Unites States v. Pokerstars, et al

Filing 196

MEMORANDUM OF LAW in Support re: 195 MOTION to Dismiss Verified First Amended Complaint.. Document filed by Christopher Ferguson. (Attachments: # 1 Affidavit Certificate of Service)(Withers, Julie)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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UNITED STATES OF AMERICA,
Plaintiffs,
- v. -

11-CV-2564(LBS)

POKERSTARS, et al.,
Defendants,
ALL RIGHT TITLE AND INTEREST IN THE
ASSETS OF POKERSTARS, et al.
Defendants-In-Rem.
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CHRISTOPHER FERGUSON’S MEMORANDUM JOINING HOWARD LEDERER’S
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF HIS MOTION
TO DISMISS THE VERIFIED FIRST AMENDED COMPLAINT
Christopher Ferguson joins in the Memorandum of Points and Authority in Support of
Howard Lederer’s Motion to Dismiss the Verified First Amended Complaint (the “Complaint”)
for failure to state a claim under Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure.
The deficiencies in the Complaint and the legal arguments asserted by Mr. Lederer apply equally
to Mr. Ferguson and he, therefore, joins in Mr. Lederer’s motion and memorandum.
1.

The Specific Factual Allegations Against Mr. Ferguson Fail to State a Claim.
With respect to the specific allegations that could give rise to a claim against Mr.

Ferguson and his in rem property, there are none. The only factual allegations in the Complaint
relating to Mr. Ferguson are: (1) he was a founder and member or chairman of the board of Full
Tilt Poker (Compl. ¶¶ 8, 23); and (2) he received distributions from the company in a
significantly lesser amount than allocated to him in accordance with his ownership interest

(Compl. ¶¶ 109). In fact, in 90 paragraphs of factual allegations, Mr. Ferguson is mentioned
only once and then it is only in reference to distributions from Full Tilt. Nowhere does the
Complaint allege that Mr. Ferguson was involved in the management of the company; he was not
identified as a managing member or an employee. Nor does the Complaint allege that he had
any knowledge whatsoever, or was involved in any way in the decisions regarding management,
payment processing or the segregation of player funds. The Complaint, as to Mr. Ferguson, does
not come close to meeting the exacting pleading standards of Rules 9(b) of the Federal Rules of
Civil Procedure or even the lesser standards of Rules (8) and 12(b)(6). See Ashcroft v. Iqbal, 129
S. Ct. 1937 (2009) (the Court should identify and eliminate conclusory allegations because they
are not entitled to an assumption of truth and should evaluate the remaining allegations to
determine if they plausibly suggest an entitlement to relief). With respect to the in rem claims,
Mr. Ferguson joins in the arguments asserted by Mr. Lederer. Because the Complaint fails to
state a claim Mr. Ferguson the claims against him should be dismissed.
2.
IGBA Does Not Apply to Full Tilt Poker’s Hosting of Online Card Play On Its
Internet Poker Site Because There Is No Evidence Full Tilt Poker Operates A Gambling
Business Which Violates The Law Where Full Tilt’s Business Is Conducted.
In addition to the arguments raised by Howard Lederer, in which Mr. Ferguson joins, the
IGBA claim should be dismissed because IGBA applies only to one who “conducts, finances,
manages, supervises, directs or owns all or part of an illegal gambling business.” 18 U.S.C.
§1955(a) (emphasis added). Importantly, the definition of “illegal gambling business” requires
proof of a “gambling business” which “is a violation of the law of the State or political
subdivision in which it is conducted”. 18 U.S.C. §1955(b)(1). Therefore, for there to be a
violation of the IGBA, it is “the gambling business which must violate [the] state law” where
that business is conducted. See Sanabria v. United States, 437 U.S. 54, 70 (1978).

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As explained by the Eighth Circuit: “The statute defines an ‘illegal gambling business’ as one
which ‘is a violation’ of state law. 18 U.S.C. § 1955(b)(1)(i). The word ‘is’ strongly suggests
that the Government must prove more than a violation of some state law by a gambling business.
The gambling business itself must be illegal.” United States v. Bala, 489 F.3d 334, 340 (8th Cir.
2007)(emphasis in original). The Government has not proven that the alleged “gambling
business” conducted by Full Tilt Poker is illegal in the place where that business is conducted.
The sole “gambling business” conducted by Full Tilt Poker is the hosting of a licensed Internet
poker cardroom through a data processing server located on Guernsey and as duly licensed and
regulated by United Kingdom protectorate Alderney in the British Channel Islands1 outside of
any State or political subdivision in the United States. Because the IGBA applies only when the
“business” violates the laws of the “State or political subdivision” where the “business” is
conducted, and Full Tilt Poker’s “business” is not “conducted” in any such State, the instant
action cannot be predicated on any alleged violation of the IGBA.

1
 From
 2004
 through
 2007,
 the Full Tilt Poker virtual online poker card room was conducted
from servers located on the sovereign Kahnawake Mohawk Indian reservation outside of
Montreal, Canada and was duly licensed and regulated by the Kahnawake Gaming Commission
(KGC) therefrom. Thereafter, the Alderney Gambling Control Commission (AGCC) regulated
the Full Tilt Poker virtual online poker card room for peer-to-peer gaming thereon.

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CONCLUSION
For the reasons stated above and those presented in Howard Lederer’s Motion to Dismiss
and Memorandum of Points and Authorities, the Complaint as to Mr. Ferguson should be
dismissed.
July 9, 2012

Respectfully submitted:
/ s / Julie Withers
Jonathan Harris
Julie Withers
Harris, O’Brien, St. Laurent & Houghteling LLP
111 Broadway, Suite 402
New York, New York 10006
Tel. [phone]
Fax [phone]
[e-mail]
Attorneys for Christopher Ferguson

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