‘Sweepstakes Casino’ Operator VGW Scores Jurisdictional Win In Key Florida Case

VGW Holdings, the leading operator in the “sweepstakes casino” vertical, scored a victory in a United States District Court in Florida on Thursday in getting the case brought by plaintiff Eric A. Knapp moved to a Delaware district court.

In Judge Carlos Mendoza’s 27-page ruling in Orlando, VGW and fellow defendants were successful in enforcing the forum selection clauses contained in the platforms’ user agreements, while Knapp had sought on various grounds to remand the claims back to Florida state court where it was originally filed.

Additionally, the joint motion filed by VGW’s payment processors Fidelity Information Services Inc. and Worldpay Inc. to transfer and dismiss was also granted. The court clerk was directed to transfer surviving claims to the U.S. District Court in Delaware for all further proceedings.

VGW is additionally facing Racketeer Influenced and Corrupt Organizations Act (RICO) lawsuits in both New York and New Jersey that allege that the operator operates illegal online gambling platforms under the guise of “social casinos.” An earlier lawsuit brought against VGW by Fair Gaming Advocates Georgia Inc. was dismissed in that state in December due to lack of jurisdiction.

Federal jurisdiction proper

Mendoza denied the plaintiff’s motion to remand the case to state court, finding federal jurisdiction was proper under the Class Action Fairness Act. He also rejected the argument that VGW and fellow defendants did not meet their burden to show the jurisdictional amount exceeded $5 million.

Plaintiff had argued that the forum selection and choice of law provisions should not be enforced because “the Defendants fraudulently induced Plaintiff into agreeing to the Terms.” But Mendoza opined “there is no indication that the forum selection and choice of law clauses were formed by fraud.”

Mendoza also acknowledged Knapp’s argument against a transfer because “Florida is most familiar with the governing law prohibiting illegal gambling within Florida,” however the judge was unmoved, writing “While Florida courts might be more familiar with Florida law, Delaware courts would be more familiar with Delaware law, which controls here per the choice of law clause.”

While VGW is certainly preferring to keep the case in federal court, the applicable Florida statutes that may be central to the case will not necessarily be interpreted more favorably when the substantive issues are litigated.

The Social and Promotional Games Association (SPGA), a trade organization that counts many social and sweepstakes operators (but not VGW) among its members, issued a statement to Casino Reports regarding Judge Mendoza’s ruling:

“This recent decision is the latest in a string of positive legal outcomes for social sweeps operators. All of these outcomes point to a clear conclusion: Civil actions against the category rest on theories and claims that simply don’t stand up to scrutiny. We’re pleased that the courts are aligned with the millions of American adults who enjoy the safe, legal, and engaging games offered by social sweeps sites.”

The payment processor Worldpay, Inc. made the argument for dismissal that it could not be served or sued because it merged into Worldpay, LLC and, effectively, no longer has a legal existence.

Because Worldpay, Inc., was a Delaware-based corporation, it argued “[w]hen a consolidation or merger has taken place under the statute, the old corporations have their identity absorbed into that of the new corporation or the one into which they were merged.”

Thus Worldpay Inc. was dismissed as a defendant.