A judge made a temporary ruling in favor of PokerStars that keeps the owners of the Atlantic Club casino from terminating the parties’ purchase agreement.
PokerStars filed a case in New Jersey state court after receiving a termination notice from Resorts International, the Atlantic Club’s owners, that sought to nullify a contract brokered between the parties in December in which PokerStars agreed to purchase the Atlantic Club Casino Hotel for $15 million. Resorts International, led by the investment firm of Colony Capital LLC, cited a clause in the agreement that required PokerStars to have a casino license in place by April 26 in order for the deal to be consummated.
PokerStars has not yet been granted casino license approval by New Jersey gaming officials and a decision on that matter is not expected until August. The reason for the delay hinges on the fact that PokerStars’ license application was deemed incomplete when originally submitted in January. The state Division of Gaming Enforcement accepted a resubmitted application and ruled it to be complete as of April 10. However, state regulators have 120 days in which to investigate and rule on PokerStars’ suitability to hold a casino license.
Resorts International offered PokerStars’ parent company the Rational Group a modest 10-day extension on the April 26 deadline, but requested a $6 million payment in return. When that demand was not met, Resorts International notified PokerStars that the acquisition agreement would be cancelled due to the fact that a casino operating license had not been secured. A $4 million termination fee was also sought by Resorts International.
PokerStars took the matter to court with claims of breach of contract and bad faith actions by the Atlantic Club owners. In its argument, PokerStars cited New Jersey statutes that prevent casino purchases from being voided once an application for licensing has commenced. PokerStars’ attorneys also pointed out that $11 million has already been paid by PokerStars toward the purchase price since last year in order to keep the Atlantic Club operating.
Along with the termination fee of $4 million, PokerStars would have already paid the $15 million price of purchase and would have nothing in return if the contract would be allowed to terminate. Judge Raymond A. Batten was swayed by PokerStars’ argument and issued a temporary restraining order (TRO) that blocks Resorts International from turning around and perhaps selling the casino to another bidder.
There are no other known suitors for the Atlantic Club at this time. The financially-strapped casino was on the shopping block for quite a while before PokerStars stepped up to the plate. The world’s leading poker site is hoping to enter the online poker market in the U.S. by way of New Jersey land-based casino ownership.
However, the deal between Resorts International and PokerStars was negotiated prior to online gambling legislation being passed by the state legislature and signed into law in late February by Governor Chris Christie. It is believed that the Atlantic Club’s value has increased substantially due to the new Internet gaming regulations. A number of other parties would now likely be interested in ownership.
Judge Batten’s ruling in favor of PokerStars is seen as a huge victory for the moment. It appears that the judge agrees that termination of the acquisition agreement by Resorts International is unenforceable because the application for casino license approval is underway. However, this fight is far from over as Resorts International will have an opportunity to reply to the complaint and TRO request of PokerStars.
Resorts International’s response brief is due on May 13. PokerStars has until the 15th of May to reply to that filing. The matter is scheduled for hearing before Judge Batten on May 17 at 1:30 p.m.