#10-5 © Copyright 2010, Professor I. Nelson Rose, Encino, California. All rights reserved worldwide. Gambling and the Law® is a registered trademark of Prof. Rose, www.GamblingAndTheLaw.com.

“If we read Ohio law as controlling the contract in question, the parties probably are guilty of a crime under Ohio law, the contract is void, and both parties could be extradited and prosecuted together in an Ohio criminal court.”

Gilbert Stroud Merritt, Jr., Concurring, in Wong v. PartyGaming

A year ago, I wrote that, “Party Poker won a nice victory in federal court in Ohio, because its Terms and Conditions say that all disputes will be heard in the courts of Gibraltar.”

The U.S. Sixth Circuit Court of Appeals has now upheld Party Poker’s win.

But one of the justices, 73-year-old Gilbert Stroud Merritt, Jr., from Tennessee, wrote a separate concurring opinion. He agreed that Party Poker should win. But his reasoning fits the old saw, “With friends like this, you don’t need enemies.”

The two plaintiffs, Rose Wong and Patrick Gibson, claimed they had lost money because Party Poker knowingly allowed other players to team up against them.

If they ever get to trial — and they never will — they will probably lose. They claim that Party Poker’s “Collusion Prevention Statement,” warning about collusion and describing the ways it tried to eliminate colluding players, somehow proved that Party Poker did nothing to prevent collusion.

Wong and Gibson filed the suit as a class action, asking not for the small amount of money they said they lost through collusion, but rather the millions they claimed everyone had lost. The risk was real. All they needed was a sympathetic judge and a runaway jury, which they might get in Ohio.

Fortunately for Party Poker, its Terms and Conditions stated that players “irrevocably agree to submit, for the benefit of the Company, to the exclusive jurisdiction of the courts of Gibraltar for settlement of any disputes…”

The Ohio federal trial judge, Ann Aldrich, held the plaintiffs were bound by this “forum selection clause.” Plus, under the doctrine of forum non conveniens, the case should be heard in Gibraltar, for the convenience of the parties and witnesses and in the interest of justice.

Of course, Wong and Gibson would be really inconvenienced. Not only would they have to fight this in Europe, they probably could not bring it as a class action. And there would be no chance of a runaway jury, because Gibraltar does not allow juries in cases like this.

So, Wong and Gibson appealed.

The case raised a legal question that has not yet been answered: should federal or state law decide whether parties are bound by forum selection clauses?

Although this seems like, and is, a technicality, the answer will determine whether cases are heard where plaintiffs filed them, which is almost always near their own homes, or in foreign countries.

The majority of the three judge panel agreed with most of what Judge Aldrich had decided. Looking at all the factors in detail, they held the case had to be heard in Gibraltar.

But the concurring opinion of Judge Merritt, quoted above, should give all Internet poker operators and players some nightmares. He ruled that the case had to be heard in Gibraltar, because to allow Ohio state law to apply would mean Wong, Gibson and everyone working for Party Poker would have to go to jail!

No one had raised the issue of whether Internet poker was illegal. “But sometimes courts have to raise embarrassing questions that both parties to litigation had rather we overlooked.”

I don’t think this will be cited as a precedent. But, it shows it is not only important to choose the right court, but also the right judge.

END
© Copyright 2010. Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law and is a consultant and expert witness for players, governments and industry. His latest books, Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.