Tonkawa Tribe of Indians of Okla. v. Sci. Games Corp.
| Decision Date | 19 May 2022 |
| Docket Number | 21-cv-04626 |
| Parties | TONKAWA TRIBE OF INDIANS OF OKLAHOMA, d/b/a TONKAWA ENTERPRISES, COW CREEK BAND OF UMPQUA TRIBE OF INDIANS, and UMPQUA INDIAN DEVELOPMENT CORPORATION, on behalf of themselves and others similarly situated, Plaintiffs, v. SCIENTIFIC GAMES CORPORATION, BALLY TECHNOLOGIES, INC., and BALLY GAMING, INC., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Plaintiffs are casino owners and operators that leased automatic card shuffling machines from Defendants. In a separate case brought in 2018 by Defendants' competitors, a jury found that Defendants had monopolized the market for automatic card shuffling machines in the United States. Piggybacking off of that 2018 verdict, Plaintiffs filed, on behalf of themselves and a putative class, this single-count monopolization claim against Defendants. Plaintiffs allege that Defendants' anticompetitive conduct caused price injury to casino consumers like Plaintiffs.
Plaintiffs' lease agreements with Defendants included an agreement to arbitrate “any and all” disputes arising “directly or indirectly” from the leases.
Defendants filed a motion to dismiss or, in the alternative to compel arbitration. As explained more fully below, the arbitration agreements in the parties' leases are enforceable and Plaintiffs' individual monopolization claims are arbitrable. Accordingly, Defendants' motion to compel arbitration is granted, and the case is stayed under 9 U.S.C. § 3 pending resolution of the arbitral process.
Plaintiffs are two casino owners and operators, and a third related entity. (Second Amended Complaint (“Compl.”) Dkt. 39 ¶¶ 5-7.) Plaintiff Tonkawa Tribe of Indians of Oklahoma (the “Tonkawa Tribe”) operates the Native Lights Casino and the Tonkawa Hotel and Casino in Oklahoma. (Id. ¶ 5.) Plaintiff Cow Creek Band of Umpqua Tribe of Indians (the “Umpqua Tribe”) operates the Seven Feathers Casino Resort in Oregon. (Id. ¶ 6.) Plaintiff Umpqua Indian Development Corporation is a wholly owned subsidiary of the Umpqua Tribe. (Id. ¶ 7.)
Defendants are manufacturers, sellers, and lessors of equipment and games for casinos in the United States. (Id. ¶ 17.) In 2013, Defendant Bally Technologies (“Bally”) acquired SHFL Entertainment, Inc. (“SHFL”), a manufacturer of automatic playing card shufflers and holder of hundreds of patents related to shuffler technology. (Id.) In 2015, Defendant Scientific Games Corporation acquired Bally. (Id.) Bally Gaming is a subsidiary of Bally and operates under the Scientific Games brand. (Id.)
According to the complaint, Defendants obtained two patents in 2003 and 2009 by fraudulently concealing known prior art from the United States Patent and Trademark Office (“PTO”). (Id. ¶¶ 18-22, 40-49, 58.) Defendants then asserted the invalid patents by bringing “sham litigations” against competitors between 2003 and 2012. (Id. ¶¶ 2, 23, 50.) These sham lawsuits forced multiple competitors out of the relevant market, directly affecting the price of automatic playing card shufflers for customers like Plaintiffs. (Id. ¶ 2.)
In the first paragraph of their complaint, Plaintiffs state that “[t]his matter is closely related to an action brought against Defendants by their competitors” in Shuffle Tech Int'l LLC et al. v. Scientific Games Corp. et al., No. 15-cv-3702 (N.D. Ill.). (Id. ¶ 1.) The Shuffle Tech plaintiffs sued Defendants in 2015, alleging that SHFL fraudulently obtained two patents from the PTO and enforced those patents against its competitors in violation of Section 2 of the Sherman Act. (Id. ¶ 23.) On August 18, 2018, a federal jury rendered a verdict against Defendants after finding that: (1) automatic card shuffling machines for regulated casinos in the United States was the relevant market; (2) Defendants had monopoly power in that market; (3) Defendants willfully acquired or maintained monopoly power by anticompetitive conduct; (4) Defendants' anticompetitive conduct occurred in or affected interstate commerce; and (5) Defendants' anticompetitive conduct harmed consumers. (Id. ¶ 51.)
