Curious claims in Ivey v. Tiltware, LLC

by , Jun 5, 2011 | 4:52 pm

Comes now Phil Ivey with a complaint against Tiltware, LLC and a number of as-yet unnamed individuals and corporations. The suit is dated May 31st and was filed in the Nevada District Court on June 1st. It sets out six of what are styled separate causes of action, inluding breach of contract and tortious interference with prospective economic dealing, but some of the causes seem more like requested remedies than distinct causes of action compelling relief. In any event, the pith and substance of Ivey’s claim appears to be:

  1. that Tiltware breached its contract with him on a number of fronts;
  2. that certain contractual covenants are over-broad, oppressive, and contrary to public policy; and,
  3. that Full Tilt’s actions separate and apart from the contractual breach have damaged Ivey’s reputation.

For this, Ivey essentially wants in excess of $150,000,000 in damages and a declaration that the non-competition covenants in the contract are void. Ivey’s contract with Tiltware is not included with the filings, which isn’t unusual, but presumably a copy will come out if this action grinds on long enough; that should be a compelling read when it surfaces.

The complaint describes Tiltware as a supplier of “software and related support for the conduct of legal online poker.” Ivey endorsed Tiltware’s product with his name and likeness, and the software was then provided to Full Tilt Poker (not named – yet – in the suit). According to Ivey, then, he only endorsed the software, and not the site itself, although the upshot of the arrangement was that Ivey “became widely recognized as being associated with Defendant, with Defendant’s product, and with Full Tilt Poker.” Quaere whether Ivey’s endorsement was ever limited to the software produced by Tiltware, and not “Full Tilt Poker” itself, but let’s ignore that factual issue for now. (The use of “Defendant” in the complaint, though undefined – unlike “Plaintiff,” which is defined as Ivey – presumably means Tiltware, even though there are several defendants.)

Without a copy of the endorsement contract, it’s impossible to say whether or not Ivey’s claims have traction or not. According to Ivey, “Defendant asserts that for the entire existence of the Company [again, presumably Tiltware], Plaintiff is prevented from owning, acquiring, assuming or participating in any investment or interest that is adverse or otherwise in conflict with the Defendant’s business or prospects, financial or otherwise, without prior written consent of the Board of the Defendant, which consent may be withheld in the Boards’ [sic] sole and absolute discretion.” If that’s what the contract says, then it may well be overly broad and contrary to public policy on its face. Non-competition clauses aren’t supposed to preclude one’s ability to earn a living forever.

However, the alleged contractual breach based on what Tiltware, Full Tilt, and Ivey apparently knew about the legality of the US poker market is potentially more interesting. Ivey claims that neither Tiltware nor Full Tilt advised him of the “repeated warnings and clear notice that their conduct was illegal in the United States,” nor “that Full Tilt Poker was allegedly using ‘fraudulent methods’ to avoid banking restrictions.” Ivey may very well not have known about the bank fraud alleged to have been orchestrated by Full Tilt and others. The “repeated warnings and clear notice” is also vague. The complaint recapitulates the US Attorney’s press release on this point, but from whence the warnings and notice? The Department of Justice? Full Tilt’s lawyers? The players themselves?

Setting that aside, it strains credulity that Ivey didn’t have constructive notice of the alleged illegality of Full Tilt’s conduct in the United States. (And, for now, that illegality is still just alleged. The purported illegality is what Ivey complains caused him the harm.) Full Tilt consistently took the position that offering Internet poker was not illegal in the United States (except in Washington state, which it eventually shut off). If Full Tilt believed that assertion but was just wrong about it, what does that mean for Ivey? Did he honestly have no view on the matter? Did he and his lawyers consider all of the arguments and also decide that Internet poker was okay in the States? Ivey’s a brilliant guy and one of the best poker players in the world. It’s hard to conceive of a scenario in which he wasn’t aware of the arguments that Internet poker wasn’t legal in at least some states and therefore potentially under federal law. It just seems like wilfull blindness.

At the same time, Full Tilt’s public response to the lawsuit was less than edifying. There are vague references to Ivey helping and enriching himself at others’ expense. Assuming without deciding that Ivey has a valid claim against Tiltware and others, it may be that Full Tilt has to pay back the players and its disgruntled pro, irrespective of their trying to spin the matter into a zero-sum game of “we can pay back the players or we can pay Ivey, but not both.”

It will be interesting to see how this case shakes out. At the time of writing, Ivey is still listed as part of Team Full Tilt on One has to expect that to change soon. One theory about why this action was started is that Ivey simply wants to take steps to publicly distance himself from Full Tilt, which I think is rational on his part. If that’s true, then the merits hardly matter; what’s important is the display of Ivey getting his narrative into the public record.

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