Pokerstars loses in court tussle over Atlantic Club casino

The attempt by Pokerstars owner The Rational Group to acquire the Atlantic Club land casino in Atlantic City ran into a major obstacle Friday when New Jersey Superior Court Judge Raymond Batten ruled that casino owners RIH-Colony Capital could terminate the sale contract when Rational failed to get a New Jersey licence by an April 26 deadline enshrined in the agreement.

The judge said the contract clearly gave either party the right to end the deal if Rational had not obtained the state regulator’s authorisation to operate by the agreed expiry date.

Accordingly, Judge Batten dissolved a temporary restraining order obtained two weeks ago by Rational that barred the casino owners from selling to anyone else.

The ruling means that RIH-Colony Capital can walk away with over $11 million of already paid Rational Group money, and is free to sell the casino to other suitably qualified parties if it wishes.

However, the deal will have to be a good one to surpass Rational’s offering; the Isle of Man online gambling group had offered $15 million, along with an undertaking to underwrite around $32 million indebtedness incurred by the casino’s pension fund, and the promise of tens of millions of dollars that Rational had planned to invest in a casino makeover and online operations.

For the online gambling industry, Judge Batten’s ruling halts a promising attempt by one of the world’s biggest, best run and most successful global online poker brands to gain a foothold in the newly legalised online gambling market currently evolving in the Garden State.

Part of the arguments presented to the Judge revolved around whether Pokerstars founder Isai Scheinberg had been involved in the deal. RIH-Colony lawyers sought to show that, despite an agreement between the online poker firm and the Department of Justice in 2011, in which it was agreed that Scheinberg would have no further management involvement, he had communicated on several occasions with casino execs during the formation of the acquisition agreement, thereby breaching the earlier settlement with the US authorities.

Scheinberg remains under indictment in a Black Friday criminal case and, according to papers filed by prosecutors the same month as the settlement, he had “chosen not to return to the United States to face those charges” and was therefore a fugitive, RIH lawyers claimed.

Legal representatives for Rational responded by denying that the company or Scheinberg had not complied with the DoJ settlement deal, and said that there was nothing improper about Scheinberg’s role in the negotiations.

Atlantic Club lawyer Tariq Mundiya said of the expiry date provision: “They [Rational] took the risk they could get it [the licensing] done. They couldn’t get it done, and now they want to rewrite the contract. Once that date came and went, Your Honor, all bets were off.”

A spokesman for Rational said the company is reviewing the decision, and still hopes to enter the New Jersey online gambling market.

The American Gaming Association, a trade body for land casino owners who would be affected by a successful Pokerstars entry into the New Jersey gambling market, will be pleased with Judge Batten’s ruling; earlier this year the Association made an unprecedented attempt to become involved in the regulator’s licensing decision on the issue .

Atlantic Club’s chief operating officer and most frequent spokesman, Michael Frawley commented on the Judge’s ruling, saying: “We are now free to build on the tremendous opportunity provided by online gaming.”

Whether Atlantic Club continues to struggle on, or will be rescued by fresh investment or a new acquisition agreement remains to be seen.