Plaintiffs allege that, because the jury in Shuffle Tech found Defendants possessed monopoly power, Defendants' “anticompetitive conduct imposed antitrust injury on casino consumers of these machines” like Plaintiffs who contracted with Defendants for automatic card shuffling machines. (Id. ¶ 63.) The Tonkawa and Umpqua Tribes allege not to have known about Shuffle Tech until June and September 2020, respectively, when “the record and judgment in SHFL was brought to their attention by antitrust counsel Berry Law PLLC.” (Id. ¶ 58.) After “diligently and immediately conduct[ing] investigations, ” (id. ¶ 60) Plaintiffs filed their direct purchaser putative class action against Defendants on September 3, 2020 (see Dkt. 1). Plaintiffs originally filed their complaint, which has since been twice amended, in the District of Nevada. (Id.) In August 2021, upon an intervenor's motion (Dkt. 5), the suit was transferred to this District where at least three other related cases remain pending (Dkt. 115).
Long before this suit began, Plaintiffs entered into lease agreements with Defendants; each included an arbitration agreement. On November 20, 2013, the Tonkawa Tribe entered into a lease agreement with Bally to lease casino equipment, including automatic shufflers. (Dkt. 57, Exh. 1 (under seal).) On March 30, 2015, the Umpqua Tribe also entered into a lease agreement with Bally for the same automatic shufflers. (Id., Exh. 5 (under seal).) Each lease contained an agreement to arbitrate “any and all” disputes arising out of the lease:
8.2 Submission of Disputes to Binding Arbitration. The parties agree that any and all controversies, disputes or claims of any nature arising directly or indirectly out of or in connection with this Agreement (including without limitation claims relating to the validity, performance, breach, and/or termination of this Agreement) shall be submitted to binding arbitration for final resolution. The arbitration shall follow the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) or other mutually agreed-upon procedures and shall be conducted in a mutually agreeable location.
(Id., Exh. 1 ¶ 8.2 (under seal); see id., Exh. 5 ¶ 6.6(b) (under seal).)
Each agreement also provided that either party to the agreement could bring an action in federal court to compel arbitration:
8.3 Enforcement / Compelling Arbitration. The parties agree that enforcement of any arbitration award, as well as any action to permit or compel arbitration, may be brought in federal or state court. If either federal or state court decline jurisdiction, then such action may be brought in Tribal Court. . . . With respect to any action to review or enforce any arbitration award, the parties agree that the standards and provisions of the Federal Arbitration Act shall apply.
(Id., Exh. 1 ¶¶ 8.3-8.4 (under seal); see id., Exh. 5 ¶¶ 6.6(c)-(d) (under seal).)
Plaintiffs' second amended complaint asserts that Defendants, by bringing sham lawsuits based on fraudulently procured patents, have obtained and maintained monopoly power in the United States for automatic playing card shufflers in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. (Compl. ¶¶ 69-70.) Defendants jointly filed a motion to dismiss or, in the alternative, to compel arbitration. (Dkt. 49.) Since that filing, Plaintiffs moved on collateral estoppel grounds for partial summary judgment as to the monopolization claim, based on the verdict against Defendants in Shuffle Tech. (Dkt. 50.) Numerous other motions are also pending: Defendants have filed objections to the formerly assigned magistrate judge's order denying a motion to stay discovery pending resolution of the dispositive motions (Dkt. 98) and have moved to stay the case pending resolution of those objections (Dkt. 99); Plaintiffs have moved for appointment of interim class counsel (Dkt. 100) and to compel class discovery (Dkt. 109); and Plaintiffs have sought leave to file a second motion for summary judgment (Dkt. 135). For the reasons that follow, Defendants' motion to compel is granted. All remaining motions are dismissed as moot, but may be refiled at a later time pending the outcome of arbitration.
The Federal Arbitration Act (“FAA”) “reflects both a liberal federal policy favoring arbitration . . . and the fundamental principle that arbitration is a matter of contract.” Gupta v. Morgan Stanley Smith Barney, LLC, 934 F.3d 705, 710 (7th Cir. 2019) (quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)); see Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (). Under the FAA, arbitration agreements “ ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.' ” Janiga v. Questar Cap. Corp., 615 F.3d 735, 740 (7th Cir. 2010) (quoting 9 U.S.C. § 2). A court should grant a motion to compel arbitration where there is: (1) a written agreement to arbitrate; (2) a dispute within the scope of the arbitration agreement; and (3) a refusal to arbitrate. Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005) (citing 9 U.S.C. § 4).
In general, “[t]he judiciary rather than an arbitrator decides whether a contract came into being.” Sphere Drake Ins. Ltd. v. All Am. Ins. Co., 256 F.3d 587, 591 (7th Cir. 2001). This reflects the basic precept that arbitration “is a matter of consent, not coercion.” Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 681...
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