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Details of Phil Ivey's Lawsuit Against Tiltware - Tiltware's Response

By Shari Geller

Yesterday Phil Ivey announced that he had filed suit against Tiltware (the parent company of Full Tilt Poker) and today the actual complaint was released.  In it, Ivey brings six separate causes of action all arising out of the same general claims  –  that Ivey is being prevented by a noncompetition agreement from entering  into other business opportunities following Full Tilt’s recent indictment and that Full Tilt’s conduct has irreparably damaged Ivey’s reputation.  Ivey is seeking damages in excess of $150 million.

In the complaint, Ivey alleges that he entered into an agreement with Tiltware in February, 2004, under which Tiltware agreed “to provide software and related support to Full Tilt Poker for the conduct of legal online poker.”  For his part, Ivey agreed to lend his significant star power to endorse Full Tilt Poker with his name and likeness.  He also agreed to a noncompetition covenant which prevented him from engaging or investing in any activity that was in competition with Tiltware. 

Following Full Tilt’s indictment, Ivey has requested that he be relieved from the noncompetition covenant and Tiltware has denied this request.  Ivey’s complaint alleges that Tiltware is in breach of their agreement according to the facts alleged in the Federal Court indictment unsealed on April 15th and that this breach relieves him of his obligations under the noncompetition covenant.

He also alleges additional facts in an attempt to support his complaint.  He claims that Full Tilt has engaged in illegal conduct relating to its banking practices, that the US Attorney for the Southern District of New York had placed Full Tilt on notice that its conduct that was illegal, and that Full Tilt failed to warn him or remedy the problem.  The complaint also includes the fact that there is approximately $150 million owed to US players and that Full Tilt Poker has not returned any of that money.  Ivey alleges that, unbeknownst to him, Full Tilt failed to maintain a reserve account sufficient to satisfy the return of funds to US players. 

The complaint also contains allegations that Ivey’s personal and professional reputation have been irreparably damaged by Full Tilt’s conduct both before and since the indictment.  He has been the subject of negative statement by US players, seeking return of their money, claiming that he has the ability to arrange for Full Tilt to return that money or should repay the players out of his own personal funds. 

To support the claim that Full Tilt’s conduct has damaged Ivey’s reputation, the complaint includes quotes from disgruntled poker players posting in the 2 + 2 Poker Forum, including “I hope any sponsored pro at the WSOP catches hell until you (FTP) pay up,” “No F’ing way…Ivey will be seen at the WSOP,”  “Plz tell me that no Full Tilt pros are going to play in the WSOP until you guys pay out,” “The fact that they need to ‘raise capital in order to pay out the US players’ means they never had all the money on them in the first place.  Scary.”

The six causes of action in the complaint are: Injunctive relief (not really a cause of action, but a remedy), breach of contract, breach of covenant of good faith and fair dealing, declaratory relief, negligent interference with prospective economic advantage,  and tortuous interference with prospective economic advantage. 

Ivey is seeking a declaration that he is not bound by the noncompetition covenant as well as unspecified damages for loss of business opportunities and damages to his reputation which he alleges exceeds the amount that Full Tilt owes its US customers -- $150,000,000.

Tiltware issued a statement late today in response to Ivey’s complaint:

 “Contrary to his sanctimonious public statements, Phil Ivey’s meritless lawsuit is about helping just one player – himself. In an effort to further enrich himself at the expense of others, Mr. Ivey appears to have timed his lawsuit to thwart pending deals with several parties that would put money back in players’ pockets. In fact, Mr. Ivey has been invited -- and has declined -- to take actions that could assist the company in these efforts, including paying back a large sum of money he owes the site. Tiltware doubts Mr. Ivey’s frivolous and self-serving lawsuit will ever get to court. But if it does, the company looks forward to presenting facts demonstrating that Mr. Ivey is putting his own narrow financial interests ahead of the players he professes to help.” 

The timing and the nature of the claims alleged in the complaint are curious.  If Full Tilt Poker is no longer able to conduct its business in the US as a result of Black Friday, relieving Ivey of his obligations under the noncompetition clause should be a rather simple, straight-forward matter.   Moreover, claims that Ivey is being prevented from engaging in the business of playing poker makes little sense -- unless all his money is tied up in the Full Tilt accounts.  More likely, he has been approached by some company knowing he can get out of his Full Tilt endorsement deal and he wants to take advantage of that opportunity as soon as he can.

Full Tilt's statement that it is Ivey in fact who owes them money as well as their assertion that there were certain actions which Ivey was asked to take that could have helped Full Tilt repay players was clearly designed to try and win the public relations war.  But initial reaction is decidedly against the company whose delays in repaying customers, coupled with the impression that the money simply isn't there, has made them Pubilc Enemy No. 1.  

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