to the Commonwealth's first request for admissions, Oldford had admitted that, between October 12, 2006, and April 15, 2011, residents of Kentucky had played and lost money on PokerStars' sites and that Oldford and REEL had received part, or all, of a "rake" charged as a fee for hosting the games. The Commonwealth contended that Kentucky law on the LRA was clear: one who receives any part of a losing bet, including a "rake" charged in a game of poker, was liable for the full amount of the lost bet. Accordingly, the Commonwealth stated that the only remaining issue to be decided was the amount of damages owed, and that it was entitled to judgment as a matter of law on the issue of liability.
Oldford and REEL filed a joint motion in opposition to the Commonwealth's motion for partial summary judgment. Therein, they contended that the Commonwealth's motion had obscured the numerous remaining genuine disputes of material fact. Specifically, Oldford and REEL contended that: while Oldford had admitted that there were individuals living in Kentucky who had lost money playing on a PokerStars site, the Commonwealth had yet to identify any specific "loser" under the statute; there was still an issue as to whether poker was a game of skill, as opposed to a game of chance as used in KRS 528.010(3); and there was still a genuine issue of fact as to whether the Secretary was legally authorized to bring claims under the LRA. The parties further argued that theCommonwealth could not rely on admissions made by Oldford to prevail on summary judgment against REEL. REEL and Oldford additionally disputed the Commonwealth's contention that Kentucky law was clear on their liability under the LRA.
On June 22, 2015, the circuit court heard the Commonwealth's motion for partial summary judgment, as well as its motion for sanctions against the PokerStars Defendants for alleged violations of discovery orders. In support of its motion for partial summary judgment, the Commonwealth pointed to the admissions Oldford had made and again stated that Kentucky law on liability under the LRA was clear. The Commonwealth reminded the circuit court that it had previously granted partial summary judgment against another defendant in the action, Party Gaming, under substantially similar facts. REEL and Oldford argued that Oldford's admissions could not be used to support partial summary judgment against REEL. Further, REEL and Oldford disagreed with the Commonwealth that the law was in the Commonwealth's favor. REEL and Oldford distinguished cases relied on by the Commonwealth, noted that there was no precedent for the Commonwealth bringing an action under the LRA, and contended that there was still a factual issue of whether poker was a game of chance or a game of skill.
On August 12, 2015...
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