Atlantic Club Casino Hotel can walk away from a sales deal with PokerStars and keep the $11 million in advances it has received, a Superior Court judge ruled Friday.
The decision not only allows Atlantic Club to look for a new buyer but may entitle it to an additional $4 million termination fee from PokerStars. That means PokerStars and its parent company, Rational Group, may be forced to pay the full $15 million it had offered for Atlantic Club without getting anything in return.
Tom Curtin and other lawyers representing Atlantic Club said they were pleased with the ruling and declined to comment on whether the company has another buyer with whom it intends to negotiate a new sale.
Judge Raymond Batten, who a few weeks ago had issued a temporary restraining order barring Atlantic Club from pursuing sales negotiations with another buyer, reversed his decision, saying that after further review, he determined a termination clause in the sale contract was valid.
“The provisions to that contract about which plaintiffs now complain are just that — they are provisions to the contract,” Batten said.
Eric Hollreiser, head of corporate communications for Rational Group, said the company was reviewing Batten’s ruling.
“We remain committed to New Jersey and to contributing to its economy,” Hollreiser said.
In court, lawyer Wayne Positan accused Atlantic Club of greed and deception, saying the company was receptive to PokerStars when the online gambling giant was advancing it money to keep operations afloat during the winter.
But now with funds in hand and a busy summer during which it can make money on its own, Atlantic Club was abandoning the deal and accusing PokerStars of being the “bad guys,” Positan said.
“They were on the verge of filing for bankruptcy. ... The only thing that stopped that was my client,” he said. “We saved their butt. What do we get? The short end of the stick.”
Positan had argued the contract’s termination clause was unenforceable because state statutes require closing dates to fall at least 121 days after submission of a completed application. He said that would require Atlantic Club to wait until the Casino Control Commission issues its licensing decision — expected in August.
But Batten rejected Positan’s argument, saying if statutes require contracts to close at the discretion of regulators, then no contracts could include a termination clause.
Atlantic Club lawyer Tariq Mundiya argued PokerStars agreed to contract language allowing either party to back out of the deal after April 26 if interim casino authorization had not been issued.
“If they couldn’t get it done, we would have several months to go out and find someone who could get it done,” he said of the authorization.
The April date, Mundiya said, would allow Atlantic Club to find another partner in advance of Internet gambling starting later in the year.
Batten questioned the setting of the termination date, saying it gave virtually no leeway for delays in the regulatory licensing process and there was no provision requiring Atlantic Club to return any money advanced to it if the contract was terminated.
“Who would do that as a business person?” he asked. “What lawyer would allow a client to do that?”
Positan said he believed the contract contained provisions allowing for delays in the process.
Atlantic Club lawyers said they had believed PokerStars could receive quick regulatory approval but didn’t realize the extent of the difficulties given the online gambling company’s legal past.
Last year, PokerStars agreed to pay $731 million to settle U.S. Justice Department charges of money laundering, bank fraud and illegal gambling.
Atlantic Club lawyer Gilbert Brooks said in court documents that when he was first brought on to review the sales contract, he had little knowledge of PokerStars, although he “was generally aware” the company had a prior legal issue with the Department of Justice. But after news reports highlighted allegations of wrongdoing the Justice Department had filed in court documents, Brooks said he did more research and found a “great deal of troubling information.”
Atlantic Club also alleged that PokerStars founder Isai Scheinberg remains involved in the company and initiated contact with Atlantic Club during the sales and regulatory process even though he is barred from serving in any management or director role at PokerStars, according to the Justice Department settlement.
Contact Hoa Nguyen: