Gemaco v Borgata: Summary Judgment Rulings Pushed to April

The three-way legal battle pitting New Jersey’s Borgata Hotel Casino & Spa against famed poker player Phil Ivey and also against Kansas-based Gemaco, Inc., one of the United States’ largest manufacturers of playing cards, will endure another in a long series of delays.  In the latest legal developments, attorneys representing Gemaco, with the consent of the Borgata’s counsel, have successfully petitioned a New Jersey court for an adjournment on the pending motions for summary motion filed last month by Gemaco and the Borgata against each other.

gemaco-playing-cards-logoAs reported here last month, the Borgata’s claims against Gemaco stem from slight variances in the cards that were supplied for use at the high-stakes mini-baccarat tables where Ivey and his associate, “Kelly” [Cheng Yin] Sun, took the casino for $9.626 million in four multi-day sessions in 2012.  Ivey and Sun are co-defendants in the lawsuit brought by the Borgata, but on a separate series of complaints.

The legal standoff between Gemaco and the Borgata shows no sign of ending soon, though whether the two sides have considered any sort of settlement remains unknown.  Such a settlement likely would be contingent on the success of the Borgata’s separate claims against Ivey and Sun, who have openly admitted to the scheme in which the pair significantly altered the game’s odds in their favor without even touching the cards.  Counsel for the Borgata has repeatedly termed Ivey’s and Sun’s actions to be fraudulent and illegal under New Jersey gaming law, though neither the New Jersey Division of Gaming Enforcement nor the New Jersey Attorney General’s Office, via the NJ State Police, have chosen to pursue cases against the pair.

One of the issues sure to receive judicial consideration if the case goes to trial, as it almost surely will, is the the nature of the “pre-shuffled” decks that Gemaco supplied to the Borgata for use at its table games.  The purple, full-bleed “Gem” cards (brand name GemPack) used in the games were specifically requested by Ivey and Sun, ho had trained her eyesight for years to detect minor print variances normally undetectable by the human eye.

However, the scheme devised by Ivey and Sun to dupe the casino may well have crossed the line into negligence, a claim made repeatedly by Gemaco’s attorneys in their defense.  The Borgata continues to admit zero negligence despite the extreme circumstances granted to Ivey and Sun in an attempt to capture the high-stakes action.  Those conditions notably included keeping the same decks in play over multiple shoes and rotating some of the cards (done by a Mandarin-speaking Borgata dealer) at Sun’s request.

Last month’s filing of the two motions contains considerable material on the matter, which may boil down to whether this is manufacturing error by Gemaco, fraud by Ivey and Sun, or negligence by the Borgata.

Here’s an excerpt from one of last month’s filings by the Borgata’s attorneys which attempts to explain why Gemaco should be held liable in the case:

… The facts are uncontested that edge sorting would not have been possible at all but for the breaches of Gemaco’s duties. If the cards backs did not enable Sun to identify the relative values printed on their faces, nothing that Ivey, Sun or Borgata did or did not do could possibly have resulted in edge sorting. The playing arrangements between Borgata and Ivey are also not relevant because the cards at issue were pre-inspected. Therefore, the legal responsibility to detect the flawed cards fell on Gemaco. The applicable regulations do not require casinos to inspect already preinspected cards. All a casino is required to do is provide a shuffle when the cards are initially put in play, and only if requested by a patron. [] Borgata was expressly entitled to rely on Gemaco’s pre-inspection. Pre-inspected, preshuffled cards are intended and marketed by Gemaco to allow casinos to put new cards into play without the lengthy break for inspection and shuffling. Gemaco’s advertisement for its pre-inspected, pre-shuffled product known as Gempack® touts the product’s ability to enhance casino revenue by generating an additional 50-100 hands per day, per table. [] If Borgata were required to reinspect and re-shuffle Gempacks®, the intended benefit of this product would be lost.

Ivey’s and Sun’s tortious conduct could be viewed as a concurrent cause of Borgata’s damages. If the case is viewed in that light then the element of proximate cause is satisfied if Gemaco’s conduct was a “substantial factor” in producing Borgata’s damages. It is uncontested that edge sorting would not be possible without asymmetrical cards, so the cards are by definition a substantial factor in producing Borgata’s injury. This is true even if Ivey and Sun were a foreseeable intervening cause, and even if their conduct was a normal incident of the risk created. Thus, if we accept Gemaco’s position that all casino playing cards are asymmetrical (which they are not), and further accept Gemaco’s implication that edge sorting was therefore foreseeable or a normal incident of the risk, Gemaco cannot escape liability. Its breach of duty is still a “substantial factor” in producing the injury and satisfies the element of causation. Whether this Court applies the “but for” or “substantial factor” definition of proximate cause, Gemaco’s conduct constitutes a proximate cause of Borgata’s damages as a matter of law.

While a convincing argument on its face, the point utterly ignores the Borgata’s own ongoing role in allowing Ivey and Sun to repeatedly carry out their scheme.  The pair visited the Borg on four separate occasions during 2012, spanning more than half the calendar year, and engaged in conduct (including betting patterns) that by the Borgata’s own admission indicated the true odds of the game had changed in Ivey’s and Sun’s favor.

Also left unaddressed in the recent Borgata filings are the countering claim by Gemaco that by allowing Ivey and Sun special conditions, which ultimately changed the game’s odds, the Borgata violated its own contract with Gemaco regarding proper use of the cards.  For instance, all parties readily admit that had the Borgata adhered to its normal casino practice of frequently changing out the 8-deck shoe of cards being used, that no edge sorting would have been possible.

We’ll have more on the Borgata-Ivey-Gemaco battle in future updates.


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