Phil Ivey Files Protest to Claimed Damages in Borgata Edge-Sorting Case

Counsel representing Phil Ivey and Cheung Yin “Kelly” Sun have filed a formal brief in opposition to the damages claimed by the Borgata following the Atlantic City casino’s split-decision victory over the pair in ongoing, high-profile case involving “edge sorting” tactics employed by the pair at the casino’s high-stakes mini-baccarat tables in 2012.

The protest, filed by New Jersey attorney Louis M. Barbone on Ivey’s and Sun’s behalf, disputes the methodology used by the Borgata in calculating the damages it expects to receive.  In its damages claim, which was filed three weeks ago, and which followed a New Jersey court ruling that Ivey and Sun had breached the implied and state-regulated gaming contract with the Borgata, the casino seeks more than $15.5 million.

That total includes the actual “win” of $9.626 million accrued by Ivey during his four visits to the Borg in 2012.  The asked-for damages also include some casino comps, craps winnings (banked for, according to the Borgata, Ivey’s ill-gotten mini-baccarat wins), and several million dollars in “expectation damages” based on the known odds of the game, the number of hands involved, and the stakes at which Ivey played.

phil-ivey1The 15-page brief filed by Barbone attacks both the methodology used by the Borgata in calculating damages and even asserts that “the undisputed factual record proves that plaintiff can prove no damages proximately caused by the defendants’ breach… .”  Eventually, the brief makes a claim that the battle over damages should be tossed to a petit jury, because, allegedly, “Plaintiff’s proof of damages is a genuine question of material fact,” and is thus open to dispute.

The filing includes several rather dubious points and is likely to provide Borgata’s counsel with a legal field day.  Indeed, attorneys for the casino immediately filed a letter asking for permission to file a response to the defense claims by December 9th.  Among the red-meat items this latest filing offers are a misdirection attempting to tie a strictly-defined parallel between this case and another New Jersey case involving the Golden Nugget and blackjack players who discovered that a supposed “pre-shuffled” shoe was anything but, and attempted to profit from that manufacturer’s error.

According to the brief:

“While Borgata relies upon the restitution formula [from the Golden Nugget case], never pled in its Amended Complaint, that formula defies the factual record here and presumes that all of the play by Ivey and Sun was in fact pursuant to an “authorized game.”  There is nothing in this record that substantiates such a damage formula.  Instead, each and every game played by Ivey and Sun was in fact “authorized” and the issue presented is whether plaintiff can establish the “probable result of the breach” by showing “reasonably certain” losses.  Each and every game played by the defendants was a valid game of chance.  Defendants’ breach was said to have adjusted the odds in defendants’ favor when that very proposition is vigorously disputed.  While the court has already found that the defendants’ technique of edge sorting adjusted odds in the defendants’ favor, the factual evidence in the record on the “probable result of the breach” confirms that plaintiff cannot prove by even the preponderance of evidence that defendants’ breach proximately caused its losses.”

Huh, what?  How’s that again?  Acknowledging that we’re slipping into op-ed mode here, although we don’t have a dog in this fight and both sides have exhibited less-than-admirable traits and practices, the above is about as Swiss-cheesy as it gets.

First, the very essence of the ruling issued by presence US District Court Judge Noel J. Hillman was that Ivey and Sun’s odds-shifting scheme breached the implied contract with the Borgata, precisely because the changed odds made the game something similar to mini-baccarat, but not the mini-baccarat as approved under New Jersey’s gaming laws.  As regulated by New Jersey’s Casino Control Commission, mini-baccarat has a specific and well-known house edge.  According to Hillman’s ruling, what Ivey and Sun did was change the game to something that was no longer mini-baccarat in the way the state’s laws authorized it to be conducted.

In what can only be characterized as an attempt to re-litigate key points of last month’s decision, this nugget from the above deserves a special highlighting:

“Defendants’ breach was said to have adjusted the odds in defendants’ favor when that very proposition is vigorously disputed. While the court has already found that the defendants’ technique of edge sorting adjusted odds in the defendants’ favor…”

In other words, the defense disagrees with the ruling.  That should go without saying, one would think.

However, this latest brief goes on to assail the claimed damages by messing with the odds and the math, and that’s where it really goes off the rails.  First, there’s a true statement that edge-sorting isn’t infallible.  An edge-sorter can guess wrong, and even if guessing right — which occurs with increasing reliability as play progresses, that knowledge only increase the chance of the bettor’s winning a giving hand.  Subsequent cards’ values are added to that hand, but it’s like starting with a first-card ace or five in blackjack: One’s a whole lot better than the other.

This latest defense filing builds on the fact that outcome of each individual hand is indeterminate, claiming, “Each and every game played by the defendants was a valid game of chance.”  It’s in the long term, however, the collective of all hands played, where the odds-changing effect of the edge-sorting builds an insurmountable advantage, a new take on “the house always wins.”

But what about that pesky math stuff laid out by the Borgata in its filing for damages?  This defense brief not only make basic math error as one of its core arguments, it then compounds that error by running with the concept for several pages.

The Borgata’s damages claim includes detailed records of Ivey’s high-stakes mini-baccarat play.  During those four controversial visits, “Ivey won 864 hands, lost 822 hands, and tied in 164 hands.”  That fact becomes the basis for several claims such as this excerpt:

“Moreover, all of the results from Ivey’s play on all trips to the Borgata resulted in [win percentages] of 44.7%, 46.7%, 43.4% and 41.3%.  []  Those actual percentages of win by Ivey are less than that required to establish damages by even a preponderance of the evidence.  A preponderance, by its very definition, means something more than 50% of the time.”

That’s a mathematical shuck job of the first degree.  The hidden secret: Tie hands in mini-baccarat are a push; no money is excanged and for mathematical and odds-calculating purposes, those hands do not count.  Ivey’s defense counsel attempts to incorporate those tie hands to belie the very fact that the edge-sorting scheme provided Ivey and Sun with a significant edge.

Of the hands that counted, meaning the 864-t0-822 (1686 hands) tally, Ivey and Sun indeed had a mathematical, “predominant” edge in the game.  All the rest is bunk.  It’s hard to see how anything in this brief will significant impact the damages likely to be awarded, but it’s the precursor to what’s likely to be another difficult fight, that of the Borgata to actually collect on this judgment.

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