Judge Dismisses Humphrey Lawsuit
Posted: Wed Jun 20, 2007 10:13 am
Anytime an industry gets successful, lawsuits inevitably arise. That certainly seems to be the case with the fantasy sports industry as another case has defined the fantasy sports landscape. Here's a decision that was rendered today that affects all fantasy game operators, including us here at the NFBC.
N.J. DISTRICT COURT DISMISSES HUMPHREY LAWSUIT
BY Greg Ambrosius
Judge Dennis M. Cavanaugh of the United States District Court of New Jersey today dismissed a lawsuit from Charles E. Humphrey Jr. that was seeking damages from three prominent fantasy sports game providers. Cavanaugh dismissed the lawsuit against ESPN, CBS SportsLine.com and The Sporting News and provided future guidance on the legality of fantasy sports within his decision.
Humphrey filed his complaint in New Jersey against the three major fantasy sports providers on June 20, 2006 because they offered pay-for-play online fantasy sports games. Even though Humphrey admitted that he never played the games, he was seeking damages under several states’ qui tam laws in an attempt to recover losses incurred by the residents of each state. Humphrey claimed he was entitled to recover the individual gambling losses of all participants of the Defendants’ allegedly unlawful gambling schemes, which would have resulted in millions of dollars in damages.
Cavanaugh dismissed the claim, stating that Humphrey “fails to identify even one individual who participated in even one of the subject leagues, much less one who allegedly lost money to Defendants in those leagues, and concedes that he has done neither himself. In short, Plaintiff asks this Court to indulge a gambling qui tam seeking a ‘recovery for his own use, unknown amount of money lost by unnamed and unknowable persons.’”
“This is a huge day for the fantasy industry,” said Bill Heberer of Manatt Phelps & Phillips LLC, which represented CBS SportsLine.com and The Sporting News in this case. “Our clients are thrilled with the decision. We think the Judge got it exactly right.”
Cavanaugh cited the recently passed Unlawful Internet Gambling Enforcement Act in his decision, stating “that law confirms that fantasy sports leagues such as those operated by Defendants do not constitute gambling as a matter of law. Federal law thus confirms that Plaintiff’s case must be dismissed.”
When discussing whether fantasy sports are gambling events, Cavanaugh distinguishes between a bet and an entry fee. “Courts have distinguished between bona fide entry fees and bets or wagers, holding that entry fees do not constitute bets or wagers where they are paid unconditionally for the privilege of participating in a contest, and the prize is for an amount certain that is guaranteed to be won by one of the contestants…Courts throughout the country have long recognized that it would be ‘patently absurd’ to hold that ‘the combination of an entry fee and a prize equals gambling,’ because if that were the case, countless contests engaged in every day would be unlawful gambling.”
Cavanaugh plainly describes in his summation how fantasy players can compete in leagues for cash prizes that in turn aren’t considered financial losses. “No fantasy league participant suffered any such loss,” he wrote. “To the contrary, participants pay Defendants a one-time, non-refundable entry fee to participate in the leagues, and receive in consideration for that fee the benefit of the Defendants’ extensive administrative, statistical and analytical services throughout the relevant sports season. Only at the end of the sports season are prizes awarded, in amounts fixed by the contracts that govern participation in the leagues. Accordingly, in paying for the right to participate in the leagues and receive Defendants’ services, participants simply do not lose anything, and certainly suffer no cognizable gambling loss. Whether or not a participant is a successful league manager, their entry fee never hangs in the balance in any way in connection with their participation in the league.”
N.J. DISTRICT COURT DISMISSES HUMPHREY LAWSUIT
BY Greg Ambrosius
Judge Dennis M. Cavanaugh of the United States District Court of New Jersey today dismissed a lawsuit from Charles E. Humphrey Jr. that was seeking damages from three prominent fantasy sports game providers. Cavanaugh dismissed the lawsuit against ESPN, CBS SportsLine.com and The Sporting News and provided future guidance on the legality of fantasy sports within his decision.
Humphrey filed his complaint in New Jersey against the three major fantasy sports providers on June 20, 2006 because they offered pay-for-play online fantasy sports games. Even though Humphrey admitted that he never played the games, he was seeking damages under several states’ qui tam laws in an attempt to recover losses incurred by the residents of each state. Humphrey claimed he was entitled to recover the individual gambling losses of all participants of the Defendants’ allegedly unlawful gambling schemes, which would have resulted in millions of dollars in damages.
Cavanaugh dismissed the claim, stating that Humphrey “fails to identify even one individual who participated in even one of the subject leagues, much less one who allegedly lost money to Defendants in those leagues, and concedes that he has done neither himself. In short, Plaintiff asks this Court to indulge a gambling qui tam seeking a ‘recovery for his own use, unknown amount of money lost by unnamed and unknowable persons.’”
“This is a huge day for the fantasy industry,” said Bill Heberer of Manatt Phelps & Phillips LLC, which represented CBS SportsLine.com and The Sporting News in this case. “Our clients are thrilled with the decision. We think the Judge got it exactly right.”
Cavanaugh cited the recently passed Unlawful Internet Gambling Enforcement Act in his decision, stating “that law confirms that fantasy sports leagues such as those operated by Defendants do not constitute gambling as a matter of law. Federal law thus confirms that Plaintiff’s case must be dismissed.”
When discussing whether fantasy sports are gambling events, Cavanaugh distinguishes between a bet and an entry fee. “Courts have distinguished between bona fide entry fees and bets or wagers, holding that entry fees do not constitute bets or wagers where they are paid unconditionally for the privilege of participating in a contest, and the prize is for an amount certain that is guaranteed to be won by one of the contestants…Courts throughout the country have long recognized that it would be ‘patently absurd’ to hold that ‘the combination of an entry fee and a prize equals gambling,’ because if that were the case, countless contests engaged in every day would be unlawful gambling.”
Cavanaugh plainly describes in his summation how fantasy players can compete in leagues for cash prizes that in turn aren’t considered financial losses. “No fantasy league participant suffered any such loss,” he wrote. “To the contrary, participants pay Defendants a one-time, non-refundable entry fee to participate in the leagues, and receive in consideration for that fee the benefit of the Defendants’ extensive administrative, statistical and analytical services throughout the relevant sports season. Only at the end of the sports season are prizes awarded, in amounts fixed by the contracts that govern participation in the leagues. Accordingly, in paying for the right to participate in the leagues and receive Defendants’ services, participants simply do not lose anything, and certainly suffer no cognizable gambling loss. Whether or not a participant is a successful league manager, their entry fee never hangs in the balance in any way in connection with their participation in the league.”
