On May 6, PokerStars filed a civil complaint in a New Jersey Court and requested a temporary restraining order to bar the Atlantic Club from attempting to sell the casino to another party. The judge in the case did issue that restraining order, in effect keeping the purchase contract in effect until a hearing could be held. The Atlantic Club the next day filed a motion for immediate relief, saying the judge’s actions were inappropriate and asked the court to lift the restraints of the TRO. That motion hearing was held via teleconference between the parties with the judge ultimately ruling that the TRO was proper and would stay in effect pending it’s scheduled hearing.
The Atlantic Club has filed their response to the issuance of that TRO, part of which is described below:
- The “outside date” in the contract is not a closing date and is not subject to the statute mentioned that would make it void. Atlantic Club alleges that PokerStars misled the court to believe that the provision in the contract violated the statute.
- PokerStars are not “innocent victims” that are being taken advantage of by defendants in order to pocket the advanced monies. They had experienced lawyers aiding in contract negotiations and they are not innocent by virtue of assuring defendants that they would be confident to get approval for a license in NJ without undue delay. However, as stated by the AGA brief filed in March 2013 which characterized PokerStars as “chronic lawbreakers”, the delays in the approval process were inevitable and raise doubts that PokerStars would ever secure a license. The brief states that the information contained in AGA’s brief caused them serious concern about PokerStars ability to obtain a license.
- Their can be no claim of unjust enrichment since PokerStars knew that Atlantic Club could retain any advances made to the casino if there was a termination of the contract.
- The defendants will be irreparably harmed if the TRO is not vacated as any delay in the ability to discuss purchase options with other potential suitors would be crippling to its chance to take part in the online gaming now approved in the state.
- PokerStars did not demonstrate immediate and irreparable harm to cause the TRO. The brief says that PokerStars knew that the $ 11 million was to be forfeited if the contract were terminated, as well as the $ 4 million now owing, and they took that risk.
Eric Matejevich, Chief Financial Officer and Senior Vice President of Resorts International Holdings (for purposes of this article “Atlantic Club”), asserts that he is familiar will all aspects of the company and has been a part of it since its inception. He admits to being one of the owners and claims to be familiar with all aspects of the discussions, negotiations and other issues surrounding the deal.
In his affidavit he claims:
- Atlantic Club hired an investment bank in April 2012 to sell the casino. By September of 2012, having been unsuccessful in selling the casino, the owners decided to “press for the passage of legislation in New Jersey that would permit online gaming”.
- Matejevich became aware (sometime after September 2012) that PokerStars was interested in entering the US market,and had a telephone call with Isai Scheinberg, founder of the company, who “expressed interest in a potential acquisition” and both sides agreed to continue discussions.
- He was aware that PokerStars had offered poker in the US despite “federal law prohibiting such activity”.
- He claims to not have known or have been advised by anyone that Scheinberg or anyone else at PokerStars had been charged by the US government.
- November 2012 a term sheet was signed which called for advance payments by PokerStars to cover shortfalls by Atlantic Club while due diligence was in progress, the amount of which was to be applied against the purchase price.
- Matejevich claims that everyone was on board with the fact that if PokerStars was unable to get a license in a timely fashion, that the casino would be able to pursue other offers before the introduction of gaming in NJ.
- He admits by February 1, 2013, PokerStars had reached the cap of funding the shortfalls of the casino allowed by the contract ($ 11 million)
- He says that the casino agreed to cooperate in building a poker room, which PokerStars was funding and says the casino would never have began those renovations had PokerStars not requested it.
- He claims that he had discussions with DGE in February 2013, and the Division said that PokerStars was not submitting the requested information in a timely manner. He further claims that PokerStars told him they were “stalling” with respect to funding commitments.
- In March 2013 he notes the press had widely reported the AGA motion to participate in the licensing hearing of PokerStars.
- In late March he claims to have received a call from DGE advising that the application from PokerStars was not complete and that it would take 90 additional days to issue findings. It was at this time, according to Matejevich, that the Atlantic Club began evaluating the information put out by the AGA and considered the termination clause in the contract. He alleges to have told PokerStars that this was under consideration.
- On April 26, Matejevich says he received a call from Scheinberg who claimed that PokerStars had a 90% chance of being successful in licensing and further if the Atlantic Club terminated that the termination fee of $ 4 million would not be paid and litigation would ensue.
- He discusses a letter received from PokerStars following the termination in which PokerStars “threatened” to tie the casino up in litigation.
- He claims the impact of the restraining order does not allow the casino to fulfill its responsibilities to its employees, owners, or patrons and that the order is prohibiting the preparation of the Atlantic Club for the entry to the online gaming market.
- He claims the media coverage has caused significant uncertainty to employees and customers.
Two previous directors of the Division of Gaming Enforcement and two former chairmen of the Casino Control Commission (now in private business within the gaming industry, not employed by the state) issued statements asserting that it is common for agreements to acquire casinos in Atlantic City to have an “outside date” or “drop dead” date within its provisions. Both say that, in their experience, the waiting period that is discussed in statute N.J.S.A. 5:12-95.12(a) only is there to bar parties from closing prior to 121 days after a completed application is filed, and in their experience, if the parties agree to abort the contract via an “outside date” then that would be of no interest to regulators.
Finally, one of the attorneys for the Atlantic Club, who is in New Jersey and has been involved in casino transactions for several years, filed an affidavit that he was retained by the Atlantic Club to aid in regulatory issues surrounding the sale, but had little knowledge of PokerStars, although he was “generally aware” that they had a prior issue with the US DOJ. It was only after the press reports in February 2013 and later with the AGA brief being filed that this attorney for the defendants researched public documents to become familiar with the civil case against PokerStars (now settled) and the criminal indictments against individuals. According to his filing, he found the information “troubling”.
The hearing regarding the Temporary Restraining Order is scheduled for Friday May 17.