Appeals Court Denies Class Certification in RICO Suit Against Gaming Companies
In a significant victory for the gaming industry, a federal appeals court recently upheld the denial of class certification in a purported class-action complaint against a group of more than 60 gaming equipment manufacturers, casino operators and cruise lines. (Poulos v. Caesars World, No. 02-16604 (9th Cir., Aug. 10, 2004)) According to the complaint, the proposed class-action plaintiffs allege - citing the federal Racketeer Influenced and Corrupt Organizations (RICO) statute - that the defendants sought to mislead gaming patrons about the basic nature and chances of winning the electronic games. Holding that “individualized causation issues would predominate in this case,” the appeals court affirmed the denial of class certification.
The plaintiffs’ central argument is that video poker and electronic slot machines are not “random games of chance” like their traditional counterparts. Instead, the plaintiffs allege the machines “are operated by computer programs which determine, in advance, the outcome of each particular play.” The plaintiffs claim that the defendants’ design and marketing of the games fails to disclose - and intends to conceal - these facts, and represents the games as similar or identical to playing “real” slot machines or poker games, which always have random outcomes. The plaintiffs also allege that the casino and cruise-ship defendants used pre-generated game outcomes to “manipulate the psychology” of patrons by generating enough “near misses” to encourage play and set the exact win percentage and timing of each win to ensure maximum profits.
The plaintiffs sought certification of six separate classes of gaming patrons that “encompass nearly everyone who has played video poker or electronic slot machines within the last fifteen years.” The trial court refused, ruling that individual factual and legal issues predominated over issues common to proposed class members.
The appeals court agreed with the initial ruling, concluding that each individual plaintiff would need to demonstrate reliance on the alleged misrepresentations to establish that the misrepresentations actually caused his/her alleged injuries. Accordingly, to proceed with the case on a class action basis would be futile. The court also rejected the plaintiffs’ argument that circumstantial evidence or “common sense” established a presumptive finding of reliance for all potential class members.
The named plaintiffs still may proceed with their individual cases at the trial court level, though the class certification ruling would drastically reduce any possible recovery.
